Developers Don’t Want to Pay for Caltrain/HSR Extension to Transbay Center

Developers who are building towers around the Transbay Transit Center in SoMa are fighting to reduce a special property tax that will be levied on developments in the area. The biggest loser could be the downtown rail extension to bring Caltrain and California high-speed rail into the terminal, as more of the funds for the regional rail hub and other long-term projects would have to come from taxpayers.

A rendering of the Transbay Transit Center and surrounding high-rise development to come, via TransbayCenter.org

The group of developers is backed by former mayor Willie Brown, who registered as an official lobbyist to work for them in July (he also recently lobbied “pro bono” for AnsoldoBreda, the manufacturer of Muni’s current train fleet). Brown previously helped create the Transbay Joint Powers Authority to oversee the massive package of projects centered around what’s been called the “Grand Central of the West,” expected to open in 2017.

SF Chronicle columnists Phil Matier and Andrew Ross reported in July:

Brown confirmed for us that he is representing Boston Properties — builder of the 61-story Salesforce Tower — and more than a half dozen other property owners.

In exchange for the city allowing them to increase the height and density of their projects, the property owners agreed two years ago to be assessed up to $400 million to help pay for a Transbay Transit Center rooftop park and other public improvements to the area.

Only now, thanks to skyrocketing property values and changes in the city’s methodology for calculating the assessments, the developers — paying into what’s known as a Mello-Roos special district — could face up to $1.4 billion in charges.

The Board of Supervisors was expected to approve the agreement creating the Mello-Roos district on Tuesday, but D6 Supervisor Jane Kim postponed the item one week. “We wanted additional time to be able to brief all of the offices on this issue, but also talk to the multiple parties involved,” Kim said at the meeting.

Sustainable transportation advocates and east SoMa residents at the meeting blasted the developers’ effort to reduce the tax, saying it would undermine the funding plan for projects that have been in the works for decades. In 2012, a massive upzoning plan for the “Transbay District” was approved to concentrate high-density housing and office development there, helping to ensure that new workers and residents arrive by transit, foot, and bike instead of clogging the streets with cars. Developer fees are also expected to help pay for pedestrian safety upgrades, protected bike lanes, and surface transit upgrades that could transform SoMa’s dangerous traffic sewers.

Matt Field of TMG Partners said that the proposed agreement “contains fundamental changes that have material impacts on Transbay that weren’t anticipated when the board approved the Transbay District plan.” He said the development group hopes the delay will “lead to a more productive discussion that can yield a consensus.”

Bruce Agid, vice chair of the TJPA Citizens Advisory Committee and a board member of the South Beach/Rincon Hill Neighborhood Association, said the current agreement would only require developers to pay “less than 1 percent of the value of each development project.”

“In exchange for the right to build much taller buildings, which ultimately results in significant increases in net revenues, or profits, the developers agreed to a Mello-Roos community facilities district special tax to fund their portion of the necessary infrastructure improvements,” said Agid. “Unless there is a fundamental flaw in the plan or implementation document, the developers must pay their fair share. If not, these infrastructure costs will be shifted onto us, the taxpayers.”

In a letter urging the Board of Supervisors to approve the tax agreement without lowering the tax assessment rates, Livable City Executive Director Tom Radulovich called the Transbay Transit Center “the most important transportation project in the Bay Area,” since it will serve thousands of new residences and jobs and provide unprecedented transit connectivity for the region.

“We all like ‘compromise,’ we all like ‘consensus,'” said Supervisor Scott Wiener. “But in this scenario, what that means is that every dollar of ‘consensus’ is a dollar that’s not going to the downtown extension. And then we’re left with a very expensive bus station with no train service — or, at least, it’s going to take a heck of a lot longer to get there.”

  • BBnet3000

    Upzoning and density bonuses up front, fees that can bring public amenities second, lower than intended, or not at all.

    I guess they are taking a page from New York’s playbook.

  • jamiewhitaker

    I guess we will find out just how corrupt our politicians are. There is absolutely no reason to change the agreed upon fees after the upzoning to over 1,000. A deal is a deal…. Less than 1%, and they have audacity to hire Willie Brown to try to change the rules? Appalling. Pass the CFD with fees as is.

