Existing law grants to the City and County of San Francisco the right, title, and interest of the state in and to certain tidelands and submerged lands in trust for certain purposes. Under existing law, the Burton Act, and the Burton Act transfer agreement, the interest of the state in and to the Harbor of San Francisco was transferred in trust to the City and County of San Francisco. The State Lands Commission has jurisdiction over tidelands and submerged lands of the state.

Existing law declares that, until January 1, 2094, certain parcels of real property denominated as the designated seawall lots are free from the use requirements of the public trust, the Burton Act trust, and the Burton Act transfer agreement, and authorizes the San Francisco Port Commission to lease all or a portion of the designated seawall lots for nontrust uses if specified conditions are met, including that the lease shall terminate no later than January 1, 2094.

This bill would revise those conditions to specify that the term of a nontrust lease shall not exceed 75 years from the initial occupancy date, as defined, of the improvements developed on the leased site or development parcel, and in no event shall the term of a nontrust lease extend beyond December 31, 2105. The bill would also prescribe the boundaries of a specified seawall lot for purposes of the Mission Bay South redevelopment plan. The bill would authorize the port to use its nontrust lease revenues from specified development parcels in a specified seawall lot to make port advances, as defined, to fund specified infrastructure if the commission has approved the port advances and complies with certain procedures for the disposition of those parcels, as prescribed.

This bill would make legislative findings and declarations as to the necessity of a special statute for the waterfront property at the Mission Bay South redevelopment area in the City and County of San Francisco.

Existing law grants to the City and County of San Francisco the right, title, and interest of the state in and to certain tidelands and submerged lands in trust for certain purposes. Under existing law, the Burton Act, and the Burton Act transfer agreement, the interest of the state in and to the Harbor of San Francisco was transferred in trust to the City and County of San Francisco. The State Lands Commission has jurisdiction over tidelands and submerged lands of the state.

Existing law declares that, until January 1, 2094, certain parcels of real property denominated as the designated seawall lots are free from the use requirements of the public trust, the Burton Act trust, and the Burton Act transfer agreement, and authorizes the San Francisco Port Commission to lease all or a portion of the designated seawall lots for nontrust uses if specified conditions are met, including that the lease shall terminate no later than January 1, 2094.

This bill would revise those conditions to specify that the term of a nontrust lease shall not exceed 75 years from the initial occupancy date, as defined, of the improvements developed on the leased site or development parcel, and in no event shall the term of a nontrust lease extend beyond December 31, 2105. The bill would also prescribe the boundaries of a specified seawall lot for purposes of the Mission Bay South redevelopment plan. The bill would authorize the port to use its nontrust lease revenues from specified development parcels in a specified seawall lot to make port advances, as defined, to fund specified infrastructure if the commission has approved the port advances and complies with certain procedures for the disposition of those parcels, as prescribed.

This bill would make legislative findings and declarations as to the necessity of a special statute for the waterfront property at the Mission Bay South redevelopment area in the City and County of San Francisco.

Existing law grants to the City and County of San Francisco the right, title, and interest of the state in and to certain tidelands and submerged lands in trust for certain purposes. Under existing law, the Burton Act, and the Burton Act transfer agreement, the interest of the state in and to the Harbor of San Francisco was transferred in trust to the City and County of San Francisco. The State Lands Commission has jurisdiction over tidelands and submerged lands of the state.

Existing law declares that, until January 1, 2094, certain parcels of real property denominated as the designated seawall lots are free from the use requirements of the public trust, the Burton Act trust, and the Burton Act transfer agreement, and authorizes the San Francisco Port Commission to lease all or a portion of the designated seawall lots for nontrust uses if specified conditions are met, including that the lease shall terminate no later than January 1, 2094.

This bill would revise those conditions to specify that the term of a nontrust lease shall not exceed 75 years from the initial occupancy date date, as defined, of the improvements developed on the leased site or development parcel, and in no event shall the term of a nontrust lease extend beyond December 31, 2120. 2105. The bill would also prescribe the boundaries of a specified seawall lot for purposes of the Mission Bay South redevelopment plan. The bill would authorize the port to use its nontrust lease revenues from specified development parcels in a specified seawall lot to make port advances, as defined, to fund specified infrastructure if the commission has approved the port advances and complies with certain procedures for the disposition of those parcels, as prescribed.

This bill would make legislative findings and declarations as to the necessity of a special statute for the waterfront property at the Mission Bay South redevelopment area in the City and County of San Francisco.

