I love a totally misleading headline, like the one for the Treasure Island article which says: “Treasure Island utopia gets reality check.” And then proceeds to back up that headline with sections like
Skeptics question whether a recently announced deal that will pay the Navy at least $55 million to transfer most of the island and part of neighboring Yerba Buena Island to the city is a good idea.
But then when you read on the only quoted “skeptic” is former San Francisco Board of Supervisor, former head of the Treasure Island Authority, and wedding singer extraordinaire Tony Hall, who may have a teensy eensy ax to grind given that he was sort of punked by Gavin Newsom.
Anyway, here are some highlights from the article:
Treasure Island was built using fill in 1936 and 1937 to host the Golden Gate International Exposition. That fill dirt has been settling for decades, prompting concerns that the island is sinking.
The development proposal calls for the island’s soil to be mechanically packed down and stabilized. The area proposed for housing and a town center would have the ground built up higher than the current sea wall in San Francisco and be set back about 300 feet from the water.
The island’s perimeter would include dikes to protect against sea level rise and form a waterfront trail. If water rises beyond projections, the dikes could be built up.
…
It will cost an estimated $1.2 billion to $1.4 billion to buy the island, address seismic safety and sea level rise, upgrade transportation infrastructure and utility lines, and put in affordable housing, along with a library, grocery store, child care center and parks.
…
The money will come from private developers and revenue the project generates through taxes and fees, Cohen said. The infrastructure costs will be spread out over the duration of the development, which is expected to take 15 to 20 years.
“It’s all supported by revenue the project generates,” Cohen said. “That’s why this project is so attractive.”
…
The broad terms of the transfer deal announced two weeks ago call for the Navy to get a guaranteed $55 million over 10 years, plus $50 million more if the private investors recoup their money and reach a rate of return still being negotiated, Cohen said. Any profits beyond that will be split among the city, Navy and developers…
So, did you catch how much it is estimated that the entire cost, including the purchase price is going to cost for Treasure Island?
$1.2 – 1.4 billion.
That’s right BILLION.
I imagine that the costs for Alameda Point will be somewhat comparable. So the idea that opponents to Measure B are wringing their hands over $500 million that they say the developer is short on, which, according to Michele Ellson includes:
The $500 million figure, which the group did not budge on, is the sum of $175 in city staff-estimated cost overruns on public benefits, $184 in future tax revenues that are to be leveraged for roads, sewers and other infrastructure and the Navy’s $108 million asking price for the Point – give or take about $30 million.
Even though the $108 million (the asking price for land) is actually a cost that was identified in the RFQ stages as something that any developer agreeing to sign on to Alameda Point would have to be willing to pay. To now say that it is part of a combined “developer shortfall” is completely incorrect and completely misleading. Not to mention that including the Tax Increment Financing as part of a “developer shortfall” is fudging the truth a bit too.
But let’s say that there is a nugget of truth buried somewhere in that talking point. Or that one is so ideologically opposed to Redevelopment Financing and Tax Increment Financing that any amount given to the developer would be considered a subsidy or “shortfall.” $184 million is nothing compared to a potential $1.2-1.4 billion that the developer would expend over the years to complete the project. It’s a drop in a very very large bucket.
So while the old slogan of Measure B being a “Bad Deal for Alameda” and from what I understand, the newest slogan being worked out is something along the lines of “Make the Developer Pay.” I would love to have the developer pay as well, but that would require a yes vote on Measure B. Because if there is no developer, then it will be the taxpayers who continue to pay for the maintenance out at Alameda Point.
Stopping the city’s loss of ~2MM per year is a vital goal. The Suncal plan does not achieve this and indeed actually makes the drain worse. To wit:
The city gives up nearly all of its .29% cut of base rate property taxes from the development at the point. This is a significant sum. Assume 4500 homes at 500M each — and that’s surely on the low side — you get approximately 6.5MM in forgone revenue per year and that’s only on the residential portion. I can’t guess at the commercial values forgone but it is obvious that they will be significant as well.
The city’s only ongoing pickup in return is its .75% cut of the 9.75% sales tax, a number which is difficult/impossible to estimate, but based on sales taxes collected in the rest of the city will clearly be only a sliver of the property taxes, likely less than 1/10th. (Transfer taxes will be significant in early years but will revert to a low and rather lumpy figure over time).
