BILL ANALYSIS Ó
SENATE COMMITTEE ON NATURAL RESOURCES AND WATER
Senator Fran Pavley, Chair
2015 - 2016 Regular
Bill No: AB 2797 Hearing Date: June 28,
2016
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|Author: |Chiu | | |
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|Version: |June 22, 2016 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Matthew Dumlao |
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Subject: City and County of San Francisco: Mission Bay South
Project: redevelopment plan
BACKGROUND AND EXISTING LAW
Since 1850, the California Legislature has periodically granted
public trust lands to local jurisdictions to hold and manage
according to various terms and conditions. These lands remain
subject to the Public Trust Doctrine, which 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
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 State Lands Commission
(SLC) oversees the grants to ensure the use and management of
the trust lands is consistent with the Public Trust Doctrine and
granting statutes.
In 1968, the tide and submerged lands along San Francisco's
waterfront were transferred from the State to the City and
County of San Francisco through the Burton Act. The City and
County of San Francisco assumed $55 million in state debt
obligations, and the state gave the San Francisco Port
Commission jurisdiction over San Francisco's tide and submerged
lands. The SLC maintains oversight authority over public trust
lands granted by the Legislature to local public agencies,
including the tide and submerged lands transferred in the Burton
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Act.
The San Francisco waterfront includes a number of seawall lots
controlled by the Port of San Francisco (Port). These seawall
lots were created when tidelands between the seawall and the
shore were filled in with rock and other debris. In 2007, the
Legislature passed and the Governor signed SB 815 (Migden,
Chapter 660, Statutes of 2007), which addressed several seawall
lots granted under the Burton Act. SB 815 deemed five seawall
lots (specifically, numbers 314, 321, 321-1, 324, and 337) were
no longer needed for public trust purposes because they were
being used mainly as parking lots and were cut off from the Bay
by streets. SB 815 freed trust use restrictions from those
specified seawall lots and allowed the Port to lease these
properties at market rates for non-trust purposes, provided
specified conditions were met. Revenues from these non-trust
leases must be deposited into a separate account and used for
the preservation of historic piers 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
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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
objectives of the proposed project.
The Mission Rock project calls for substantial investments in
public infrastructure, including new streets, sidewalks, bicycle
paths, and utility infrastructure. 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
AB 2797 would authorize the Port of San Francisco to loan
specified nontrust lease revenue for infrastructure costs for
the development of Seawall Lot 337, and extends the boundaries
of Seawall Lot 337. Specifically, AB 2797:
Provides numerous definitions covering the entities
involved in development of Seawall Lot 337, the financing
options for development, and the waterfront plans adopted
by the entities overseeing San Francisco's waterfront near
Seawall Lot 337.
Makes findings and declarations regarding San
Francisco's seawall lots in general and Seawall Lot 337 in
particular; the San Francisco waterfront; the proposed
redevelopment project on Seawall Lot 337; the high cost of
improving the infrastructure on Seawall Lot 337; possible
financing options to pay for the infrastructure
improvements; the role of the San Francisco Bay
Conservation and Development Commission (BCDC) in
protecting the Bay's natural resources; the BCDC's plans
governing the protection of historic piers near Seawall Lot
337; and the value of the proposed improvements along the
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waterfront to the public.
Allows the boundaries of Seawall Lot 337 to be revised
to conform to new street and/or park boundaries, as
specified.
Provides exemptions to specified statutes, which govern
the dissolution of redevelopment agencies, and would
otherwise prohibit Parcel P20 (a parcel that lies partially
within the southern portion of Seawall Lot 337) from being
removed from the Mission Bay South redevelopment plan and
redevelopment project area.
Allows a nontrust lease of Seawall Lot 322-1 (which was
included in SB 815 from 2007) to be entered into for the
same duration as permitted for other designated seawall
lots.
Declares that Pier 48, the wharf between Pier 48 and
Pier 50, and the portion of Seawall Lot 337 are no longer
classified as a "port priority use area."
Amends BCDC's special area plan to permit a
redevelopment project on Pier 48 provided the project is
consistent with certain standards.
Reasserts that BCDC has authority to approve or deny
permits for mixed-use development on Pier 48.
Authorizes the Port to enter into a nontrust lease that
will not exceed 75 years from the initial occupancy date of
the improvements developed on the leased site or
development parcel. In no event will the term of the
nontrust lease extend beyond December 31, 2120.
Authorizes the Port, with SLC approval, to use nontrust
lease revenues from development parcels in Seawall Lot 337
to make port advances to fund Seawall Lot 337
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 the Port to provide separate accounting and
final audit reports, as specified.
