BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 2797

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          Date of Hearing:  April 20, 2016 


                           Susan Talamantes Eggman, Chair

          AB 2797  
          (Chiu) - As Amended April 13, 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 for infrastructure costs for  
          the development of Seawall Lot 337, and expands the boundaries  
          of Seawall Lot 337.  Specifically, this bill:   

          1)Provides numerous definitions, pursuant to Seawall Lot 337,  
            and financing options for development.  

          2)Makes findings regarding the San Francisco Bay, the San  
            Francisco waterfront, public trust, and SB 815 (Migden),  
            Chapter 660, Statutes of 2007.  

          3)Expands the boundaries of Seawall Lot 337 to include Parcel 20  
            (P20), Third Street, and Terry Francois Boulevard, as  

          4)Provides that no action of the Department of Finance or the  
            State Controller is required for any action taken by the  


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            oversight board, the successor agency, the San Francisco Board  

          of Supervisors (BOS), or any other governmental body required to  
            act to amend the Mission Bay South redevelopment plan to  
            remove P20 from the Mission Bay South redevelopment project  
            area.  Provides exemptions to specified statues, which govern  
            the dissolution of redevelopment agencies, and would otherwise  
            prohibit P20 from being removed from the redevelopment plan.  
          5)Authorizes the Port, for Seawall Lot 337, to enter into  
            nontrust leases of development parcels, subject to specified  
            requirements, if the State Lands Commission (SLC) has approved  
            port advances from nontrust lease revenue for infrastructure,  
            pursuant to 13), below.  

          6)Authorizes the Port to enter into a 75-year nontrust lease  
            that terminates after January 1, 2094.  Requires a nontrust  
            lease to terminate no later than the later date of January 1,  
            2094, or the date 75 years after the Port first issues a  
            certificate of occupancy for the improvement on the leased  
            site or development parcel.  

          7)Authorizes the Port to use its nontrust lease revenue from the  
            development of parcels in Seawall Lot 337 to make advances to  
            fund Seawall Lot 337 infrastructure, if the State Lands  
            Commission (SLC) has approved Port advances from nontrust  
            lease revenue for infrastructure, pursuant to 13), below.  

          8)Prohibits revenue from being expended for historic piers or  
            historic structures on land subject to public trust use  
            restrictions, unless the SLC's executive officer has approved  
            the proposed uses of the pier or structure.  

          9)Requires SLC, for nontrust leases of Seawall Lot 337, to  


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            consider whether the Port will receive consideration equal to  
            the fair market value on terms consistent with prudent land  
            management practices based on specified procedures.  

          10)Requires the Port, following the BOS approval of the  
            development project, to submit to SLC the proposed disposition  
            and development agreement between the master developer and  
            Port governing the development of Seawall Lot 337.  

          11)Requires additional information, such as the proposed  
            procedures for the disposition of nontrust development  
            parcels, including a proposed financing plan, proposed  
            procedures for establishing the fair market value of each  
            nontrust lease of a development parcel, a description of  
            expected nontrust sources, and a description of how the Port  
            will select the developer of each development parcel.  

          12)Requires the Port to submit specified project documents,  
            following BOS approval for the development project of Seawall  
            Lot 337.  

          13)Requires the SLC, within 75 days after BOS approval of the  
            project and receipt of all required documentation, to either  
            approve or deny the Port advances from nontrust lease revenues  
            for Seawall Lot 337 infrastructure based on the information  
            provided and whether Port advances are consistent with the  
            goals of SB 815.  

          14)Requires the Port to bear the costs of any study or  
            investigation that the SLC undertakes, as specified.  

          15)Requires the Port to provide separate accounting and final  
            audit reports, as specified.  


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          16)Requires the Port to ensure repayment, with interest, of each  
            port advance within 50 years.  Authorizes the repayment period  
            to extend beyond 50 years with SLC approval.  

          FISCAL EFFECT:  This bill is keyed fiscal.  


          1)Public Trust and Granted Lands.  The common law doctrine of  
            the public trust (Public Trust Doctrine) protects 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, known as  
            public trust lands, are to be held in trust by the state for  
            the benefit of the people of California.

            Only in rare cases may the public trust be terminated, and  
            only where consistent with the purposes and needs of the  
            trust.  For over 100 years, in more than 300 statutes, the  
            Legislature has granted public trust lands to local trustees  
            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  


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          2)Port of San Francisco.  Under the Burton Act (Chapter 1333,  
            Statutes of 1968), the state conveyed certain state tidelands  
            along the San Francisco waterfront, generally extending from  
            Fisherman's Wharf to Candlestick Point, to the City and County  
            of San Francisco, through its Port, in 1969 in trust for  
            public trust and Burton Act trust purposes, subject to the  
            obligation on the part of the City and County of San Francisco  
            to assume $55 million in state debt obligations then existing  
            relating to the waterfront properties.  