  • david vartanoff

    If they don’t want to contribute, cancel their building permits. As to Willie, who would be surprised? The fee percentage should be CPI indexed. If the speculators don’t like it, tough.

  • Jamison Wieser

    In exchange for the city allowing them to increase the height and density of their projects, the property owners agreed two years ago to be assessed up to $400 million to help pay for a Transbay Transit Center rooftop park and other public improvements to the area.

    So we are getting a park then? That hasn’t been cancelled like the glass walls then?

  • RoyTT

    Fees that are expressed as a percentage would not need to be CPI-indexed. Only fees expressed in absolute dollar terms need indexation. Percentage fees self-index.

    More generally, there is always a potential problem with taxes (let’s call these fees by their more appropriate name) when they are based on valuations rather than transactions.

    Taxes in this country generally apply only to transactions. And this makes sense because there is actual money changing hands and we know that the money is there. Income tax, sales tax, property transfer taxes, estate taxes and capital gains taxes all apply to transactions.

    The one exception is property taxes because they are essentially a tax on wealth and, as such, there is never any guarantee that the money is there to pay the tax. A good example is with asset-rich, cash-poor people, like seniors who own a big home. Public policy generally supports the idea that they should not be forced to sell their home to pay their property tax, and there are various programs to help people in that situation.

    Likewise, a big part of the basis for Prop 13 was to avoid such situations arising.

    Property tax is really the only good example I can think of where this nation has a wealth tax – something which is otherwise specifically banned by the US constitution (although Florida has an Intangibles Tax, which targets that state’s large number of affluent retirees).

    Anyway, this special tax assessment is a de facto tax on implied but unrealized wealth. Just because the properties may have doubled in value over the last few years does not mean that the cash is lying around to pay twice the taxes. And do we really want the developer cutting corners to find the cash to pay the extra tax? Would that signal the end of the mooted rooftop park? Safety compromises? Quality of finish?

    Point being – this isn’t just a simple good versus evil situation. Imagine, for instance, that we were in a bad real estate market and these valuations were declining. Would Kim and Wiener be arguing that the city should take less in taxes? I don’t think so.

  • Richard Mlynarik

    So we are getting a park then? That hasn’t been cancelled like the glass walls then?

    If only!

    The (wildly overbudget) structural steel supporting the batshit insane celestial park enclosing The Big Bus Station in the Sky is why the Transbay Terminal cannot and never will function as a remotely useful rail terminal.

    America’s Finest Transportation Planning Professionals of ARUP North America, Parsons Transportation Group, the Transbay Joint Powers Authority and Caltrain: death is too kind a fate for any of them. $2 billion down the crapper.

  • jamesbeaz

    Absolutely laughable — the Italians have found a way to get high-speed trains — from two different operators — to the center of Naples, but the city of Google and Facebook is too incompetent — and politically impotent — to get trains into its own center. The US is a disaster.

  • sffoghorn

    Good thing that the sustainable urbanists fought for heights and densities around transit corridors, your developer overlords thank you for services rendered and are now showing you the hand.

  • Jason P.

    Neither Facebook nor Google are based in the city of San Francisco. Twitter is, a good six very long blocks away from the Transbay Terminal, but it’s right off the Civic Center BART stop so that doesn’t matter.

    The city of Google (Mountain View) already has a surface-level train station served by CalTrain and VTA light rail, though not a convenient distance from the offices. Likewise, there is also a CalTrain stop in Menlo Park, home of Facebook, also inconveniently distant.

  • Amanda Clark

    Of course, no one forced Facebook to move to a building that is only accessible by car.

  • 94103er

    It would be perfectly accessible via rail if the MTC (correct me if I’m wrong) didn’t flush money earmarked for re-opening the Dumbarton rail bridge ‘down the crapper,’ to paraphrase our favorite cranky commenter @Richard_Mlynarik:disqus.

