BILL ANALYSIS Ó
AB 2797
Page 1
Date of Hearing: April 11, 2016
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
AB 2797
(Chiu) - As Amended April 5, 2016
SUBJECT: City and County of San Francisco: Mission Bay South
Project: redevelopment plan
SUMMARY: Authorizes the Port of San Francisco (Port) to loan
specified nontrust lease revenues to cover the infrastructure
costs for the development of Seawall Lot 337. Expands the
boundaries of Seawall Lot 337 and extends permissible lease
periods.
EXISTING LAW:
1)Protects, pursuant to the common law doctrine of the public
trust (Public Trust Doctrine), the public's right to use
California's waterways for commerce, navigation, fishing,
boating, natural habitat protection, and other water oriented
activities. The Public Trust Doctrine provides that filled
and unfilled tide and submerged lands and the beds of lakes,
streams, and other navigable waterways (public trust lands)
are to be held in trust by the state for the benefit of the
people of California.
2)Establishes that the State Lands Commission (SLC) is the
steward and manager of the state's public trust lands. SLC
AB 2797
Page 2
has direct administrative control over the state's public
trust lands and oversight authority over public trust lands
granted by the Legislature to local public agencies (granted
lands).
3)Grants in trust to the Port, pursuant to the Burton Act,
Chapter 1333, Statutes of 1968, administrative control over
the public trust lands in the harbor of San Francisco for
purposes of commerce, navigation, and fisheries.
4)Authorizes the Port, pursuant to SB 815 (Migden), Chapter 660,
Statutes of 2007, to lease all or any portion of designated
seawall lots free from use requirements established by the
public trust, the Burton Act trust, and the Burton Act
Transfer Agreement (hereinafter "nontrust leases"), provided
certain conditions are met, including:
a) The term of any individual non-trust lease, including
any extension of the term allowed by right of renewal, does
not exceed 75 years, and the non-trust lease will terminate
no later than January 1, 2094;
b) All revenues received by the Port from the non-trust
lease will be deposited in a separate account in the harbor
fund to be expended for the preservation of historic piers
and historic structures, or for the construction and
maintenance of waterfront plazas and open space required by
the special area plan. Prior to the use of revenues for
any pier of structure subject to public trust restrictions,
the executive officer of SLC must approve the proposed uses
of the piers or structures; and,
c) The non-trust lease is for fair market value subject to
the approval of SLC, which must find that the lease is
consistent with the terms of the public trust and Burton
Act trust, other than their restrictions on use, and that
it is in the best interest of the state.
5)Requires that, prior to the lease of Seawall Lot 337 for
AB 2797
Page 3
nontrust uses, a study is undertaken and approved by SLC.
Requires the study to analyze the need to retain
trust-consistent uses on the site. Requires that, prior to
the lease of Seawall Lot 337 for nontrust uses, the San
Francisco Bay Conservation and Development Commission has
amended the seaport plan to remove the port priority use
designation from lands to be leased for nontrust uses.
6)Allows the Port to lease Seawall Lot 330 to any person, free
of the public trust, the Burton Act trust, and the
restrictions of SB 815 if all specified conditions are met.
7)Authorizes the Port, conditioned on the approval of SLC, to
provide a rent credit or other waiver or deferral of rent in
connection with a nontrust lease of Seawall Lot 337 that
results in an effective rent to the port below fair market
value for affordable housing.
THIS BILL:
1)Defines 40 terms, many of which have already been defined in
prior Port granted land statutes, including "port advances"
which means, "nontrust lease revenues that the port uses to
pay directly or to reimburse the Seawall Lot 337 developer or
any district providing project-based public financing for
costs of infrastructure in accordance with the terms and
conditions of this act."
2)Makes numerous findings about San Francisco Bay, the San
Francisco waterfront, seawall lots, SB 815, and Mission Bay
South Redevelopment Project Area.
3)Declares it is critical that the Port be able to use nontrust
AB 2797
Page 4
lease revenues "to pay Seawall Lot 337 infrastructure costs to
minimize the cost of development capital and maximize the land
value that the Port is able to realize for preservation of its
historic piers and historic structures, and for other public
trust uses."
4)Expands the boundaries of Seawall Lot 337 to include portions
of Parcel P20, Third Street, and Terry A. Francois Boulevard.
