BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2797 (Chiu) - City and County of San Francisco: Mission Bay
South Project: redevelopment plan
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|Version: June 22, 2016 |Policy Vote: GOV&F. 6 - 1, |
| | N.R.&W. 6 - 2 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 8, 2016 |Consultant: Mark McKenzie |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2797 would authorize the Port of San Francisco
(Port) to borrow non-trust lease revenues to pay for
infrastructure and other developer advances related to
development projects on Seawall Lot 337 (Misson Rock Project),
extend the final termination dates of any non-trust lease terms
from 2094 to 2020, and make other changes to provisions of law
pertaining to San Francisco's waterfront, as specified.
Fiscal
Impact:
Unknown, significant State Lands Commission (SLC) costs to
review development project documents, review and approve
non-trust leases, make fair market value determinations, and
approve or disapprove the Port's use of non-trust lease
revenues for specified purposes. These SLC costs must be
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reimbursed by the Port.
Unknown ongoing SLC costs (General Fund) for oversight of the
non-trust leases and land uses in the project area through
2120. Staff notes that the current termination date for any
authorized non-trust leases is 2094.
Unknown temporary loss of local trust revenues, likely in
excess of $150 million, for 50 or more years, for loans of
non-trust revenues to the Port to pay for Seawall Lot 337
infrastructure (including a return on developer equity) or to
reimburse the developer directly for those costs. These costs
represent a diversion of funds that would otherwise be used to
preserve historic piers and structures, or the construction
and maintenance of waterfront plazas and open space,
consistent with public trust purposes.
Likely minor costs to the San Francisco Bay Conservation and
Development Commission (BCDC) to update and reprint the
seaport plan to reflect the removal of Pier 48 form the port
priority use area designation, as specified. (General Fund)
Background: The 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
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
AB 2797 (Chiu) Page 2 of
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controlled by the Port, some of which have been developed, but
many 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), Chap. 660/2007,
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.
Revenues from these non-trust leases must be deposited into a
separate account and used for the preservation of historic piers
and structures 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 non-trust uses to have a
term of up to 75 years, and specified that any non-trust leases
will terminate no later than January 1, 2094, at which time the
public trust restrictions on the land are restored, and any
improvements that are inconsistent with public trust purposes
must be removed or modified.
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
objectives of the proposed project.
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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.
Proposed Law:
AB 2797 would authorize the Port of San Francisco to borrow
non-trust lease revenues to pay for infrastructure and other
developer advances related to development projects on Seawall
Lot 337, extend the termination dates of any non-trust lease
terms from 2094 to 2020, and make other changes to provisions of
law pertaining to San Francisco's waterfront. Specifically, AB
2797:
Provides numerous definitions, and specifies that the
definitions supercede any previous definitions specified in
SB 815 or AB 2549 (Chap. 757/2012).
Makes numerous findings regarding the San Francisco Bay,
the San Francisco waterfront, public trust, and SB 815.
Expands the boundaries of Seawall Lot 337 to include
Parcel 20 (P20), Third Street, and Terry Francois
Boulevard, subject to approval by the SLC, 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 a non-trust lease of Seawall Lot 322-1, under
the same terms that apply to other seawall lots, as
provided in SB 815.
Removes Pier 48 from the specified "port priority use
area designation, as specified.
Authorizes the Port, for Seawall Lot 337, to enter into
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non-trust leases of development parcels, subject to
specified requirements, if the SLC has approved port
advances from non-trust lease revenue for infrastructure.
Removes the current January 1, 2094 termination date for
any non-trust leases, and instead authorizes an individual
non-trust lease to have a maximum term of 75 years from the
date of initial occupancy of the improvements. The term of
any non-trust lease shall not extend beyond December 31,
2120.
Authorizes the Port to use its non-trust lease revenue
from the development of parcels in Seawall Lot 337 to make
advances to fund Seawall Lot 337 infrastructure, if the SLC
has approved Port advances from non-trust lease revenue for
infrastructure (as defined in the bill).
Requires SLC, for non-trust 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 board of supervisors
(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, and other specified project documents.