Requires the 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 approval of the development
project from the San Francisco Board of Supervisors, to
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submit to the SLC the proposed disposition and development
agreement between the master developer and Port governing
the development of Seawall Lot 337.
Requires the Port to bear the costs of any study or
investigation that the SLC undertakes, as specified.
Requires the Port to ensure repayment, with interest, of
each port advance within 50 years, or longer with SLC
approval.
ARGUMENTS IN SUPPORT
The City and County of San Francisco and the Port of San
Francisco are sponsoring this bill.
The author of the bill argues that "AB 2797 will facilitate the
development of the new Mission Rock neighborhood in San
Francisco by, among other provisions, allowing the Port of San
Francisco to use nontrust lease revenues to finance the cost of
the infrastructure for the project."
In support of this bill, the Port argues that "Many of the
proposed public infrastructure improvements will further trust
purposes. The majority of planned open space will enjoy direct
views of San Francisco Bay. Improvements to the seawall in
front of Pier 48 will help preserve this important historic
trust asset." Furthermore, the Port says the project will be
consistent with sea level rise projections.
The Port also argues that by "authorizing the use of nontrust
lease revenues as an additional source of early infrastructure
funding will reduce infrastructure financing costs and increase
the underlying land value accruing to the harbor fund, with the
advanced ground rents ultimately repaid, with interest, to the
harbor fund."
ARGUMENTS IN OPPOSITION
None received.
COMMENTS
This bill's goal is to find a way to finance the development:
The proposed Mission Rock project calls for new streets, bicycle
paths, utility infrastructure, eight acres of park space, and
adjustments to the elevation of Seawall Lot 337, all of which
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will be very expensive. To finance this project, the developer
will provide equity financing. The City and County of San
Francisco intends to acquire the public infrastructure from the
developer over time through non-Port revenue generated from the
project site in the form of special taxes, tax increment, and
bonds secured by those revenues. However, the tax increment
revenues will not be immediately available for early
infrastructure costs. Therefore, this bill would allow the Port
to advance a portion of the nontrust lease revenue. These
advances would allow the Port to reimburse the developer's
equity and pay off the accrued return on developer equity well
before funding from tax increment would be available for that
purpose. Ultimately the Port advances would be repaid, with
interest, from the special tax and tax increment revenues.
Changes to the termination dates specified in SB 815:
SB 815 establishes January 1, 2094 as the outside termination
date for nontrust leasing terms of 75 years at Seawall Lot 337.
Section 7 of SB 815 requires that all uses on Seawall Lot 337
shall be consistent with the public trust, the Burton Act trust,
and Burton Act transfer agreement. SB 815 further says that
"all structures, buildings, and appurtenances on the designated
seawall lots not consistent with the purposes of the public
trust, the Burton Act trust, and Burton Act transfer agreement
shall be removed or modified, including any necessary
restoration or remediation of the seawall lots, to facilitate
public trust uses."
The proposed project, however, is a phased project: the Port and
the project sponsor anticipate construction over 10-15 years
from project approval in 2017. Some vertical construction could
occur into the mid-2030's. For this reason, AB 2797 changes the
existing 2094 outside date to 2120 in order to provide full 75
year lease terms for each of the project's development parcels.
Clarification of Seawall Lot 337 boundaries:
The Mission Rock project would revise the boundaries of the
Seawall Lot 337 to account for how the streets are finally
configured. If Terry Francois Boulevard is removed, the
boundary to the north will be the China Basin Park.
Changes to the classification of Pier 48
As part of the proposed Pier 48 historic rehabilitation and
reuse project, the project sponsors will need a major permit
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from BCDC for planned seismic improvements for the pier. The
major permit process allows BCDC to ensure that the project will
provide maximum feasible public access around the pier.
However, Pier 48 is also subject to certain BCDC policies - the
Replacement Fill Policy and the port priority use designation -
that do not apply to the Port's other historic finger piers and
that may hinder the Port's ability to achieve its historic
preservation and public access goals for the pier. The Port
proposes that Pier 48 be exempted from these policies and that
Pier 48 be treated like other piers in the embarcadero Historic
District. The Port also proposes that the port priority use
designation be removed from both Pier 48 and Seawall Lot 337.
Pier 48 is currently designated an inactive cargo terminal, a
legacy from when the pier was used for freight rail service.
However, the historic use of Pier 48 for freight cargo
operations is no longer viable due to a number of factors,
including the elimination of rail service to the piers.
SUPPORT
City and County of San Francisco, Mayor Edwin M. Lee (Sponsor)
Port of San Francisco (Sponsor)
South Beach Mission Bay Business Association
OPPOSITION
None received.
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