Existing law grants to the City and County of San Francisco the right, title, and interest of the state in and to certain tidelands and submerged lands in trust for certain purposes. Under existing law, the Burton Act, and the Burton Act transfer agreement, the interest of the state in and to the Harbor of San Francisco was transferred in trust to the City and County of San Francisco. The State Lands Commission has jurisdiction over tidelands and submerged lands of the state.

Existing law declares that, until January 1, 2094, certain parcels of real property denominated as the designated seawall lots are free from the use requirements of the public trust, the Burton Act trust, and the Burton Act transfer agreement, and authorizes the San Francisco Port Commission to lease all or a portion of the designated seawall lots for nontrust uses if specified conditions are met, including that the lease shall terminate no later than January 1, 2094.

This bill would revise those conditions to specify that the term of a nontrust lease shall terminate no later than January 1, 2094, or the date that is 75 years after the initial occupancy date for the leased site or development parcel. not exceed 75 years from the initial occupancy date of the improvements developed on the leased site or development parcel, and in no event shall the term of a nontrust lease extend beyond December 31, 2120. The bill would also prescribe the boundaries of a specified seawall lot for purposes of the Mission Bay South redevelopment plan. The bill would authorize the port to use its nontrust lease revenues from specified development parcels in a specified seawall lot to make port advances, as defined, to fund specified infrastructure if the commission has approved the port advances and complies with certain procedures for the disposition of those parcels, as prescribed.

This bill would make legislative findings and declarations as to the necessity of a special statute for the waterfront property at the Mission Bay South redevelopment area in the City and County of San Francisco.

Existing law grants to the City and County of San Francisco the right, title, and interest of the state in and to certain tidelands and submerged lands in trust for certain purposes. Under existing law, the Burton Act, and the Burton Act transfer agreement, the interest of the state in and to the Harbor of San Francisco was transferred in trust to the City and County of San Francisco. The State Lands Commission has jurisdiction over tidelands and submerged lands of the state.

Existing law declares that, until January 1, 2094, certain parcels of real property denominated as the designated seawall lots are free from the use requirements of the public trust, the Burton Act trust, and the Burton Act transfer agreement, and authorizes the San Francisco Port Commission to lease all or a portion of the designated seawall lots for nontrust uses if specified conditions are met, including that the lease shall terminate no later than January 1, 2094.

This bill would revise those conditions to specify that a nontrust lease shall terminate no later than January 1, 2094, or the date that is 75 years after the initial occupancy date for the leased site or development parcel. The bill would also prescribe the boundaries of a specified seawall lot for purposes of the Mission Bay South redevelopment plan. The bill would authorize the port to use its nontrust lease revenues from specified development parcels in a specified seawall lot to make port advances, as defined, to fund specified infrastructure if the commission makes specified findings related to the use of the development parcels has approved the port advances and complies with certain procedures for the disposition of those parcels, as prescribed.

This bill would make legislative findings and declarations as to the necessity of a special statute for the waterfront property at the Mission Bay South redevelopment area in the City and County of San Francisco.

Existing law grants to the City and County of San Francisco the right, title, and interest of the state in and to certain tidelands and submerged lands in trust for certain purposes. Under existing law, the Burton Act, and the Burton Act transfer agreement, the interest of the state in and to the Harbor of San Francisco was transferred in trust to the City and County of San Francisco. The State Lands Commission has jurisdiction over tidelands and submerged lands of the state.

Existing law declares that, until January 1, 2094, certain parcels of real property denominated as the designated seawall lots are free from the use requirements of the public trust, the Burton Act trust, and the Burton Act transfer agreement, and authorizes the San Francisco Port Commission to lease all or a portion of the designated seawall lots for nontrust uses if specified conditions are met, including that the lease shall terminate no later than January 1, 2094.

This bill would revise those conditions to specify that a nontrust lease shall terminate no later than January 1, 2094, or the date that is 75 years after the date the port first issues a certificate of initial occupancy date for the improvements on the site. leased site or development parcel. The bill would also prescribe the boundaries of a specified seawall lot for purposes of the Mission Bay South redevelopment plan. The bill would authorize the port to use its nontrust lease revenues from specified development parcels in a specified seawall lot to make port advances, as defined, to fund specified infrastructure if the commission makes specified findings related to the use of the development parcels and complies with certain procedures for the disposition of those parcels, as prescribed.

This bill would make legislative findings and declarations as to the necessity of a special statute for the waterfront property at the Mission Bay South redevelopment area in the City and County of San Francisco.

Existing law prescribes procedures for the establishment of agricultural conservation easements intended to preserve and protect certain agricultural lands in the state. Existing law provides that this law shall be known, and may be cited, as the California Farmland Conservancy Program Act.

