SAN FRANCISCO — San Francisco is laying the foundation for a $600 million-plus rehab of 69 acres of waterfront that will need a big chunk of public financing.
The Pier 70 project, on one of the largest pieces of undeveloped land left in the city, will include three million square feet of new buildings and will rehabilitate 700,000 square feet of historic buildings, according to the master plan. It will also add parking, 20 acres of open space, and infrastructure.
Considered the most complete 19th-century maritime industrial complex west of the Mississippi, plans for the site also include registering as a National Registered Historic District, improving shipyards, building a park that extends trails around San Francisco Bay, and attracting a range of businesses to the area.
“We hope to transition it from industrial waterfront to a place where people can access the bay,” said Kathleen Diohep, the Pier 70 project manager at the Port of San Francisco. “We recognize this is a challenging project.”
The whole undertaking is expected to take 18 years to complete, starting at the earliest in 2014, and will cost an estimated $665 million, Diohep said.
The project requires a basket of financing tools. The San Francisco Port Commission, which heads the project, manages and develops port properties for the city. It plans to grab funds from federal historic and new-market tax credits, Mello-Roos community facilities district financing, property tax-increment financing, park and open space funding tools, grants from various sources, and other sources of low-cost debt.
The port is funded with revenues generated by its waterfront property, according to the Pier 70 master plan released in April. Diohep said the project’s financial feasibility study calls for funding $310 million of the development via public financing and much of the rest with private equity.
“To the extent we can,” she said, “we will use public financing tools that will let us bring low-cost debt to the project.”
The plan still has a projected $34 million gap in financing, Diohep said, citing the financial feasibility study.
The first chapter of the project will develop 25 acres of new buildings, renovate historic buildings, and add waterfront parkland.
The port has issued a request for proposals for the first phase seeking submissions by Nov. 18.
Gabriel Metcalf, director of the San Francisco Planning and Urban Research Association, said Pier 70 is an extraordinary location and the last major waterfront-development opportunity in the city.
“Whoever figures out this deal is going to be sitting on one of the most high-value locations in Northern California, arguably in the country,” Metcalf said. “That said, it is a challenging project.”
He noted that the pier site is filled with beautiful historic buildings and located near the recently built University of California at San Francisco’s Mission Bay campus, a rail line, and a biotech hub.
However, the site also needs a major cleanup. Soil throughout the property is contaminated with hazardous materials, including metals, petroleum, and other chemicals from its previous occupants.
Project parkland will be mostly financed through the city’s 2008 Proposition A bonding authority, which provided $33 million of general obligation bonds to expand open space along the waterfront on port property.
Diohep said the port will approve the overall plan and rezone the entire 69-acre site once it has a partner in place for the initial 25-acre project and a vision for its historic rehabilitation. Officials are ready to take advantage of the project’s designation as an infrastructure financing district, which was bolstered by legislation earlier this month.
Gov. Arnold Schwarzenegger approved AB 1199, which expands the port’s infrastructure financing powers and allows it to grab 90% of the growth in property taxes from the rehab of Pier 70. The legislation requires at least 20% of the infrastructure financing district revenues to be spent on waterfront parks and public access to the bay, environmental remediation, and removal of bay fill.
“This bill will give the city new finance tools to redevelop Pier 70 into a center of innovative industries, jobs and economic investment, while maintaining the area’s historic nature,” San Francisco Mayor Gavin Newsom said in a statement.
Schwarzenegger vetoed a similar bill last year in a move that stirred controversy due to the unusual message it appeared to contain. The veto message was aligned so the first letters of its seven lines formed a two-word message, starting with the F-word and ending with “you.”
Schwarzenegger sent that message days after the bill’s sponsor, Assemblyman Tom Ammiano, D-San Francisco, responded to the Republican governor’s surprise appearance at a San Francisco Democratic Party banquet by reportedly yelling at him, “You lie!” and “Kiss my gay ass!”
Citing the need for job creation, the governor signed this year’s bill with the letters along the left margin of the signing letter spelling out “You Are Welcome.” Aside from state legislation, city voters have also helped push the project financing ahead.
In 2008, city voters approved Proposition D, which streamlined the entitlement process and created financing mechanisms for Pier 70. The proposition lets the Board of Supervisors allocate a 20-year funding stream of up to 75% of the anticipated growth in payroll and hotel taxes from the pier project. The port must demonstrate it needs resources beyond property tax increments and lease revenues to get the funds.
Diohep said the extra tax proceeds would likely allow larger debt financing, even though the port is far from nailing down project financing details.
“This is not near-term in terms of construction or needing to spend money,” Diohep said. “We are working through the paper side of it.”
Shipbuilders are also part of the development mix because the city plans to keep a 15-acre shipyard on the site. The port recently helped BAE Systems Ship Repair, which operates in the proposed area, get $1.8 million in federal stimulus funds to upgrade its facility.
It also secured $2.4 million in federal funding to investigate environmental conditions on the site of the project.