5)Exempts specified actions amending the Mission Bay South
Redevelopment Plan from certain redevelopment agency
dissolution provisions.
6)Allows the Port to enter into 75-year leases that terminate
after January 1, 2094.
7)Allows the Port to use its nontrust lease revenues from
Seawall Lot 337 to make port advances to fund Seawall Lot 337
infrastructure.
8)Requires SLC to consider whether the Port will receive
consideration equal to fair market value on terms consistent
with prudent land management practices.
9)Requires SLC to consider whether to make all of the following
findings:
a) The disposition and development agreement, including the
plan of finance and use of Port advances, the procedures
for establishing rent for future nontrust leases of
individual development parcels, including appraisal
instructions, and other consideration to the port will
AB 2797
Page 5
provide the port with fair market value.
b) The submitted documentation identifies the projected
amount of port advances and the nontrust sources projected
to repay Port advances with interest. If port advances are
not projected to be repaid with interest within 40 years
after the Port makes its first Port advance, the
projections and other evidence shall demonstrate the
availability and viability of those sources for full
repayment within an additional period that the SLC finds
reasonable and consistent with this bill.
c) The master development on the whole is consistent with
the Port study.
d) The use of Port advances will not substantially
interfere with trust uses and purposes and will reduce
Seawall Lot 337 infrastructure financing costs.
e) The Port advances will generate increased revenues for
the trust, including revenues available for historic pier
and historic structure preservation.
f) The master development is consistent with the terms of
the public trust and the Burton Act trust, other than their
restrictions on uses.
g) The development is otherwise in the best interest of
the state.
AB 2797
Page 6
10)Prohibits port advances if the SLC cannot the make the
findings above.
11)Requires the Port to provide the SLC an accounting of all
nontrust sources and other Port revenue spent on Seawall Lot
337 annually, including any port advance.
12)Authorizes SLC to require the Port to take actions to remedy
any shortfall in repayments of port advances.
FISCAL EFFECT: Unknown
COMMENTS:
1)Public Trust. The foundational principle of the common law
Public Trust Doctrine is that it is an affirmative duty of the
state to protect the people's common heritage in navigable
waters for their common use. The traditional uses allowed
under the Public Trust Doctrine were described as
water-related commerce, navigation, and fisheries. As a
common law doctrine, the courts have significantly shaped the
Public Trust Doctrine in a number of important ways. Courts
have found that the public uses to which sovereign lands are
subject are sufficiently flexible to encompass changing public
needs. The courts have also found that preservation of these
lands in their natural state, so that they may serve as
AB 2797
Page 7
ecological units for scientific study, as open space, and as
environments that provide food and habitat for birds and
marine life, are appropriate uses under the common law Public
Trust Doctrine. Courts have also made clear that sovereign
lands subject to the Public Trust Doctrine cannot be sold into
private ownership.
2)Background on Granted Lands. For over 100 years, the
Legislature has granted public trust lands to local
governments so the lands can be managed locally for the
benefit of the people of California. There are over 80
trustees in the state, including the ports of Los Angeles,
Long Beach, San Diego, San Francisco, Oakland, Richmond,
Benicia, and Eureka. While these trust lands are managed
locally, SLC has oversight authority to ensure those local
trustees are complying with the Public Trust Doctrine and the
applicable granting statutes.
3)Port of San Francisco. In 1968, the Legislature enacted the
Burton Act, which transferred, in trust, the interest of the
state in, and the control and management of, the Port.
However, when this occurred, the Port's assets were in poor
condition. For example, 23 of the piers transferred in 1968
were virtually unusable for maritime purposes because of their
poor physical condition. Those piers which were structurally
sound were only marginally productive because containerized
shipping was already replacing break bulk shipping at the time
of the transfer.
The City was also required to assume $55 million of the
state's bond debt, which, according to the Port, hampered its
ability to make capital improvements to its assets. The age
and condition of Port facilities, some of which are historic
structures at the end of their useful life, combined with
their construction on filled tidelands in a high risk seismic
area, has created a significant capital funding challenge for
the Port.