This bill would make technical, nonsubstantive changes to this latter provision.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2797

Author:(Chiu)

As Amended Ver:August 19, 2016

Majority vote

Original Committee Reference: NAT. RES.

SUMMARY: Authorizes the Port of San Francisco (Port) to loan specified nontrust lease revenues to cover the infrastructure costs for the development of Seawall Lot 337. Expands the boundaries of Seawall Lot 337 and extends permissible lease periods. Specifically, this bill:

1. Exempts specified actions amending the Mission Bay South Redevelopment Plan from certain redevelopment agency dissolution provisions.
2. Requires the San Francisco Bay Conservation and Development Commission (BCDC), on January 1, 2017, to designate Pier 48, the wharf between Pier 48 and Pier 50, and a portion of Seawall Lot 337 as not a Port priority use area.
3. Allows the Port to enter into 75-year leases and prohibits nontrust leases from extending beyond December 31, 2105.
4. Allows the Port to use its nontrust lease revenues from Seawall Lot 337 to make Port advances to fund Seawall Lot 337 infrastructure.
5. Requires State Lands Commission (SLC) to either approve or disapprove the procedures for establishing the fair market value of the development parcels, the form of ground lease, and the Port's use of Port advances to pay for Seawall Lot 337 infrastructure costs.
6. Prohibits SLC from approving the Port's use of Port advances unless SLC determines that the Port advances are in the best interests of the state, will benefit the public trust, and is consistent with the Port's fiduciary duties as trustee. Requires SLC to only approve the Port's use of Port advances if it finds that there are sufficient assurances that the trust will be made whole.
7. Requires the Port to ensure repayment, with interest, of each Port advance within 25 years after the Port advance is made. Allows extension of the repayment period beyond 25 years if SLC approves. Requires SLC to base its approval, in part, on whether the port is taking actions that ensure the trust is made whole, consistent with its fiduciary duties as a trustee of the public trust.

The Senate amendments:

1. Allow the Port to revise the boundaries of Seawall Lot 337 to the realigned or reconfigured park or street boundaries if the new boundaries are approved by the executive officer of SLC rather than specifying the boundaries.
2. Require BCDC, on January 1, 2017, to designate Pier 48, the wharf between Pier 48 and Pier 50, and a portion of Seawall Lot 337 as not a Port priority use area.
3. Limit nontrust leases from extending beyond December 31, 2105.
4. Allow SLC to only approve the Port's use of Port advances if it finds that there are sufficient assurances that the trust will be made whole.
5. Reduce the time limits on repayment of each port advance from 50 years to 25 years after the Port advance is made.
6. Require that no later than December 31, 2105, the use of the designated seawall lot or development parcel in Seawall Lot 337 be consistent with the public trust.

EXISTING LAW:

1. Protects, pursuant to the common law doctrine of the public trust (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 the beds of lakes, streams, and other navigable waterways (public trust lands) are to be held in trust by the state for the benefit of the people of California.
2. Establishes that 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 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 "nontrust leases"), provided certain conditions are met, including:
   1. The term of any individual non-trust lease, including any extension of the term allowed by right of renewal, does not exceed 75 years, and the non-trust lease will terminate no later than January 1, 2094;
   2. All revenues received by the Port from the non-trust lease will be deposited in a separate account in the harbor fund to be expended for the preservation of historic piers and historic structures, or for the construction and maintenance of waterfront plazas and open space required by the special area plan. Prior to the use of revenues for any pier of structure subject to public trust restrictions, the executive officer of SLC must approve the proposed uses of the piers or structures; and,
   3. The non-trust lease is for fair market value subject to the approval of SLC, which must find that the lease is consistent with the terms of the public trust and Burton Act trust, other than their restrictions on use, and that it is in the best interest of the state.
5. Requires that, prior to the lease of Seawall Lot 337 for nontrust 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 nontrust uses, the San Francisco Bay Conservation and Development Commission has amended the seaport plan to remove the port priority use designation from lands to be leased for nontrust 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 nontrust lease of Seawall Lot 337 that results in an effective rent to the port below fair market value for affordable housing.

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. 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.
2. 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.
3. 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.
4. Likely minor costs to the BCDC to update and reprint the seaport plan to reflect the removal of Pier 48 from the port priority use area designation, as specified. (General Fund).