Having given over this revenue to the TID, which is a SUBSIDY to a private entity, the city is left with a large area that still requires law enforcement, fire protection, parks maintainence and other services.
The long & short of it is that the city will face higher expenses from such an expansion but will not reap the revenues from said expansion to pay for required services. To further complicate matters, the redevelopment bonds called for by the plan signficantly crimp the city’s future financing options.
This isn’t “Making the Developer Pay” at all. It is financed on the backs of taxpayers, and disproportionately on the backs of existing taxpayers. This has been explained to you several times, Lauren, and your constant ignoring of it is curious, if not willful.
So what does work, you might ask?
One alternative is complete privatization. Dissolve the TID and allow a private entity to purchase the land & finance the plan with private capital. Said entity can build or develop however it choooses, subject of course to existing zoning & other laws. This option is also known as Business As Usual, The American Way, etc.
Another option is the oft discussed long term lease scheme. If the leases are priced & termed attractively, and that attractive price may be close to zero, it can incent the lessees to invest in the infrastructure themselves. Even if this only achieves cash flow neutrality, it fixes the problem of the current cash drain without the significant deleterious effects on the city’s balance sheet & future flexibility that the Suncal plan will cause.
If your concern for the city’s finances were genuine, you’d be in favor of those 2 paths, or perhaps even come up with a better idea that would be fiscally sustainable. If.
Comment by David Hart — December 29, 2009 @ 7:53 am
David H.:
If you were to take a completely free market approach, then developing Alameda Point would be akin to developing a greenfield development somewhere out in the apple orchards in Stockton. There would be no Measure A to restrict development type, there would be little to no added fees (affordable housing, sewer connection, citywide development fee, etc… and so forth), there would be little to no historic restrictions, there would be no need to remove existing infrastructure, etc and so forth.
Given all these negatives to building in brownfields, cities like Alameda and San Francisco have to do something to make the prospect of developing brownfields more attractive.
You talk about the “loss” of property tax from development of Alameda Point with the Redevelopment area and suggest that the Ci but it’s questionable whether there would be any property tax to recoup if there isn’t someone to make the investment.
My go-to example is always Bayport, while you are correct that the city gets very little in the way of ad valorem tax because of the TIF, I have always offered the example of the Municipal Services District which is set up to pay for services that would normally be paid for through property taxes.
While you have suggested that these MSD/CFD/Mello Roos only pay for physical infrastructure, I have attached the FY 10 budget which shows allocations for services (police, fire, park, administration). This is the City’s mechanism to use TIF to provide incentives to development, but ensure that future developments are not a drain on current residents. Currently, the City pays for very little in the way of maintenance in the Bayport neighborhood and I recently learned that the City doesn’t even pay for the landscape maintenance and irrigation along the public streets in Bayport either. Right now, the MSD fund for Bayport has a fairly large reserve that continues to grow.
Dissolving Redevelopment areas is not something that the City has any intention of doing in the near future, in fact one disagreement that the City has with the way the language is phrased in Measure B’s DA is over limiting the TIF money to just Alameda Point. The City wants to option to be able to extend the use of that money to other Redevelopment project areas in order to extend the sunset dates on those project areas by combining the project areas.
Comment by Lauren Do — December 29, 2009 @ 8:48 am
Your two alternatives are, of course, wishful thinking. Complete privatization, a great idea but your solution to sell the land to a private developer and let the city et al walk away would bring out the city squawkers and make Measure B discourse sound like mutes talking to deaf people.
Long term lease, the panacea of the hour, means we watch the base continue to crumble and shunt the infrastructure problems to future generations.
How about a third option. Parcel the whole damned thing out and sell each parcel to the highest bidder. That way the nay-sayers would probaly lose interest over the long haul and thus couldn’t sustain their political impact. That’s the american way.
Comment by Jack Richard — December 29, 2009 @ 9:03 am
2
Point by point rebuttal:
Total free market — did you miss the part where I stated, plainly, “subject of course to existing zoning & other laws.”