  • Amanda Clark

    I agree, unfortunately I don’t think we’ll see a new Dumbarton crossing in our lifetimes.

  • p_chazz

    So move to Italy!

  • Hi Richard Miynarik could you please explain this structural steel issue, thanks!

  • Bluehale

    That’s how NYC paid for extending the 7 train to Hudson Yards since the MTA wouldn’t build it unless NYC paid for the whole thing. The fact is that the same developers fighting this are the same ones who are going to benefit greatly from Caltrain/HSR running into the Transbay Terminal.

    The Board of Supervisors shouldn’t change a thing of the CFD especially since as long as Republicans control the House and possibly the Senate after November we won’t have the Feds to help fund the rail extension into the Transbay Terminal.

  • M.

    ‘inconveniently distant.’ Not unless you can’t walk. Plus, there are free shuttles to the campuses. A major city building a new major transit hub that won’t actually be a hub? Why build something new in a way that we already know is dumb and will be dumber in the near future?

  • andrelot

    Is there any area zoned for the sq. footage Facebook needs for its campus near a Caltrain station?

    IIRC, Palo Alto, Mountain View and other cities explicitly don’t want a lot of construction near the stations, especially high rises.

    Even with high-rises, they would still need some decent space on the ground for the campus-vibe tech companies like to provide.

  • murphstahoe

    A good example is with asset-rich, cash-poor people, like seniors who own a big home.

    I never understand this. Let’s say a property increases by 10,000 percent in one year. This means the property tax will go up by $100 per year. A senior may have – let’s say – 30 more years to live. That means the increase in property taxes will, over the rest of their 30 years of life, chew up only 30% of their one year gain.

    That’s a cause for celebration, not an attack on their homes. Take out equity from the house, pay the taxes. QED. Even with nominal interest rates on the equity removal, they come out way ahead. The argument that they can’t leave their equity to their heirs is laughable, the fact that they are paying less taxes can only result in higher taxes and less services for those same heirs.

    The alternative – houses going down in value, is much worse for asset-rich cash-poor people. Presuming they have saved enough cash for retirement to pay the taxes on their current basis, an increase in asset value is good, not bad.

  • Affen_Theater

    Redwood City, on the other hand, is fully open for business as far as (re)-development & construction goes in and around the entire downtown and Caltrain station: http://www.bizjournals.com/sanjose/news/2014/09/02/developers-queue-up-for-redwood-city-projects-as.html?page=all
    An already out-dated map of current projects: http://www.redwoodcity.org/phed/pdf/CD_Downtown_Project_Map_April14.pdf

  • Sean

    Classic bait and switch. They must be learning from our Mayor.

  • coolbabybookworm

    How do they expect people to get to their buildings if there isn’t good transit? Are they building helipads on the roofs?

  • David Salaverry

    “… a de facto tax on implied but unrealized wealth. Just because the properties may have doubled in value… does not mean that the cash is lying around to pay twice the taxes. And do we really want the developer cutting corners …Would that signal the end of the mooted rooftop park? Safety compromises? Quality of finish?”

    Straw man arguments. RAISE THE RENT! San Francisco is the premier location for office space. In the libertarian market fundamentalist economy of RoyTT’s dream, the market makes the necessary adjustments. If the corporate renters don’t want to pay, don’t build.

    The developers ploy to lower their costs is pure crony capitalism. You can be sure crony capitalism is at work when Natty Prince Willie is in the house.

  • Anandakos

    It’s some shit he’s made up in his fevered illusionation. He’s that jerk who buttonholes you at a party and rants about the injustices his landlord has wreaked upon him.

    Pay that man behind the narcissism no mind.

  • Anandakos

    Well, the City WOULD be taking less in property taxes, so what “Kim and Weiner” think is irrelevant.

    You’re one of those erudite defenders of ceaseless wealth accumulation. In other words, a royalist.

    There ought to be a graduated rate on estates which reaches 100% on the next (unlimited) marginal level at $1 billion. You could make it per recipient if you it to be “fair” to families with lots of children.

    Nobody needs more than a billion dollars “to get started”, end of story.