COMMENTS:

1. Public Trust. The foundational principle of the common law Public Trust Doctrine is that it is an affirmative duty of the state to protect the people's common heritage in navigable waters for their common use. The traditional uses allowed under the Public Trust Doctrine were described as water-related commerce, navigation, and fisheries. As a common law doctrine, the courts have significantly shaped the Public Trust Doctrine in a number of important ways. Courts have found that the public uses to which sovereign lands are subject are sufficiently flexible to encompass changing public needs. The courts have also found that preservation of these lands in their natural state, so that they may serve as ecological units for scientific study, as open space, and as environments that provide food and habitat for birds and marine life, are appropriate uses under the common law Public Trust Doctrine. Courts have also made clear that sovereign lands subject to the Public Trust Doctrine cannot be sold into private ownership.
2. Background on Granted Lands. For over 100 years the Legislature has granted public trust lands to local governments so the lands can be managed locally for the benefit of the people of California. There are over 80 trustees in the state, including the ports of Los Angeles, Long Beach, San Diego, San Francisco, Oakland, Richmond, Benicia, and Eureka. While these trust lands are managed locally, SLC has oversight authority to ensure those local trustees are complying with the Public Trust Doctrine and the applicable granting statutes.
3. Port of San Francisco. In 1968, the Legislature enacted the Burton Act, which transferred, in trust, the interest of the state in, and the control and management of the Port. However, when this occurred, the Port's assets were in poor condition. For example, 23 of the piers transferred in 1968 were virtually unusable for maritime purposes because of their poor physical condition. Those piers which were structurally sound were only marginally productive because containerized shipping was already replacing break bulk shipping at the time of the transfer.

The City was also required to assume $55 million of the state's bond debt, which, according to the Port, hampered its ability to make capital improvements to its assets. The age and condition of Port facilities, some of which are historic structures at the end of their useful life, combined with their construction on filled tidelands in a high risk seismic area, has created a significant capital funding challenge for the Port.

In 2007, after lengthy discussions between the Port and SLC, the Legislature enacted SB 815. That statute recognized that several of the seawall lots granted under the Burton Act, including portions of Seawall Lot 337, ceased to be useful for the promotion of the public trust except for the generation of revenues for the public trust. SB 815 lifted the public trust and the Burton Act use restrictions on the designated seawall lots, subject to the requirement that the revenues be used by the Port for preservation of historic piers and historic structurers. The bill also authorized leases for nontrust uses to have 75-year terms, with an end date of January 1, 2094.

Analysis Prepared by: Michael Jarred / NAT. RES. / (916) 319-2092 FN: 0004812

 THIRD READING  

Bill No: AB 2797

Author:

:

Vote:

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:

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 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 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 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 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.
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 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 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 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: Fiscal Com.: Local:

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 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: (Verified 8/22/16)

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.”

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:

8/22/16 23:10:19

**** END ****

 THIRD READING  

Bill No: AB 2797

Author:

:

Vote:

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:

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 lease terms from 2094 to 2120; and makes other changes to provisions of law pertaining to San Francisco’s waterfront, as specified.

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 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, extend the termination dates of any non-trust lease terms from 2094 to 2120, and make 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 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 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.
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.
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 50 years, and authorizes the Port to extend the repayment period beyond 50 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,” (rather than removed, as currently specified), or modified to facilitate public trust uses.

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 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 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 50 years of each port advance, a term that may be extended beyond 50 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 31, 2120 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 2120 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: Fiscal Com.: Local:

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 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 8/18/16)

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: (Verified 8/18/16)

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.”

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:

8/18/16 16:57:26

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 2797 (Chiu) - City and County of San Francisco: Mission Bay South Project: redevelopment plan

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 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 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.

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 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.
• 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 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.

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.

-- END --

SENATE COMMITTEE ON NATURAL RESOURCES AND WATER

Senator Fran Pavley, Chair

2015 - 2016 Regular

Bill No: AB Hearing Date: June 28, 2016

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 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 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 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 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 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 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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SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

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 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 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 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.
• 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 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 & 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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Date of Hearing: May 11, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2797

Author:(Chiu) – As Amended Ver:April 13, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes the Port of San Francisco (Port) to loan specified non-trust lease revenues for infrastructure costs for the development of the Mission Rock Project (Seawall Lot 337), and expands its boundaries, as specified. Additionally, this bill:

1. Requires the State Lands Commission (SLC) to approve or deny Port advances within 75 days after the San Francisco Board of Supervisors approves the project, as specified.
2. Requires the Port to pay for any study or investigation SLC undertakes, as specified.
3. Requires the Port to repay advances with interest within 50 years, unless the time period is extended by SLC.

FISCAL EFFECT:

Increased, reimbursable costs for SLC to review, and approve or deny the trust revenue advances.

Potential significant temporary losses of local trust revenue, in the tens of millions of dollars range, during the period between the advance and repayment of the loan (up to 50 years, or more). The Port estimates the infrastructure costs at Seawall Lot 337 will exceed $150 million dollars.

