BILL ANALYSIS Ó
AB 2797
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
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
specified.
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.
COMMENTS:
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
statutes.
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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.
REGISTERED SUPPORT / OPPOSITION:
Support
City and County of San Francisco [SPONSOR]
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SPUR (San Francisco Bay Area Planning and Urban Research
Association)
San Francisco Housing Action Coalition
Individual
Opposition
None on file
Analysis Prepared by:Misa Lennox / L. GOV. / (916) 319-3958