BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB
1545
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR:
Desaulnier
VERSION:
2/24/12
Analysis by: Art Bauer FISCAL: Yes
Hearing date: March 27, 2012 URGENCY: YES
SUBJECT:
Bay Area regional agencies: building purchase
DESCRIPTION:
This bill prohibits the Bay Area Headquarters Authority (BAHA)
from using public funds to develop or improve a specific
building in San Francisco for use as the headquarters of the
Metropolitan Transportation Commission (MTC), Bay Area Toll
Authority (BATA), and possibly other regional agencies until MTC
responds to a State Auditor's report to be issued in June of
this year.
ANALYSIS:
MTC, the regional transportation planning agency (RTPA) for the
nine-county San Francisco Bay Area, has been headquartered for
nearly thirty years in Oakland, directly across the street from
BART's Lake Merritt station. MTC and BATA acting through the
BAHA, a joint powers agency that they created, acquired a
building for the headquarters of the two agencies at 390 Main
Street in San Francisco last October for $93 million.
The Joint Legislative Audit Committee at the request of Senator
DeSaulnier authorized the State Auditor to examine the analysis
underlying the decision to relocate MTC from Oakland to San
Francisco. The State Auditor's examination will include an
evaluation of the trade-offs between acquiring a building in
Oakland as opposed to moving to San Francisco, the structure of
the transaction and whether it protects the public's interests,
and other related questions. The State Auditor expects to
complete its work by June of this year.
This bill :
SB 1545 (DESAULNIER) Page 2
1. Prohibits MTC from spending any public funds on the
development or improvement of an office building at 390
Main Street, San Francisco, until after the State Auditor
has completed the audit.
2. Requires MTC, upon completion of the audit, to submit a
report to the Legislature responding to any issues raised
by the State Auditor prior to expending any funds on the
rehabilitation of the building.
COMMENTS:
1. Purpose . MTC is currently located in a building jointly
owned by MTC, the Association of Bay Area Governments
(ABAG), and BART. Beginning in 2010, MTC, ABAG and the Bay
Area Air Quality Management District (BAAQMD) initiated a
process to find an office building in which all three
agencies could co-locate. The reasons for the joint effort
were at least three. First, the agencies had concluded
that their present facilities were in need of repair and
various upgrades. Second, the existing space did not allow
for anticipated growth in staff. Third, because of the
increasing need to coordinate regional policies and
programs, the agencies believe that co-location will
facilitate staff interaction. ABAG, because its regional
land use modeling supports MTC and BAAQMD planning efforts,
agreed to participate in the evaluation of alternative
office sites but has not made a commitment to relocate. In
the meantime, the Bay Conservation and Development
Commission (BCDC), a state agency responsible for
regulating land uses on the shoreline of the bay, indicated
a willingness to locate in the new building. BCDC's
enabling legislation requires the organization to be
located in San Francisco. The state Department of General
Services is representing BCDC in the transaction.
The author believes that process of selecting a new
building and the structure of the transaction was not
transparent. He, therefore, requested a review of the
transaction by the State Auditor. The author wants MTC to
stop work on the new building until the report from the
State Auditor is published and MTC has an opportunity to
respond.
2. Budget for the relocation . MTC is using toll revenues
collected by BATA to acquire the building. MTC established
SB 1545 (DESAULNIER) Page 3
the budget for the acquisition and improvements to a
building at $179,776,515. Since the acquisition of the
building, the budget has decreased to $167,026,515. The
components of the budget area as follows:
----------------------------------
|Building |$ |
| |93,000,000 |
|--------------------+-------------|
|Building | |
|Improvements |25,160,723 |
|--------------------+-------------|
|Tennant | |
|Improvements |23,865,792 |
|--------------------+-------------|
|Building Total |$142,026,515 |
|--------------------+-------------|
| | |
|--------------------+-------------|
|Project contingency |$ |
| |15,000,000 |
|--------------------+-------------|
|Optional exterior | |
|enhancements |8,300,000 |
|--------------------+-------------|
|Staff cost | |
| |1,700,000 |
|--------------------+-------------|
|Total project costs | |
| |$167,026,515 |
|--------------------+-------------|
|Source: MTC | |
----------------------------------
MTC set goals to relocate into the new facility twenty-four
months after the close of escrow and to have at least
350,000 square feet in the new building. In addition, MTC
preferred to own a new building rather than lease space.
3. Search for an office building . The search for office
buildings resulted in four candidates, three in Oakland and
one in San Francisco, including the building ultimately
selected, a former Post Office building. Two of the
buildings exceeded the amount budgeted for improvements.
One of the buildings in downtown Oakland was located at the
City Center, which is a BART station, but was available
SB 1545 (DESAULNIER) Page 4
only for lease.
MTC selected the former postal facility at 390 Main Street
in San Francisco. The eight story building has nearly
500,000 square feet. The asking price was $108.3 million.
MTC acquired it for $93 million. Escrow on the acquisition
closed last October.
In December, MTC awarded a million dollar contract to begin
the design work necessary for rehabilitation, seismic and
air conditioning upgrades, and providing for disabled
access. In addition, MTC awarded a $240,000 contract for
property management services.
An additional relocation cost will be an increase in the
transit subsidy benefit that MTC offers its employees.
Seventy percent of its staff commutes by public transit.
For 60 percent of MTC's employees, the move to San
Francisco will increase the length of the commute. MTC
intends to increase its transit subsidy benefit from $119
to $161 per month, a 35 percent increase.
4. Community issues . Led by Oakland, East Bay communities
have been strongly opposed to the relocation. They argue
that it takes jobs out of Oakland and that the San
Francisco site lacks easy accessibility, because it is a
half-mile from the nearest BART station. Oakland officials
also believe that MTC did not fully vet the Oakland sites.
The new site has also been a concern to the disabled
community because of its poor accessibility. MTC intends
to mitigate the accessibility issue by operating a shuttle
service to the new building from the BART station.
5. Who's in charge ? In addressing the relocation issue it
is difficult to determine who is in charge. Although MTC
and BATA are independent public agencies, they have the
same governing board and many of MTC's staff work both for
BATA and MTC. The joint powers agreement establishing the
legal entity that actually acquired and manages the
building is BAHA. Neither party to the formation of BAHA
and the actual purchase of the building is operating
independently or at arms-length. This organizational
structure may have prevented different points of view from
being fairly considered.
In addition, BATA is the financial "partner" for the
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acquisition. It is funding the acquisition of the
building, is providing financing to BAAQMD for its share of
the building, and has proposed a financing strategy to
allow ABAG to move into the building.
BATA has broad authority to acquire facilities with its
toll revenue. Because tolls are a user fee, the purposes
for which they are used must benefit the toll payers. To
this end, it is unclear if toll payers benefit from BATA's
use of toll revenues to acquire a building that exceeds its
space requirements so that other regional agencies may
co-locate. The audit will address this issue.
6. ABAG has not committed to relocating . Although ABAG
participated in the vetting of office buildings, its board
for the time being has decided not to relocate to San
Francisco. Because ABAG has limited resources, BATA has
proposed that ABAG transfer its rights to the commercial
space in the building to BAHA and the revenues generated
from the space be used to pay down ABAG's share of the
buildings cost.
SB 1545 (DESAULNIER) Page 6
POSITIONS: (Communicated to the committee before noon on
Wednesday,
March 21, 2012)
SUPPORT: Mayor Jean Quan, City of Oakland
OPPOSED: None received.