COMMENTS:

1. Purpose. According to the author, following the enactment of SB 815, the Port initiated a planning process for Seawall Lot 337. In 2009, the Port selected a development team led by the San Francisco Giants for exclusive negotiations with the Port for the development of Seawall Lot 337.

The proposed development at Seawall Lot 337 and Pier 48 is 28 acres and includes former tidelands lying between Mission Bay to the south, and China Basin and the Giants ballpark to the north. This bill provides the infrastructure financing necessary to develop the Mission Rock project.

1. Background. 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. SB 815 (Migden), Chapter 660, Statutes of 2007, freed trust use restrictions from the seawall lots along the Embarcadero, 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 are required to 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 is required to approve the proposed uses. The port is also authorized to use part of the non-trust lease revenues for purposes consistent with the existing public trust law. 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.

1. Public Trust and Granted Lands. 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 requires filled and unfilled tide and submerged lands and the beds of lakes, streams, and other navigable waterways 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. There are over 80 trustees in the state, including the ports of Los Angeles, Long Beach, San Diego, San Francisco, Oakland, Richmond, Benicia, and Eureka. While these trust lands are managed locally, SLC has oversight authority to ensure those local trustees are complying with the public trust doctrine and the applicable granting statutes.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Susan Talamantes Eggman, Chair

ABPCA Bill Id:AB 2797 (

Author:Chiu) – As Amended Ver:April 13, 2016

SUBJECT: City and County of San Francisco: Mission Bay South Project: redevelopment plan.

SUMMARY: 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, this bill:

1. Provides numerous definitions, pursuant to Seawall Lot 337, and financing options for development.
2. Makes findings regarding the San Francisco Bay, the San Francisco waterfront, public trust, and SB 815 (Migden), Chapter 660, Statutes of 2007.
3. Expands the boundaries of Seawall Lot 337 to include Parcel 20 (P20), Third Street, and Terry Francois Boulevard, as specified.
4. Provides that no action of the Department of Finance or the State Controller is required for any action taken by the oversight board, the successor agency, the San Francisco Board
   of Supervisors (BOS), or any other governmental body required to act to amend the Mission Bay South redevelopment plan to remove P20 from the Mission Bay South redevelopment project area. Provides exemptions to specified statues, which govern the dissolution of redevelopment agencies, and would otherwise prohibit P20 from being removed from the redevelopment plan.
5. 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 infrastructure, pursuant to 13), below.
6. 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.
7. 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, pursuant to 13), below.
8. 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.
9. 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.
10. 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.
11. 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.
12. Requires the Port to submit specified project documents, following BOS approval for the development project of Seawall Lot 337.
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.
14. Requires the Port to bear the costs of any study or investigation that the SLC undertakes, as specified.
15. Requires the Port to provide separate accounting and final audit reports, as specified.
16. Requires the Port to ensure repayment, with interest, of each port advance within 50 years. Authorizes the repayment period to extend beyond 50 years with SLC approval.

FISCAL EFFECT: This bill is keyed fiscal.

COMMENTS:

1. Public Trust and Granted Lands. 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.

Only in rare cases may the public trust be terminated, and only where consistent with the purposes and needs of the trust. For over 100 years, in more than 300 statutes, 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. There are over 80 trustees in the state, including the ports of Los Angeles, Long Beach, San Diego, San Francisco, Oakland, Richmond, Benicia, and Eureka. While these trust lands are managed locally, SLC has oversight authority to ensure those local trustees are complying with the public trust doctrine and the applicable granting statutes.

1. Port of San Francisco. Under the Burton Act (Chapter 1333, Statutes of 1968), the state conveyed certain state tidelands along the San Francisco waterfront, generally extending from Fisherman's Wharf to Candlestick Point, to the City and County of San Francisco, through its Port, in 1969 in trust for public trust and Burton Act trust purposes, subject to the obligation on the part of the City and County of San Francisco to assume $55 million in state debt obligations then existing relating to the waterfront properties.

The San Francisco waterfront includes a number of seawall lots controlled by the Port, which are triangular lots on the west side of the Embarcadero 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. SB 815 (Migden), Chapter 660, Statutes of 2007, freed trust use restrictions from the seawall lots along the Embarcadero, and allowed the Port to lease these properties at market rates for non-trust purposes provided specified conditions were met. These seawall lots, parcels of filled tidelands, included Seawall Lot 337.

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 is required to approve the proposed uses. There are other requirements, including that the non-trust lease must be for fair market value, subject to SLC’s approval, and is in the best interest of the state, among others. The port is also 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.