In 2007, after lengthy discussions between the Port and SLC,
AB 2797
Page 8
the Legislature enacted SB 815. That statute recognized that
several of the seawall lots granted under the Burton Act,
including portions of Seawall Lot 337, ceased to be useful for
the promotion of the public trust except for the generation of
revenues for the public trust. SB 815 lifted the public trust
and the Burton Act use restrictions on the designated seawall
lots, subject to the requirement that the revenues be used by
the Port for preservation of historic piers and historic
structurers. The bill also authorized leases for nontrust
uses to have 75-year terms, with an end date of January 1,
2094.
4)According to the author:
The Port initiated a planning process for Seawall Lot
337 and in 2009, the Port Commission selected a
development team led by the San Francisco Giants for
exclusive negotiations with the Port for the
development of Seawall Lot 337. The proposal, known
as the Mission Rock project, would include
approximately 1,500 rental apartments, 40% of which
would be affordable to individuals and families
earning between 45% - 150% of area median income;
approximately 1.3 million square feet of office space;
3,100 parking spaces; and 250,000 square feet of
retail, manufacturing, and restaurants on the ground
floors of the buildings. Public improvements include
the installation of streets, sidewalks, 8 acres of
parks, public access areas, water, sewer, and
electrical utilities, and other infrastructure known
as "horizontal development." In addition, to address
the effects of climate change, the project sponsor
proposes to raise the elevation of portions of Seawall
Lot 337 and new streets within the site to be
resilient to future sea level rise of 55" and 100 Year
Storm events. The Developer will finance much of the
horizontal development; infrastructure costs are
currently expected to exceed $150 million.
AB 2797
Page 9
The Mission Rock project also includes the
rehabilitation of Pier 48 consistent with the
Secretary of the Interior's Standards for the
Treatment of Historic Properties. Pier 48 is one of
the Port's historic finger piers and is a contributing
resource to the Embarcadero Historic District, which
is listed on the National Register of Historic Places.
Under the proposed project, Pier 48 would be
renovated to become the expanded home for Anchor
Brewing Company, San Francisco's oldest and largest
manufacturing business. Anchor will host public tours
of its brewing operations, and the project will
include a restaurant and a new public boardwalk with
dramatic water and bridge views around the pier. The
project would entail seismic improvements to the
seawall along China Basin Park to the north and to the
east of Seawall Lot 337, including in front of Pier
48, to minimize the risk of lateral ground spreading
toward San Francisco Bay, which could seriously damage
the piles supporting the pier. As with all of the
Port's finger pier projects, the project's design and
mix of uses on Pier 48 are required to be consistent
with the Burton Act and the public trust.
The proposed legislation is necessary to address
challenges of financing the infrastructure and public
facilities required for the project, which the Port
has come to better understand since 2007. The
legislation would remove substantial obstacles to the
development of the project and the public benefits it
will provide.
5) Amendments. The bill has some conflicting findings and a
convoluted SLC approval process. In addition, it is unclear
when the Port advance must be repaid and what happens if it
is not. The bill might also reduce SLC oversight over
nontrust leases the Port enters into. The author and
committee may wish to amend the bill to:
AB 2797
Page 10
a) Remove the findings in subdivision (g) of Section 2;
b) Specify that nontrust lease revenues are a loan in
subdivision (y) of Section 1 and (m) of Section 2;
c) Ensures that SLC maintains oversight and approval over
nontrust leases;
d) Clarify that the Port must receive SLC approval prior
to any port advances; and,
e) Set a repayment deadline of 50 years after a port
advance is made and require any extension of the repayment
deadline be subject to SLC approval.
This bill has been significantly amended prior to this
hearing. The process of using port advances is extremely
complex, and involves large sums of money that will
eventually be used to further the public trust. As the bill
moves forward, the author may wish to consider continuing to
work with all interested parties to refine the provisions of
this bill.
6) Double Referral. This bill has been double referred to the
Assembly Local Government Committee.
REGISTERED SUPPORT / OPPOSITION:
AB 2797
Page 11
Support
Port of San Francisco (sponsor)
San Francisco Mayor Edwin Lee (sponsor)
San Francisco Housing Action Coalition
The San Francisco Bay Area Planning and Urban Research
Association
One individual
Opposition
None on file
Analysis Prepared by:Michael Jarred / NAT. RES. / (916) 319-2092
AB 2797
Page 12