SAN FRANCISCO (CN) – A federal judge seemed disinclined to order a trial in the U.S. Postal Service’s now four-year legal fight with the city of Berkeley over the planned sale of its historic downtown post office, wary of claims the city is intentionally trying to diminish the building’s value and discourage buyers.
“We’re not just talking about the Postal Service’s ability to sell one piece of property, but their obligation to serve the whole country and be self-sustaining,” said Julie Berman, a Justice Department attorney arguing on behalf of the Postal Service. “The financial situation of the Postal Service is such that it’s putting the mission at risk.”
Her argument did not convince U.S. District Judge William Alsup.
“You could still do a pretty good deal,” he said, even with the possible 39 percent decrease in value.
The Postal Service announced plans to sell the 104-year old neoclassical style building, designed by Oscar Wenderoth and listed as a National Historic Landmark in 1981.
In September 2014, the Postal Service struck an agreement to sell the building to urban developer Hudson McDonald. That same month, Berkeley passed an overlay restricting nine parcels of downtown land, including the post office, to civic and nonprofit uses.
The Postal Service argued the developer backed out of the deal because the overlay had so devalued the property that the developer said it was “destroyed and worth very little.”
At a hearing on cross-motions for summary judgment Thursday, Alsup said the Postal Service had all but conceded it would have to prove that the city’s overlay did more than simply interfere with the sale. He said the agency must show “total frustration” of its ability to dispose of its property and manage its resources to the point it violates the 1970 Postal Reorganization Act, which mandates disposal of unused property.
“If it devalues the property in a way that obstructs the Postal Service’s ability to manage its finances and the potential for sale at only 61 percent of market value, the court should examine that potential,” Berman said, adding the Postal Service fears a ruling in favor of the city would encourage others to enact similar zoning laws. “If this overlay ordinance is upheld, other municipalities would follow suit.”
Berman said the overlay reduces the number of potential buyers by about 80 percent of the market.
“That still leaves 20 percent,” Alsup said. “Where does it say they’ve got to sell it for full value? They paid almost nothing for this property. They could still sell it for a profit. If it just comes down to ‘We could get more without the overlay,’ you’re going to lose. Because it’s not a total frustration.
“I just think you need something stronger to be able to show it’s total frustration. They could sell it for 30 percent. That’s good money. The Postal Service goes and buys a lot of stamps for that,” he joked, appearing weary of Berman’s constant dodging of his direct questions.
“I’m not going to rule on this now,” he said, ending the hearing with an admonition to Berman that the Postal Service is going to need a stronger argument to proceed to trial other than the law says it should be able to make maximum profit off of the sale.
The planned sale of the Berkeley post office has been met with throngs of passionate opponents, and a handful of them attended Thursday’s hearing. Some questioned why the Postal Service argues it is self-sustaining and unsupported by taxpayer dollars but is represented by lawyers from the taxpayer-funded Department of Justice.
Others pointed out that Richard Blum, head of the global real estate firm CBRE and husband of U.S. Sen. Diane Feinstein, was subcontracted by the Postal Service to handle the sale of dozens of its buildings, and that Feinstein is benefiting from the sale of the properties.
Harvey Smith, author of “Berkeley and the New Deal” and president of the National New Deal Preservation Association’s board, said the Postal Service shouldn’t resort to selling off the community’s treasured historical buildings when there are other ways it can make money.
“If they don’t want the buildings they should revert back to the people who paid for it. This building is located in one of the hottest markets in the country. They can renovate it and rent it out,” he said. “In a nutshell, the Postal Service is saying, ‘You don’t deserve these beautiful buildings to do your business in. We’ll give you these tacky little fluorescent-lit places.”
Smith dismissed the Postal Service’s claims about the overlay intentionally stifling the sale as nonsense, saying the civic center overlay predates its 2014 enactment by more than 100 years as part of a “City Beautiful Movement-style central park area.” In 1915, Berkeley’s first city-planning act drafted by Charles Henry Cheney envisioned a space called “Liberty Square,” and included the newly built post office.
But the current zoning overlay doesn’t just cover the post office, Smith said. “The overlay protects many buildings in that historic district,” he said.
David Welsh, a retired postal worker, said many who have rallied around the post office can’t stand to see it turned into a boutique hotel or restaurants.
“This is our legacy and heritage,” he said. “This is our public space. Why are they taking it away?”