1. Bill Summary. This bill authorizes the Port to use nontrust lease revenue from the development of parcels on Seawall Lot 337 to make loans to fund infrastructure on Seawall Lot 337 with the approval of the SLC. This bill specifies the documentation and information that must be provided by the Port, following the BOS approval, to the SLC to gain approval. This bill also expands the boundaries of Seawall Lot 337 to include P20, a parcel of land previously included in the Mission Bay South redevelopment plan and provides the exemptions to redevelopment law to enable the inclusion of P20 in the development proposal for Seawall Lot 337. This bill authorizes the Port to enter into a 75-year lease beyond the January 1, 2094, limit in existing law. This bill is sponsored by the Port.
2. Author's Statement. According to the author, "As a result of SB 815, the Port initiated a planning process for Seawall Lot 337 and in 2009 the Port selected a development team led by the San Francisco Giants for exclusive negotiations with the Port for the development of Seawall Lot 337. Since 1997, Seawall Lot 337 has been used primarily as a surface parking lot; most recently by an affiliate of the San Francisco Giants. The proposed development at Seawall Lot 337 and Pier 48 is 28 acres and includes former tidelands lying between Mission Bay to the south and China Basin and the Giants ballpark to the north.

"The proposal, known as the Mission Rock project, would include approximately 1,500 rental apartments, 40% of which would be affordable to individuals and 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. Public improvements include the installation of streets, sidewalks, 8 acres of parks, public access areas, water, sewer, and electrical utilities, and other infrastructure known as horizontal development. The Mission Rock project also includes the rehabilitation of Pier 48 consistent with the Secretary of the Interior’s Standards for the Treatment of Historic Properties. 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 site to be resilient to future sea level rise of 55” and 100 Year Storm events. The Developer will finance much of the horizontal development; infrastructure costs are currently expected to exceed $150 million.

"The City and County of San Francisco, through the Port, the San Francisco Public Utilities Commission, and San Francisco Public Works, intends to acquire the public infrastructure from the developer over time through non-Port revenue generated from the project site in the form of Mello-Roos community facilities district special taxes (CFD), tax increment from an infrastructure financing district formed over the project (IFD), and bonds secured by those revenues. However, the tax increment revenues will not be immediately available for early infrastructure costs. Accordingly, the proposed financing plan calls for the Port to advance a portion of the ground rent from nontrust leases to CFD, which will use the funds to acquire and maintain the infrastructure on behalf of the City. These advances of ground rent (port advances) would allow the Port to reimburse the Developer Capital and pay off the accrued return, well before sufficient CFD and IFD revenues would be available for that purpose, substantially reducing financing costs. The port advances would be repaid, with interest, from CFD and IFD revenues.

"The proposed legislation 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. The legislation would remove substantial obstacles to the development of the project and the public benefits it will provide."

1. Arguments in Support. The City and County of San Francisco argues, "Developed in concert with San Francisco's partners at the SLC and the San Francisco Giants, AB 2792 would greatly assist San Francisco in the development of the new Mission Rock neighborhood in San Francisco's Mission Bay. In addition to having support of affordable housing, open space, public transit, and other advocates, the larger public is now behind the project. In November of 2015, San Franciscans approved the Mission Rock development project through Proposition D with an overwhelming 74-26% vote."
2. Arguments in Opposition. None on file.
3. Double Referral. This bill was heard in the Natural Resources Committee on April 11, 2016, where it passed with a 9-0 vote.

REGISTERED SUPPORT / OPPOSITION:

Support

City and County of San Francisco [SPONSOR]

SPUR (San Francisco Bay Area Planning and Urban Research Association)

San Francisco Housing Action Coalition

Individual

Opposition

None on file

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958

Date of Hearing: April 11, 2016

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Das Williams, Chair

ABPCA Bill Id:AB 2797 (

Author:Chiu) – As Amended Ver:April 5, 2016

SUBJECT: City and County of San Francisco: Mission Bay South Project: redevelopment plan

SUMMARY: Authorizes the Port of San Francisco (Port) to loan specified nontrust lease revenues to cover the infrastructure costs for the development of Seawall Lot 337. Expands the boundaries of Seawall Lot 337 and extends permissible lease periods.

