BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |AB 2797                          |Hearing    |6/15/16  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Chiu                             |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |4/13/16                          |Fiscal:    |Yes      |
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          |Consultant|Weinberger                                            |
          |:         |                                                      |
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            City and County of San Francisco:  Mission Bay South Project:   
                                 redevelopment plan



          Modifies state laws governing state tideland property managed by  
          the Port of San Francisco.


           Background 

           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.

          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.  The 1968 Burton Act resulted in  
          transferring the state tidelands along San Francisco's  
          waterfront to the City and County of San Francisco, which  
          assumed $55 million in state debt obligations, and gave the San  
          Francisco Port Commission jurisdiction over San Francisco's tide  
          and submerged lands.  The State Lands Commission (SLC) is the  
          steward and manager of the state's public trust lands and  







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          maintains oversight authority over public trust lands granted by  
          the Legislature to local public agencies.

          The San Francisco waterfront includes a number of seawall lots  
          controlled by the Port, 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.  In 2007, the  
          Legislature freed trust use restrictions from specified seawall  
          lots and allowed the Port to lease these properties at market  
          rates for non-trust purposes provided specified conditions were  
          met (SB 815, Migden, 2007).  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 must approve the proposed uses.  The non-trust  
          lease must be for fair market value, subject to SLC's approval,  
          and in the best interest of the state.  The port is 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.

          Included among the seawall lots subject to SB 815's provisions  
          is Seawall Lot 337, which currently functions as the San  
          Francisco Giants' parking lot in Mission Bay, located  
          immediately south of AT&T Park.  After SB 815's enactment, the  
          Port initiated a planning process for Seawall Lot 337 and in  
          2009, the Port Commission selected a development team led by an  
          affiliate of the San Francisco Giants for exclusive negotiations  
          with the Port for the development of Seawall Lot 337,  
          rehabilitation and reuse of Pier 48, and expansion of China  
          Basin Park.  The Giants' proposal, known as the Mission Rock  
          project, includes 8 acres of parks; approximately 1,500 rental  
          apartments, 40% of which would be designated affordable units to  
          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.  Seventy four percent of San Francisco voters  
          approved Proposition D in November 2015, approving a height  
          increase for this proposed project and endorsing the policy  








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          objectives of the proposed project.  

          The Mission Rock project calls for substantial investments in  
          public infrastructure, including new streets, sidewalks, bicycle  
          paths, utility infrastructure, and 8 acres of parks.  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 Mission Rock project site to  
          be resilient to future sea level rise.  SB 815's provisions did  
          not take into account the need to finance these infrastructure  
          investments.  Port officials want the Legislature to allow the  
          Port to use specified revenues to finance these infrastructure  
          costs and to make additional modifications to state law to  
          accommodate other aspects of the Mission Rock development that  
          were not contemplated when SB 815 was enacted.


           Proposed Law

           Assembly Bill 2797 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, AB 2797:   
                 Provides numerous definitions, pursuant to Seawall Lot  
               337, and financing options for development.  

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

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

                 Provides exemptions to specified statutes, which govern  
               the dissolution of redevelopment agencies, and would  
               otherwise prohibit P20 from being removed from the Mission  
               Bay South redevelopment plan and redevelopment project  
               area.  

                 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  








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               infrastructure.  

                 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.  

                 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.  

                 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.  

                 Requires SLC, for nontrust leases of Seawall Lot 337, to  
               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.  

                 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.  

                 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.   


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









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                 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.  

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

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

                 Requires the Port to ensure repayment, with interest, of  
               each port advance within 50 years, or longer with SLC  
               approval.


           State Revenue Impact

           No estimate.


           Comments

           1.  Purpose of the bill  .  Developed in concert with San  
          Francisco's partners at the SLC and the San Francisco Giants, AB  
          2797 would greatly assist San Francisco in the development of  
          the new Mission Rock neighborhood in San Francisco's Mission  
          Bay.  The bill 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.  In addition to having support of affordable housing, open  
          space, public transit, and other advocates, San Francisco's  
          voters strongly supported the project.  AB 2797 removes  
          substantial obstacles to the development of the Mission Rock  
          project and the public benefits it will provide.

          2.   RDA dissolution exemption  .  AB 2797 clarifies the status of  
          a narrow strip of land located along the northern line of the  
          realigned Mission Rock Street, known as Parcel P20. Under the  
          land transfer agreements for Mission Bay, the public trust and  
          Burton Act trust restrictions were removed from proposed  
          development parcels and imposed on certain proposed open space  








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          and street segments, including Parcel P20.  Under a related land  
          transfer agreement, the Port agreed to lease the trust property  
          to the redevelopment agency when required for development.  The  
          Port continues to hold Parcel P20, which has been used for  
          parking under the current Seawall Lot 337 lease.  AB 2797  
          authorizes the successor agency to the San Francisco  
          Redevelopment Agency to remove Parcel P20 from the Mission Bay  
          South Redevelopment Plan and related plans and agreements, which  
          would not otherwise be authorized under state laws governing the  
          dissolution of former redevelopment agencies.  By exempting San  
          Francisco's redevelopment successor agency from provisions of  
          state law governing former redevelopment agencies' dissolution,  
          AB 2797 could establish a precedent that invites similar  
          exemption requests from other jurisdictions. However, there are  
          unique circumstances that may justify this exemption that would  
          not apply in other jurisdictions.  Specifically, parcel P20 was  
          never transferred to the former redevelopment agency and the  
          changes that will be made to the former redevelopment agency's  
          Mission Bay South project area and redevelopment plan may  
          benefit the state by facilitating revenue-generating development  
          on Seawall Lot 337 that will advance public trust purposes.  To  
          lessen the possibility that AB 2797 will set a precedent for  
          future exemptions, the Committee may wish to consider amending  
          the bill to include legislative declarations citing the unique  
          circumstances that justify the bill's exemptions from  
          redevelopment dissolution laws.

          3.   Double-referred  .  The Senate Rules Committee has ordered a  
          double-referral of AB 2797, first to the Senate Governance &  
          Finance Committee, which hears bills relating to former  
          redevelopment agencies, and then to the Senate Natural Resources  
          & Water Committee which has jurisdiction over bills relating to  
          state tidelands.  Stakeholders in the development of Seawall Lot  
          337, including the Port, the State Lands Commission, and the Bay  
          Conservation and Development Commission, are engaged in  
          discussions about possible amendments to AB 2797 that would,  
          among other things, clarify numerous definitions, avoid  
          potential conflicts with language enacted by SB 815, and make  
          other changes recommended by stakeholders.  However, none of the  
          amendments under discussion propose substantive changes to the  
          portions of the bill which fall within the Senate Governance &  
          Finance Committee's jurisdiction.  As a result, the possible  
          amendments will be addressed in Senate Natural Resources & Water  
          Committee if the bill is approved by the Senate Governance &  








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          Finance Committee.


           Assembly Actions

           Assembly Natural Resources Committee:  9-0
          Assembly Local Government Committee:  8-0
          Assembly Appropriations Committee:20-0
          Assembly Floor:               26-0


           Support and  
          Opposition   (6/9/16)


           Support  :  City and County of San Francisco; SPUR (San Francisco  
          Bay Area Planning and Urban Research Association); San Francisco  
          Housing Action Coalition.

           Opposition  :  Unknown.



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