BILL ANALYSIS Ó ----------------------------------------------------------------- | | | SENATE COMMITTEE ON NATURAL RESOURCES AND WATER | | Senator Fran Pavley, Chair | | 2011-2012 Regular Session | | | ----------------------------------------------------------------- BILL NO: AB 418 HEARING DATE: June 28, 2011 AUTHOR: Ammiano URGENCY: No VERSION: June 23, 2011 CONSULTANT: Marie Liu DUAL REFERRAL: No FISCAL: Yes SUBJECT: Tidelands and submerged lands: City and County of San Francisco: Pier 70. BACKGROUND AND EXISTING LAW Section 3 of Article X of the California Constitution prohibits all tidelands within two miles of any incorporated city, city and county, or town from being granted or sold to private parties unless the Legislature finds that these tidelands are not used or necessary for navigation. The Legislature may impose conditions on these sales and grants to protect the public interest. Chapter 1333 of the Statutes of 1968, otherwise known as the Burton Act, allowed the granting of the Port of San Francisco from the state to the City and County of San Francisco. The Act allows San Francisco to operate, manage, regulate, and improve the granted lands in a manner consistent with the public trust. Allowable activities include: activities for the promotion and accommodation of commerce and navigation; and the construction, maintenance, and operation of public buildings, parks, and public educational and recreational facilities. The Burton Act also allows San Francisco to lease portions of the granted lands for periods up to 66 years for uses that are consistent with the public trust and the state's commerce and navigation needs. Revenues from the leases and other uses of the granted lands are deposited into the Harbor Trust Fund (Harbor Fund) and may only be used for the management of San Francisco's granted trust lands. PROPOSED LAW This bill removes and impresses the public trust on several parcels within San Francisco's granted lands that are managed by the Port of San Francisco (Port). This bill is divided into two main sections - Pier 70 and Seawall Lot 330. 1 Regarding Pier 70, this bill would: Authorize the State Lands Commission (Commission) to approve an exchange of trust lands within Pier 70 to allow for the development of the area, subject to multiple conditions, including: o The lands being exchanged out of the public trust and Burton Act trusts are filled so that they are no longer tidelands or navigable waterways; o The lands being impressed with the trust have a monetary value equal to or greater than the monetary value of the lands being exchanged out of the trust; o The lands being impressed with the trust will provide a significant benefit to the trust; o There is public access to the trust lands and streets, and other transportation facilities will provide access to shoreline improvements; and o The exchange is in the best interests of the statewide public. Allow the Port to continue to hold title to lands that are released from the public trust (e.g. trust termination lands) so long as they are managed as assets of the public trust. Any revenues generated from these trust termination lands must be deposited into the Harbor Fund. The Harbor Fund may be used by the Port for the management of the trust termination lands subject to certain conditions. Allow historic buildings on the trust lands to be leased for non-trust purposes so long as the buildings are rehabilitated to federal restoration standards, the leases allow for public access to view the historic architectural amenities of the buildings, and the Executive Officer of the Commission finds that the leases are part of an overall program that furthers trust purposes. Make numerous findings and declarations regarding the history of Pier 70, the future plans for the area, and the need for a trust exchange. Regarding Seawall Lot 330, this bill would: Terminate the public trust on Seawall Lot 330 in perpetuity. Allow the Port to convey the title and interest of Seawall Lot 330 to any person so long as the Port receives at least fair market value. Revenues or considerations from the sale must be used for trust purposes. Considerations may be in the form of improvements to other trust lands within the Port's jurisdiction. Require the Commission to review the appraisals used to determine the fair market value of the lot. 2 Require the Port, as a condition of selling the fee title to Seawall Lot 330, to impress new lands with the public trust. The new lands must be within or adjacent to the San Francisco Bay, have a total area equal to or greater than the area of Seawall Lot 330, and be useful for trust purposes as determined by the Commission. Make numerous findings and declarations regarding extensive needed capital improvements along the waterfront, the insufficient revenues from the trust lands to fund such improvements, the host agreement for the 34th America's Cup, the economic impacts of hosting the 34th America's Cup, and the current underutilization of Seawall Lot 330. ARGUMENTS IN SUPPORT According to the Port of San Francisco, in support of the bill, "A trust realignment will make both trust and non-trust parcels more valuable by enabling major economic development and waterfront restoration and providing for the preservation of ongoing ship repair and historic resources, while creating a vibrant and authentic historic district that will activate new waterfront open spaces and development?Market potential and community consensus suggest that cultural, institutional, office, biotech, other commercial, and perhaps a limited amount of residential uses, most of which are not consistent with the public trust, should be developed at Pier 70 in areas that are least suitable for public trust uses, as reflected in the Master Plan. Higher land value uses are essential to generating the revenues needed to realize Pier 70's potential and the Port's overarching goals. Realigning the land use regulations is imperative to realizing the vision of a revitalized Pier 70." ARGUMENTS IN OPPOSITION None received. COMMENTS Development plans for Pier 70: Pier 70 is a 69-acre brownfields site on San Francisco's Central Waterfront that has been used for ship building and repair for over 150 years. In April 2010, the Port published its Master Plan for the Pier 70 area to create a "vibrant and authentic historic district." Plans include preserving and integrating ongoing ship repair operations; providing sites for office, research, light industry, commercial, and recreational uses; remediating past environmental contamination; and extending the San Francisco Bay Trail and Blue Greenway. The Pier 70 area is comprised of parcels acquired from the 3 state, the federal government, and private parties. The result is a patchwork of sites subject to public trust restrictions. According