            The San Francisco waterfront includes a number of seawall lots  
            controlled by the Port, which are triangular lots on the west  
            side of the Embarcadero that have been used for decades as  
            parking lots, a use that is inconsistent with the trust and  
            does not conform with the surrounding urban landscape.  SB 815  
            (Migden), Chapter 660, Statutes of 2007, freed trust use  
            restrictions from the seawall lots along the Embarcadero, and  
            allowed the Port to lease these properties at market rates for  
            non-trust purposes provided specified conditions were met.   
            These seawall lots, parcels of filled tidelands, included  
            Seawall Lot 337.  

            Revenues from these non-trust leases must be deposited into a  
            separate account and used for the preservation of historic  
            piers and construction or the construction and maintenance of  
            waterfront plazas and open space, as specified.  Before using  
            any revenues for any pier or structure subject to public trust  
            restrictions, the SLC's executive officer is required to  
            approve the proposed uses.  There are other requirements,  
            including that the non-trust lease must be for fair market  


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            value, subject to SLC's approval, and is in the best interest  
            of the state, among others.  The port is also authorized to  
            use part of the non-trust lease revenues, as specified, for  
            any purpose consistent with the public trust and the act.  SB  
            815 authorized leases for nontrust uses to have 75-year terms  
            until January 1, 2094, at which time the public trust  
            restrictions on the land are restored.  

          3)Bill Summary.  This bill authorizes the Port to use nontrust  
            lease revenue from the development of parcels on Seawall Lot  
            337 to make loans to fund infrastructure on Seawall Lot 337  
            with the approval of the SLC.  This bill specifies the  
            documentation and information that must be provided by the  
            Port, following the BOS approval, to the SLC to gain approval.  
             This bill also expands the boundaries of Seawall Lot 337 to  
            include P20, a parcel of land previously included in the  
            Mission Bay South redevelopment plan and provides the  
            exemptions to redevelopment law to enable the inclusion of P20  
            in the development proposal for Seawall Lot 337.  This bill  
            authorizes the Port to enter into a 75-year lease beyond the  
            January 1, 2094, limit in existing law.  This bill is  
            sponsored by the Port.  

          4)Author's Statement.  According to the author, "As a result of  
            SB 815, the Port initiated a planning process for Seawall Lot  
            337 and in 2009 the Port selected a development team led by  
            the San Francisco Giants for exclusive negotiations with the  
            Port for the development of Seawall Lot 337.  Since 1997,  
            Seawall Lot 337 has been used primarily as a surface parking  
            lot; most recently by an affiliate of the San Francisco  
            Giants.  The proposed development at Seawall Lot 337 and Pier  
            48 is 28 acres and includes former tidelands lying between  
            Mission Bay to the south and China Basin and the Giants  
            ballpark to the north.  


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            "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.  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.  
             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.   

            "The City and County of San Francisco, through the Port, the  
            San Francisco Public Utilities Commission, and San Francisco  
            Public Works, intends to acquire the public infrastructure  
            from the developer over time through non-Port revenue  
            generated from the project site in the form of Mello-Roos  
            community facilities district special taxes (CFD), tax  
            increment from an infrastructure financing district formed  
            over the project (IFD), and bonds secured by those revenues.   
            However, the tax increment revenues will not be immediately  
            available for early infrastructure costs.  Accordingly, the  
            proposed financing plan calls for the Port to advance a  
            portion of the ground rent from nontrust leases to CFD, which  


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            will use the funds to acquire and maintain the infrastructure  
            on behalf of the City.  These advances of ground rent (port  
            advances) would allow the Port to reimburse the Developer  
            Capital and pay off the accrued return, well before sufficient  
            CFD and IFD revenues would be available for that purpose,  
            substantially reducing financing costs.  The port advances  
            would be repaid, with interest, from CFD and IFD revenues.

            "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)Arguments in Support.  The City and County of San Francisco  
            argues, "Developed in concert with San Francisco's partners at  
            the SLC and the San Francisco Giants, AB 2792 would greatly  
            assist San Francisco in the development of the new Mission  
            Rock neighborhood in San Francisco's Mission Bay.  In addition  
            to having support of affordable housing, open space, public  
            transit, and other advocates, the larger public is now behind  
            the project.  In November of 2015, San Franciscans approved  
            the Mission Rock development project through Proposition D  
            with an overwhelming 74-26% vote."  

          6)Arguments in Opposition.  None on file.  

          7)Double Referral.  This bill was heard in the Natural Resources  


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            Committee on April 11, 2016, where it passed with a 9-0 vote.   



          City and County of San Francisco [SPONSOR]


                                                                    AB 2797

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          SPUR (San Francisco Bay Area Planning and Urban Research  

          San Francisco Housing Action Coalition



          None on file 

          Analysis Prepared by:Misa Lennox / L. GOV. / (916) 319-3958