potrero view

July 2010

Public Benefits Delayed in Eastern Neighborhoods

By Sarah Mcdonald

Roughly a year and a half ago, the City re-zoned parts of the Central Waterfront, Mission District, Mission Bay, Potrero Hill, East SoMa and Showplace Square – the eastern neighborhoods – to allow for more housing and mixed-uses in the historically industrial area.  In addition, the Eastern Neighborhoods Plan describes the public infrastructure – including parks and streetscapes – needed to sustain projected population increases.

The plan took a decade to develop, and was adopted almost simultaneously with the collapse of the Bay Area’s housing market.  During what may be the tail end of the Great Recession, stakeholders are evaluating how well the rezoning is performing.  “The pipeline is kind of stalled because of the economy,” said Bruce Kin Huie, a Central Waterfront resident who is a member of the Eastern Neighborhood Community Advisory Council (ENCAC), which advises the City on plan implementation.

ENCAC’s 13 members are appointed by the Mayor and Board of Supervisors, and live, work, or own property in the neighborhoods affected by the plan.  Chris Block – who serves as the Commission’s vice-chair, appointed by District 8 Supervisor Bevan Dufty – believes that rezoning brought a more balanced approach to development.  Letting developers do whatever they want might be cheaper and bring in more tax revenue, he said, but “you might not have created the City you want to live in.”

A 2006 Nexus study found that the population of the eastern neighborhoods could grow by 11,386 people by 2025.  According to Tony Kelly, a candidate for District 10 Board of Supervisors, this growth will principally occur in neighborhoods that don’t even have sidewalks or public transit lines.   “So what do people do?” he said. “The difficulty has been this part of town is already deficient.”

A portion of the public infrastructure called for in the plan is expected to be funded by developers, who will be assessed $8 to $16 per square foot for residential development, and $6 to $14 per square foot for commercial space.  Fee levels are determined by building heights, with lower fees assessed on affordable housing projects. 

Fee revenue will be placed into a Community Benefit Fund, and used to help finance parks, recreational facilities, affordable housing, transit, streetscape improvements, and community facilities, such as childcare centers and libraries.  According to Block, it’s hard to predict how much money the fees will bring in.  “It’s all hypothetical at this point,” he said. “It’s all dependent on future development.”

In May, the Board of Supervisors passed a measure to enable developers to defer 80 percent of the impact fees that would otherwise be assessed in the eastern neighborhoods, as a means to spur construction during hard economic times.  Rather than paying the required fees upfront before receiving a building permit, developers can wait to pay the bulk of these charges until after construction has been completed.

According to Kelly, the policy could delay payments by three to five years.  Developers who choose to defer will be required to pay interest for the period in which the fees would have otherwise been paid. The legislation, proposed by the Mayor’s office, originally called for an option to defer 100 percent of the fees, but was amended to create some revenues to support public benefits projects.  Kelly said this was an important compromise, but expressed disappointment that the fees will be deferred at all. “What’s still a problem is the fact that the plan still isn’t fully funded,” he said.

But according to Tim Colen, the San Francisco Housing Action Coalition’s executive director, deferring the impact fees could trigger development in the eastern neighborhoods that would otherwise not occur.  “You don’t build the park benches and street lights before the housing,” Colen said.

In addition to a bad economy and fee deferral, other factors could muffle the amount of fee revenues generated in coming years.  The plan allows developers to enter into in-kind agreements, creating their own community infrastructure in lieu of paying fees.  One of these agreements, approved by the San Francisco Planning Commission in April, waived $1.9 million in estimated fees to be assessed on the Martin Building Company in exchange for construction of a childcare facility at 2235 Third Street, a 1.25 acre Dogpatch development that will include 179 rental units, as well as restaurant and retail space. According to Kelly, these agreements are dangerous because they enable developers to decide which public benefit projects get done. “You want to have the people in charge of where stuff goes,” he said.

There’s broad agreement that fee revenues alone will be insufficient to pay for needed infrastructure, prompting a need to identify other funding sources.  The Eastern Neighborhood Infrastructure Finance Working Group, which consisted of representatives from different City agencies, recommended forming an Infrastructure Finance District (IFD) and a Community Finance District (CFD) to the San Francisco Board of Supervisors last year.  Under an IFD, which would require a two-thirds vote of affected developers, projects would be funded through the expected property tax revenues generated by new development in the district.  A CFD would allow property owners to voluntarily vote to increase taxes to pay for public benefit improvements. 

According to Adam Van de Water, Assistant Director of the Capital Planning Program at the Office of the City Administrator, and a member of the working group, existing residents will benefit from public improvements, and should share the cost.  “You have to be a little more creative with your financing strategies so you can share the burden with many different parties,” he said.

In an opinion piece published in the View’s May issue – “Dense” – the paper’s publisher and another District 10 Board of Supervisors candidate Steve Moss called for a realignment of local, state, and federal infrastructure spending towards expected growth areas, like the eastern neighborhoods.  “The City, and the region, is pushing higher density development into Southeast San Francisco as a means to help solve a host of problems:  affordable housing, traffic congestion, polluting air and greenhouse gas emissions,” said Moss.  “If we’re going to solve the region’s problems they need to solve ours.”

The Eastern Neighborhood Community Advisory Council meets monthly at the Planning Department.

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