EXISTING LAW:

1. Protects, pursuant to the common law doctrine of the public trust (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 the beds of lakes, streams, and other navigable waterways (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 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 “nontrust leases”), provided certain conditions are met, including:
   
   1. The term of any individual non-trust lease, including any extension of the term allowed by right of renewal, does not exceed 75 years, and the non-trust lease will terminate no later than January 1, 2094;
      
   2. All revenues received by the Port from the non-trust lease will be deposited in a separate account in the harbor fund to be expended for the preservation of historic piers and historic structures, or for the construction and maintenance of waterfront plazas and open space required by the special area plan. Prior to the use of revenues for any pier of structure subject to public trust restrictions, the executive officer of SLC must approve the proposed uses of the piers or structures; and,
      
   3. The non-trust lease is for fair market value subject to the approval of SLC, which must find that the lease is consistent with the terms of the public trust and Burton Act trust, other than their restrictions on use, and that it is in the best interest of the state.
5. Requires that, prior to the lease of Seawall Lot 337 for nontrust 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 nontrust uses, the San Francisco Bay Conservation and Development Commission has amended the seaport plan to remove the port priority use designation from lands to be leased for nontrust 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 nontrust lease of Seawall Lot 337 that results in an effective rent to the port below fair market value for affordable housing.

THIS BILL:

1. Defines 40 terms, many of which have already been defined in prior Port granted land statutes, including “port advances” which means, “nontrust lease revenues that the port uses to pay directly or to reimburse the Seawall Lot 337 developer or any district providing project-based public financing for costs of infrastructure in accordance with the terms and conditions of this act.”
2. Makes numerous findings about San Francisco Bay, the San Francisco waterfront, seawall lots, SB 815, and Mission Bay South Redevelopment Project Area.
3. Declares it is critical that the Port be able to use nontrust lease revenues “to pay Seawall Lot 337 infrastructure costs to minimize the cost of development capital and maximize the land value that the Port is able to realize for preservation of its historic piers and historic structures, and for other public trust uses.”
4. Expands the boundaries of Seawall Lot 337 to include portions of Parcel P20, Third Street, and Terry A. Francois Boulevard.
5. Exempts specified actions amending the Mission Bay South Redevelopment Plan from certain redevelopment agency dissolution provisions.
6. Allows the Port to enter into 75-year leases that terminate after January 1, 2094.
7. Allows the Port to use its nontrust lease revenues from Seawall Lot 337 to make port advances to fund Seawall Lot 337 infrastructure.
8. Requires SLC to consider whether the Port will receive consideration equal to fair market value on terms consistent with prudent land management practices.
9. Requires SLC to consider whether to make all of the following findings:
   1. The disposition and development agreement, including the plan of finance and use of Port advances, the procedures for establishing rent for future nontrust leases of individual development parcels, including appraisal instructions, and other consideration to the port will provide the port with fair market value.
   2. The submitted documentation identifies the projected amount of port advances and the nontrust sources projected to repay Port advances with interest. If port advances are not projected to be repaid with interest within 40 years after the Port makes its first Port advance, the projections and other evidence shall demonstrate the availability and viability of those sources for full repayment within an additional period that the SLC finds reasonable and consistent with this bill.
   3. The master development on the whole is consistent with the Port study.
   4. The use of Port advances will not substantially interfere with trust uses and purposes and will reduce Seawall Lot 337 infrastructure financing costs.
   5. The Port advances will generate increased revenues for the trust, including revenues available for historic pier and historic structure preservation.
   6. The master development is consistent with the terms of the public trust and the Burton Act trust, other than their restrictions on uses.
      
   7. The development is otherwise in the best interest of the state.
10. Prohibits port advances if the SLC cannot the make the findings above.
11. Requires the Port to provide the SLC an accounting of all nontrust sources and other Port revenue spent on Seawall Lot 337 annually, including any port advance.
12. Authorizes SLC to require the Port to take actions to remedy any shortfall in repayments of port advances.

FISCAL EFFECT: Unknown

COMMENTS:

1. Public Trust. The foundational principle of the common law Public Trust Doctrine is that it is an affirmative duty of the state to protect the people’s common heritage in navigable waters for their common use. The traditional uses allowed under the Public Trust Doctrine were described as water-related commerce, navigation, and fisheries. As a common law doctrine, the courts have significantly shaped the Public Trust Doctrine in a number of important ways. Courts have found that the public uses to which sovereign lands are subject are sufficiently flexible to encompass changing public needs. The courts have also found that preservation of these lands in their natural state, so that they may serve as ecological units for scientific study, as open space, and as environments that provide food and habitat for birds and marine life, are appropriate uses under the common law Public Trust Doctrine. Courts have also made clear that sovereign lands subject to the Public Trust Doctrine cannot be sold into private ownership.
2. Background on Granted Lands. For over 100 years, the Legislature has granted public trust lands to local governments so the lands can be managed locally for the benefit of the people of California. There are over 80 trustees in the state, including the ports of Los Angeles, Long Beach, San Diego, San Francisco, Oakland, Richmond, Benicia, and Eureka. While these trust lands are managed locally, SLC has oversight authority to ensure those local trustees are complying with the Public Trust Doctrine and the applicable granting statutes.
   