Brownfields. If you really believe that private capital will not take them on (which means that the risk doesn’t justify the reward) why on earth should the city enter into high risk commercial transactions? The city is NOT a commercial enterprise. It exists to provide in a uniform way essential services not provided by the free market, ie police/fire/parks. If you say that city IS a commercial enterprise, then let’s drop the whole discussion, there’s no point in reasoning with the irrational.
Loss of revenues. To say it’s “questionable” if there would be any taxes generated is equivalent to saying it’s questionable if the land has value. That is ridiculuous, the land has tremendous value. Whether that value is realized as SFH’s or tennis racquet factories is best decided by the market, but the “questionable” line is just plain foolish.
Bayport. Compare the ad valorem taxes to the MSD payments. You’ll notice a signficant difference. And WRT to your attachment, why does the city’s budget show receipts of fixed amounts for parks, Public works and street lights, but none for police, parks admin, general admin, etc? And what is that doc anyway? It needs context to have meaning.
Dissolving redevelopment areas. Obviously they have no intention, but that doesn’t make it right or advisable or fiscally sustainable, does it? If intentions counted, Bush might have been a good president…
Comment by David Hart — December 29, 2009 @ 9:51 am
3
To be clear, I suggest long term leases as a possibility, not a panacea.
And your third option is merely my first with multiple rtaher than a single buyer, or do I miss something?
Comment by David Hart — December 29, 2009 @ 9:54 am
Well, at least their public amenities will include dykes, according to the article.
Comment by Kevis Brownson — December 29, 2009 @ 10:14 am
David H.: I received that document from the Department of Public Works.
For police, park, fire, administration, you have to look at anything labeled “2″ which are the annual expenses for the district and includes “4-ac City Park – maintenance”, “Public Safety Service Allocation”, and “Administration.”
Comment by Lauren Do — December 29, 2009 @ 10:24 am
6.
Dykes as public amenities? Only in San Francisco.
Comment by Jack Richard — December 29, 2009 @ 10:49 am
I hope you realize that the parks are for all of Alameda just as Bayport park which is always busy on the weekends and it is actully being overused. The Plan for the Point will add a lot of parks and playing fields.
Comment by Joaquin — December 29, 2009 @ 10:56 am
oops I guess I meant dikes– but a little levity in this discussion is appreciated.
Comment by Kevis Brownson — December 29, 2009 @ 11:44 am
7
That one page doc does indeed list those items, however my copy of the city’s budget lists only parks & public works contributions from Bayport.
But let’s assume for a moment that you are right (hypothetically, I am not conceding the point). Bayport’s assessed value is approx 360MM (450 homes at 800M each), indicating GFR of 1MM+. That far exceeds what your example alleges as Bayport’s contribution to an already strained GF. Even if you are right, the numbers belie the fiscal neutral & existing taxpayer protections that Suncal et al like to mention.
Comment by David Hart — December 29, 2009 @ 12:30 pm
David H.:
Then the debate lies on whether one believes that Bayport would be Bayport generating the type of property tax assessments it does now without the benefit of some TIF financing.
.29% of nothing is still nothing. But almost $1500 per household to pay for municipal services in the form of a MSD payments is a whole heck of a lot more than a hypothetical situation where the private sector would swoop into Alameda to develop a highly polluted brownfield with questionable infrastructure without some form of incentive to do so.
Comment by Lauren Do — December 29, 2009 @ 2:24 pm
What is wrong with even a redevelopment district (as we have in other sections) subject to our zoning laws, development code, and other laws with development agreement subject to negotiation? Why this ridiculous initiative that exempts SunCal from virtually all of our codes and makes us go back to the voting booth if we want to change anything about the development agreement? The views on the West End are world class– Measure B is definitely not our last chance to either develop the site or have it fall into the bay.
Comment by Kevis Brownson — December 29, 2009 @ 5:07 pm
The parry in your first sentence indicates that you concede the fiscal neutrality point….better late than never.
But the entire post indicates that you miss the broad point. If you think it took subsidies by way of forgone tax revnues to give Bayport its higher valuations, what is the point of that? The fiscal situation would be improved by NOT subsidizing — lower values with full taxability would generate revenue instead of cost it. That statement also clearly illustrates what a blunt giveaway it is: city gives up tax dollars, developer reaps higher sale prices. Is that sound public policy?
