BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2797|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 2797
Author: Chiu (D)
Amended: 8/19/16 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 6-1, 6/15/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Pavley
NOES: Moorlach
SENATE NATURAL RES. & WATER COMMITTEE: 6-2, 6/28/16
AYES: Pavley, Allen, Hertzberg, Hueso, Jackson, Monning
NOES: Stone, Vidak
NO VOTE RECORDED: Wolk
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
ASSEMBLY FLOOR: 76-0, 5/19/16 (Consent) - See last page for
vote
SUBJECT: City and County of San Francisco: Mission Bay South
Project: redevelopment plan
SOURCE: City and County of San Francisco, Mayor Edwin M. Lee
Port of San Francisco
DIGEST: This bill authorizes the Port of San Francisco (Port)
to borrow non-trust lease revenue to pay for infrastructure and
other developer advances related to development projects on
Seawall Lot 337 (Mission Rock Project); allows individual
non-trust leases to have a variable start date with a maximum of
75 years; extends the final termination dates for any non-trust
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lease terms from 2094 to 2120; and makes other changes to
provisions of law pertaining to San Francisco's waterfront, as
specified.
Senate Floor Amendments of 8/19/16 modify the terms of non-trust
leases including the final termination date for nontrust leases
(now December 31, 2105), add assurances that the trust will be
made whole, shorten the repayment period for port advances (now
25 years), and clarify the fate of structures after the nontrust
leases end.
ANALYSIS:
Existing law:
1) Protects, through the Public Trust Doctrine, 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.
2) Establishes that the State Lands Commission (SLC) is the
steward and manager of the state's public trust lands. SLC
has direct administrative control over the state's public
trust lands and oversight authority over public trust lands
granted by the Legislature to local public agencies (granted
lands).
3) Grants in trust to the Port, pursuant to the Burton Act
(Chapter 1333, Statutes of 1968), administrative control over
the public trust lands in the harbor of San Francisco for
purposes of commerce, navigation, and fisheries.
4) Authorizes the Port, pursuant to SB 815 (Migden, Chapter
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660, Statutes of 2007), to lease all or any portion of
designated seawall lots free from use requirements
established by the public trust, the Burton Act trust, and
the Burton Act Transfer Agreement (hereinafter "non-trust
leases"), provided certain conditions are met.
5) Requires that, prior to the lease of Seawall Lot 337 for
non-trust uses, a study is undertaken and approved by SLC.
Requires the study to analyze the need to retain
trust-consistent uses on the site. Requires that, prior to
the lease of Seawall Lot 337 for non-trust uses, the San
Francisco Bay Conservation and Development Commission (BCDC)
has amended the seaport plan to remove the port priority use
designation from lands to be leased for non-trust uses.
6) Allows the Port to lease Seawall Lot 330 to any person, free
of the public trust, the Burton Act trust, and the
restrictions of SB 815 if all specified conditions are met.
7) Authorizes the Port, conditioned on the approval of SLC, to
provide a rent credit or other waiver or deferral of rent in
connection with a non-trust lease of Seawall Lot 337 that
result in an effective rent to the port below fair market
value for affordable housing.
This bill authorizes the Port to borrow non-trust lease revenues
to pay for infrastructure and other developer advances related
to the Mission Rock Project, extends the termination dates of
any non-trust lease terms from 2094 to 2120, and makes other
changes to provisions of law pertaining to San Francisco's
waterfront. Specifically, this bill:
1) 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.
2) Makes numerous findings regarding San Francisco's seawall
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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
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
waterfront to the public.
3) Expands the boundaries of Seawall Lot 337 to include Parcel
20 (P20; a parcel that lies partially within the southern
portion of Seawall Lot 337), Third Street, and Terry Francois
Boulevard, subject to approval by the SLC, as specified.
4) Provides exemptions to specified statutes, which govern the
dissolution of redevelopment agencies, and otherwise
prohibits P20 from being removed from the Mission Bay South
redevelopment plan and redevelopment project area.
5) Authorizes a non-trust lease of Seawall Lot 322-1, under the
same duration as permitted for other seawall lots, as
provided in SB 815.
6) Removes Pier 48, the wharf between Pier 48 and Pier 50, and
a portion of Seawall Lot 337 from the specified "port
priority use area" designation, as specified.
7) Reasserts that BCDC has authority to approve or deny permits
for mixed-use development on Pier 48.
8) Authorizes the Port, for Seawall Lot 337, to enter into
non-trust leases of development parcels, subject to specified
requirements, if the SLC has approved port advances from
non-trust lease revenue for infrastructure.
9) Authorizes the Port to enter into a non-trust lease that
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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 non-trust lease
extend beyond December 31, 2120.
10)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).
11)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.
12)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.
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. The SLC may only approve the
Port's use of port advances if it finds that there are
sufficient assurances that the trust will be made whole.
14)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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15)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.
16)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.
17)Requires the Port to ensure repayment, with interest, of
each port advance within 25 years, and authorizes the Port to
extend the repayment period beyond 25 years with SLC
approval, as specified.
18)Provides that 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, modified
or removed.
Background
The San Francisco waterfront includes a number of seawall lots
controlled by the 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, 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
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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 eight 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. 74 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
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contemplated when SB 815 was enacted.
Comments
This bill creates a system to finance 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
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 allows 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. The Port must ensure
repayment of non-trust funds with interest within 25 years of
each port advance, a term that may be extended beyond 25 years
with SLC approval. The money diverted to pay port advances is
currently set placed in an account that is used to pay for
preservation of the historic piers and structures, construction
and maintenance of waterfront plazas and open space, and other
purposes consistent with the Public Trust Doctrine.
This bill changes the non-trust lease termination date specified
in SB 815. Current law (pursuant to SB 815) allows non-trust
leases on Seawall Lot 337 to be entered into for a maximum
period of 75 years and establishes that no lease may extend
beyond January 1, 2094. This bill maintains the 75-year maximum
lease term, but extends the final termination date to December
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31, 2105 and specifies that a lease term does not begin until
the initial occupancy date of improvements on the leased site.
The proposed project 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 2105 in order to provide full 75
year lease terms for each of the Project's development parcels.
The Port argues that the flexible start date is needed to secure
financing for development.
NOTE: For a complete discussion on the other changes purposed
in this bill, please see the Senate Natural Resources and
Water Committee analysis.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
Unknown, significant 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 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. Senate Appropriations 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
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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 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)
SUPPORT: (Verified 8/22/16)
City and County of San Francisco, Mayor Edwin M. Lee (co-source)
Port of San Francisco (co-source)
South Beach Mission Bay Business Association
OPPOSITION: (Verified8/22/16)
None received
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." 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."
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ASSEMBLY FLOOR: 76-0, 5/19/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,
Levine, Linder, Lopez, Low, Maienschein, Mayes, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Wood, Rendon
NO VOTE RECORDED: Chang, Mathis, McCarty, Williams
Prepared by:Matthew Dumlao / N.R. & W. / (916) 651-4116
8/22/16 23:10:19
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