3. Port of San Francisco. In 1968, the Legislature enacted the Burton Act, which transferred, in trust, the interest of the state in, and the control and management of, the Port. However, when this occurred, the Port’s assets were in poor condition. For example, 23 of the piers transferred in 1968 were virtually unusable for maritime purposes because of their poor physical condition. Those piers which were structurally sound were only marginally productive because containerized shipping was already replacing break bulk shipping at the time of the transfer.

The City was also required to assume $55 million of the state’s bond debt, which, according to the Port, hampered its ability to make capital improvements to its assets. The age and condition of Port facilities, some of which are historic structures at the end of their useful life, combined with their construction on filled tidelands in a high risk seismic area, has created a significant capital funding challenge for the Port.

In 2007, after lengthy discussions between the Port and SLC, the Legislature enacted SB 815. That statute recognized that several of the seawall lots granted under the Burton Act, including portions of Seawall Lot 337, ceased to be useful for the promotion of the public trust except for the generation of revenues for the public trust. SB 815 lifted the public trust and the Burton Act use restrictions on the designated seawall lots, subject to the requirement that the revenues be used by the Port for preservation of historic piers and historic structurers. The bill also authorized leases for nontrust uses to have 75-year terms, with an end date of January 1, 2094.

1. According to the author:

The Port initiated a planning process for Seawall Lot 337 and in 2009, the Port Commission selected a development team led by the San Francisco Giants for exclusive negotiations with the Port for the development of Seawall Lot 337. The proposal, known as the Mission Rock project, would include approximately 1,500 rental apartments, 40% of which would be affordable to individuals and 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. Public improvements include the installation of streets, sidewalks, 8 acres of parks, public access areas, water, sewer, and electrical utilities, and other infrastructure known as “horizontal development.” 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 site to be resilient to future sea level rise of 55” and 100 Year Storm events. The Developer will finance much of the horizontal development; infrastructure costs are currently expected to exceed $150 million.

The Mission Rock project also includes the rehabilitation of Pier 48 consistent with the Secretary of the Interior’s Standards for the Treatment of Historic Properties. Pier 48 is one of the Port’s historic finger piers and is a contributing resource to the Embarcadero Historic District, which is listed on the National Register of Historic Places. Under the proposed project, Pier 48 would be renovated to become the expanded home for Anchor Brewing Company, San Francisco’s oldest and largest manufacturing business. Anchor will host public tours of its brewing operations, and the project will include a restaurant and a new public boardwalk with dramatic water and bridge views around the pier. The project would entail seismic improvements to the seawall along China Basin Park to the north and to the east of Seawall Lot 337, including in front of Pier 48, to minimize the risk of lateral ground spreading toward San Francisco Bay, which could seriously damage the piles supporting the pier. As with all of the Port’s finger pier projects, the project’s design and mix of uses on Pier 48 are required to be consistent with the Burton Act and the public trust.

The proposed legislation 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. The legislation would remove substantial obstacles to the development of the project and the public benefits it will provide.

1. Amendments. The bill has some conflicting findings and a convoluted SLC approval process. In addition, it is unclear when the Port advance must be repaid and what happens if it is not. The bill might also reduce SLC oversight over nontrust leases the Port enters into. The author and committee may wish to amend the bill to:
   1. Remove the findings in subdivision (g) of Section 2;
   2. Specify that nontrust lease revenues are a loan in subdivision (y) of Section 1 and (m) of Section 2;
   3. Ensures that SLC maintains oversight and approval over nontrust leases;
   4. Clarify that the Port must receive SLC approval prior to any port advances; and,
   5. Set a repayment deadline of 50 years after a port advance is made and require any extension of the repayment deadline be subject to SLC approval.

This bill has been significantly amended prior to this hearing. The process of using port advances is extremely complex, and involves large sums of money that will eventually be used to further the public trust. As the bill moves forward, the author may wish to consider continuing to work with all interested parties to refine the provisions of this bill.

1. Double Referral. This bill has been double referred to the Assembly Local Government Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Port of San Francisco (sponsor)

San Francisco Mayor Edwin Lee (sponsor)

San Francisco Housing Action Coalition

The San Francisco Bay Area Planning and Urban Research Association

One individual

Opposition

None on file

Analysis Prepared by: Michael Jarred / NAT. RES. / (916) 319-2092