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 submit a copy of the proposed
non-trust lease to the executive director of the SLC,
following SLC approval and prior to entering into the
lease. Unless the executive officer provides written
determination that the lease is inconsistent with the SLC's
original approval within 30 days, the Port may enter into
the lease.
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Requires the Port to bear the costs of any study or
investigation that the SLC undertakes, including SLC staff
time related to the Port's submittal, as specified.
Requires the Port to provide separate accounting and
final audit reports related to non-trust leases and other
revenues received in connection with Seawall Lot 337, as
specified.
Requires the Port to ensure repayment, with interest, of
each port advance within 50 years, and authorizes the Port
to extend the repayment period beyond 50 years with SLC
approval, as specified.
Upon termination of the 75-year non-trust lease term for
a development parcel, all structures, buildings, and
appurtenances on the parcel that are not consistent with
the public trust must be "repurposed," (rather than
removed, as currently specified), or modified to facilitate
public trust uses.
Staff
Comments: This bill makes several substantive changes to San
Francisco's existing authority (through the Port) to lease
specified trust lands for non-trust purposes.
AB 2797 would allow non-trust lease revenues to be used to make
"port advances" to fund the construction of Seawall Lot 337
infrastructure, including planning and design and a return on
developer equity. "Seawall Lot 337 infrastructure" includes
water, sewer, stormwater management, and other utility
installations, streets, roadways, sidewalks, parks, public
access and open space areas, shoreline improvements, and other
public facilities. "Port advances" means a loan of non-trust
lease revenues from Seawall Lot 337 to a district or other
entity providing project-based public funding to pay directly or
to reimburse the Seawall Lot 337 developer for costs of
infrastructure. Based on these definitions, it appears that the
intent would be for the developer to pay for infrastructure
costs, as specified, and the Port would borrow non-trust lease
revenues to repay the developer for those costs, and provide an
additional amount from non-trust lease revenues for "a return on
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developer equity," or a built in profit margin. The Port must
ensure repayment of non-trust funds with interest within 50
years of each port advance, a term that may be extended beyond
50 years with SLC approval. Staff notes that this bill would
divert funding from other authorized uses, such as preservation
of historic piers and structures, and construction and
maintenance of waterfront plazas and open space (as required by
BCDC's special area plan). In total, these diversions could
exceed $150 million in the aggregate, depending upon other
sources of funding that may be available to pay for public
infrastructure, and repayment could occur over 50 years or more.
While these are non-state funds, the bill would divert
significant funding from purposes consistent with the public
trust, for which there is a state interest.
Current law, as negotiated during the passage of SB 815,
provides for leases on Seawall Lot 337 for non-trust purposes
for a period of 75 years, but no lease may extend beyond 2094.
This bill would continue the 75-year maximum lease term, but
would extend the final termination date of any individual
non-trust lease to December 31, 2120, and specify that a lease
term does not begin until the initial occupancy date of
improvements on the leased site. These changes provide maximum
flexibility for San Francisco and its developer partners to
capitalize on using waterfront parcels for non-trust uses.
Under current law, these uses must terminate within 75 years or
the year 2094, whichever comes first, but this bill ensures that
individual parcels may be used for non-trust purposes for a full
75 years, and allow some parcels to remain outside of trust uses
until 2021. Even with phased development of the site, a
non-trust lease could be initiated in 2046 and still have a full
75-year term. With the revised terms specified in the bill, it
is likely that some portion of Seawall Lot 337 would remain
outside of public trust uses for over 100 years, assuming a 25
year time gap between the initiation of the first non-trust
lease and later leases. In addition, since the clock doesn't
start on the 75-year lease term until initial occupancy on an
individual development parcel, the non-trust uses would extend
beyond 75 years, when one accounts for pre-development and
construction on the parcel. Considering the length of time that
these parcels would be used for non-trust purposes, the
Committee may wish to consider whether it is realistic to expect
that these parcels would ever return to the public trust.
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Under current law, any structures or buildings must be removed
or modified and returned to purposes consistent with the public
trust. This bill allows a building or structure to be
repurposed rather than removed at the end of a non-trust lease.
It is unclear what trust purposes could be served by repurposing
some of the larger structures planned for the Mission Rock
Project, such as a 240-foot housing tower.
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