Your second paragraph is just plain confused. Firstly, if the property cannot be developed with private capital, it is obviously too risky or too expensive for the city to do so. But people lined up to buy, at least in the initial phases, and homes there still tade well, even after the bubble. That property most certainly had, and retains, tremendous economic value. Without subsidy, perhaps it would have taken more duplexes to pay, maybe the prices would needed to be higher, or the developer might have accepted a lower (though still profitable) IRR, or some such other change in plans, but the statement that it couldn’t have happened absent subsidy just doesn’t wash. Your last clause about incentive misses the most obvious one: the private sector does it or the PROFITS. Land with that much value is profitable to develop, ipso facto.
Comment by David Hart — December 29, 2009 @ 5:07 pm
Dissecting Bayport development and judging whether or not it was wise for the city to entice development in lieu of future tax income may be interesting but, the base situation is not comparable to Bayport. Bayport aka, East Housing had humans living on it for generations. The toxic waste situation there is nothing in comparison to the base. The costs involved in meeting ERA requirements for human habitation on the base are astronomical.
I doubt any developer would risk footing the expenses of this particular development unless they knew full well the city was equally involved in the risk. The city has few options for this particular development other than to incentivise with future tax revenues.
Comment by Jack Richard — December 29, 2009 @ 5:53 pm
#15: So on the one hand, the risk of forgoing the SunCal deal is too great for the city, on the other hand, the risk of developing the site w/out having the city “equally involved” is too great for SunCal? In that case, I think it’s also too great a risk for the city.
Comment by DLM — December 29, 2009 @ 8:41 pm
Jack: While you are spot-on about the scale of the base being far greater than Bayport, in making that point you actually are (perhaps unintentionally) arguing against the Suncal plan. The huge environmental costs involved with getting the soil etc up to residential standards are what prevents those Housing Opportunties from Making Economic Sense. And to echo DLM, if it’s too big & too risky for a commercial enterprise, it’s certainly same for a small city.
Comment by David Hart — December 30, 2009 @ 6:26 am
David H.: You know that HOMES has never suggested that only housing/residential be built at Alameda Point. That their end goal has been working toward a diversity of housing types that is precluded under Measure A.
I’m not a member of homes, but even I know that the goal of HOMES, despite the brush that opponents have been eager to paint them with, is not “residential only,” but rather a mix of uses that is reminiscent of traditional urban planning rather than a segregation of uses that was prevalent 30 years ago.
In that vein, for multi-story buildings where the bottom story is garage or retail/commercial uses, the clean-up requirement is much less stringent than the clean-up requirements for single-family homes.
Comment by Lauren Do — December 30, 2009 @ 7:35 am
Are there not a significant number of SFH’s in the Suncal plan?
And have you conceded the fiscal neutrality issue?
Comment by David Hart — December 30, 2009 @ 8:01 am
Absolutely not, but you refuse to acknowledge what the MSD/CFD pays for, so we are at an impasse.
I have offered you documents that verify what the CFD is intended to pay for and what the CFD does pay for but because you cannot locate it on your budgets, it is completely improbable that the CFD exists to do what it intended to do, which is to ensure fiscal neutrality for new developments.
Comment by Lauren Do — December 30, 2009 @ 8:20 am
pls re-read post 11
Comment by David Hart — December 30, 2009 @ 8:27 am
Again, the question then lies on whether the property taxes generated from a Bayport would be to the levels that they are without the Redevelopment investment. You believe that the private sector would have — if allowed to do it’s thing — would have created a Bayport type development generating Bayport level property taxes without Redevelopment financing.
I say, that it would not have.
In fact, the renegotiation of the Alameda Landing DDA offering better terms for the City that the one for the Bayport section would seem to offer up the anecdotal data that at the time that these developments were under consideration there weren’t a ton of developers chomping at the bit to develop the land, which is why the City incentivized the process so much. Also anecdotally, the City Council has mentioned this in passing at a recent City Council meeting.
Comment by Lauren Do — December 30, 2009 @ 8:39 am
16. DLM
Yes, some believe development going forward is too great a risk and others believe that going forward is best. Maybe we should vote on it.