to the author, the purpose of this bill is to allow a public trust swap that will consolidate trust properties along the water's edge to promote maritime uses and public access. In exchange, upland portions of the area will be exchanged out of the public trust for development. Trust termination lands at Pier 70 - Expanded uses- and revenues- for the Harbor Fund: The Committee may wish to find that the authorization for the Pier 70 trust exchange is generally consistent with past exchanges approved by the Legislature. One notable unique aspect of this authorization, however, is the allowance for the Port to remain in control of some of the non-trust lands, or trust termination lands, and use the Harbor Fund for some management costs. Under the bill, the Port would manage these lands as an investment of sorts - revenues generated from the trust termination lands will be deposited in the Harbor Fund. The Port would, in exchange, have a limited ability to use the Harbor Fund to manage and administer the non-trust lands, which is a new use of the Harbor Fund. According to the Port, it is their belief that more revenues will be generated on the trust termination lands than will be needed to administer the lands - thereby ensuring a net benefit for the Harbor Fund. The committee should note that the author intends to work with the Commission to draft a future amendment to this bill that would add a reporting requirement in approximately 35 years to assure that the Harbor Fund was held whole under this authorization and potentially require the Port to make the Harbor Fund whole, if necessary. Seawall Lot 330 and America's Cup: On December 31, 2010, San Francisco was chosen as the host location for the 34th America's Cup in 2013. A host and venue agreement between San Francisco and the America's Cup Event Authority (Authority). This agreement, however, is contingent on California Environmental Quality Act compliance; improvements to and use of specific facilities; and city, state, and federal approvals. These are all currently underway. The host agreement includes approximately $55 M in improvements to the waterfront (mostly pier improvements and public viewing facilities), which will be made by the Authority with private funds. In exchange, the Port will grant the Authority long-term leases, probably for two sites, one of which is Seawall Lot 330. 4 The Authority will receive rent credits equal the capital improvements that the Authority actually makes to the waterfront. Seawall Lot 330 currently serves as a surface parking lot. The Legislature has previously found that Seawall Lot 330 was no longer useful to the trust (SB 815 (Migden, 2007)) and allowed the Port to use the property for non-trust purposes on a temporary but long-term basis (up to 75 years) so long as the revenues from the lot continue to be used for specific trust purposes. This bill proposes to permanently release the lot from the public trust and further allow the Port to sell the property for fair market value, consistent with the host agreement. The author estimates that the property is worth approximately $25 M. The proceeds from this sale will essentially decrease the amount of rent credits the Authority will receive from the Port. Presumably the Authority will develop the property for its highest and best use, residential development. Under the host agreement, if the Legislature does not allow the property sale and permanent lifting of the public trust, the Port will grant the Authority a 75-year lease on Seawall Lot 330, which would preclude residential development. Thus the Port will have to offer the Authority significantly more rent credits. Authority to sell trust lands to a private entity outside of an equal-value trust exchange is unprecedented : In the past, the Legislature has approved the sale and lifting of the public trust on trust lands, but only as part of an exchange so that the state receives trust land that is equal in value, as required by §6307 of the Public Resources Code. For example, the Legislature has previously allowed the sale of a small portion of Seawall Lot 330 (0.52 acres) for the construction of a 22-store condominium tower. Replacement lands of equal value were placed in trust and the Port additionally agreed to use $9M of the sale proceeds to construct the Brannan Street Wharf (Chapter 310, Statutes of 1987). The requirement that the exchange is equal in value assures that the statewide public's interest is kept whole in the sale. This bill would obligate the Port, as a condition of selling Seawall Lot 330, to impress the public trust on new lands in the San Francisco Bay that are at least equal in area of Seawall Lot 330, but not equal in value, thereby arguably not necessarily keeping the statewide public interest whole. The Committee may wish to consider whether it is in the best interest of the state 5 to receive less revenue or land value than normal in these land exchanges, in exchange for the Authority making upfront investments to the waterfront that the Port otherwise does not have the cash flow to do. Permits are required by the San Francisco Bay Conservation and Development Commission (BCDC) : This bill contains language that specifies how San Francisco will satisfy BCDC's regulatory requirements in order to receive a development permit. BCDC's standard practice is to only issue a permit after the local agency has given final approval for the project. As recently amended, this bill would require BCDC to issue a permit before the local government's final approval, which means BCDC might have to revise its permits if the local government makes any changes before final approval. The author contends that BCDC's standard process does not work well for large projects that are built in phases over time. The committee may wish to delete the recent amendments to this section of the bill to allow BCDC and the Port to continue conversations on how best to address the permit and approval sequencing for the Pier 70 project. SUGGESTED AMENDMENTS AMENDMENT 1 Beginning on page 18, line 40, delete "that is consistent with an approved financial and land use plan for the Pier 70 area as permitted under charter section B7.310" and insert "and city final approval of all necessary amendments to the city's general plan, planning code, and zoning maps." SUPPORT City and County of San Francisco Dogpatch Neighborhood Association GreenTrustSF- Central Waterfront Neighborhood Parks Council Northern California District Council of the International Longshore and Warehouse Union Port of San Francisco Potrero Boosters Neighborhood Association San Francisco Architectural Heritage San Francisco Building and Construction Trades Council San Francisco Chamber of Commerce San Francisco Planning and Urban Research Association OPPOSITION None Received 6 7