17. David
Did I miss something? I thought SunCal (a commercial enterprise) had determined developing the base made economic sense provided MA could be modified and B passes. Isn’t that why we’re voting on it?
Comment by Jack Richard — December 30, 2009 @ 8:41 am
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If you believe that massive taxpayer subsidies to private entities make economic sense, you are not the Jack Richard who used to post here. Who are you & what have you done w/ the real JR?
Comment by David Hart — December 30, 2009 @ 9:29 am
In certain situations it makes sense (to me) that the public help provide for the long term community benefit. The proper method to determine if a certain situation fits into that category is through the ballot box.
Comment by Jack Richard — December 30, 2009 @ 9:52 am
That is certainly true for essential public services, Jack. We vote to support schools, for example (the more enlightened of us do anyway). A new subdisivion is not an essential public service, though, and one that burdens existing taxpayers disproportionately offers no “long term community benefit.”
Comment by David Hart — December 30, 2009 @ 10:02 am
I’ve seen an awful lot of those “No to measure B” signs. Its basically what Alameda does anytime anything new is proposed.
But here’s what I don’t get. I drive out on the old Navy base quite often. Its clear that the area has one of the best views in the Bay Area. Its right on the ocean, has great views of the city, and is seldom fogged in. In other words, the entire area is highly desirable and worth untold millions, if not billions of dollars. Sure- there’s some nasty things in the ground. That takes money to clean up. But given that I’m assuming any house remotely close to the ocean is going to have a minimum of a million dollar asking price, the costs could easily be absorbed by the developer.
I’ve not really kept up with all the back and forth see-sawing issues going on with this development. But to me it seems that the best way to handle this issue is to let the free market handle it. Open the area up to developers who can make their own call as to what they can build in order to cover the costs. That’s how typical economics works anyway. By trying to create some sort of Utopian community with strings attached is likely why the financial concerns are so scrambled up.
Treasure Island is the same way. It too also has an almost perfect location. Given the chance, developers I’m sure would eagerly build super upscale houses and resorts all over it. The cost of compacting the earth and so forth is chicken feed compared to the profits they could realize from such a development. I don’t understand the reason why there’s a huge concern over it being built on fill either. Half of the Bay Area, including Alameda is as well. The soil in my yard is so loose that I can almost dig out holes with my hands. Yet people seem to be ok with that.
The way I look at it is that Alameda and the Bay Area years ago stopped being a kind of area for middle class families.The area is more of a boutique city for the uber-wealth and nuevo rich. That being the case, might as well let these developments be built to the financial requirements of the developers which means they’ll probably fill em’ up with more gigantic Mcmansions and fancy homes galore. They will build these houses and rich people will buy them. In turn that means more tax dollars for the city, more rich people to buy expensive things from the increasingly hoity-toity shops on Park street, and increased property values for the established residents.
Frankly I don’t care all that much because I’m a lowly renter. But looking at these issues from an outward perspective, it seems to me that it would make more sense to allow the point to develop under natural economic forces rather than try to mold it into something in order to please the residents.
Comment by edvard — December 30, 2009 @ 11:05 am
David,
You can’t reason with an unreasonable person such as Loren Do. Give it up. I can’t even READ this stuff.
Dennis Green
Comment by Dennis Green/ZenDada — December 30, 2009 @ 1:22 pm
Denny Green: why do you post on this blog if you “can’t even READ this stuff” does that mean you post blindly without reading?
Comment by E — December 30, 2009 @ 1:28 pm
I didn’t read all the comments…but the City made money off of Bayport in a profit sharing agreement. The City, Warmington and Catellus made quite abit more than they were projecting. There was housing here before Bayport and I am sure the property tax was a lot less for what they were getting for services…Every thing we ordered from hardwood floors to shutters…the City got a piece. I am paying close to $14K a year…for property taxes…I have a friend in the Gold Coast who’s house is 1 Million in value…but assesed at $70,000..so don’t say we are not paying for our parks and school…when they shut down 3 other shools for this one. We don’t have kids…but we pay for yours…which I am happy to do…but Bayport is an asset to the community and pays for itself…Before I moved here the development across the steet (Summerhouse) was a high crime area they supposely had calls every night…I am sure we are saving money…in public services
Comment by Joaquin — January 1, 2010 @ 2:02 pm