As the economy gathers steam, San Francisco port officials hope that a range of waterfront developments will do the same.
The Port of San Francisco, which maintains control of 7 1/2 miles of shoreline between Aquatic Park and India Basin, is pushing forward on a range of projects, including a new cruise ship terminal, relocation of the Exploratorium museum, development of the parking lot adjacent to AT&T Park and refurbishing historic Pier 70.
That momentum contrasts with a year ago, when the foul economy had stalled many of the port’s biggest efforts.
It’s not just the improved economic conditions that are increasing the chances of development success. The port, after years of work, now has access to new sources of funds for pursuing projects.
The port this year sold almost $37 million in revenue bonds, for the first time in 25 years. It was able to access a portion of voter-approved bonds to build public parks, and gained changes in state law to be able to capture new tax money generated from newly developed land.
Until recently the port relied primarily on the fortitude and financial strength of private developers to determine a project’s success or failure.
“Before we said, ‘Here’s the land. You (developer) deliver everything,'” said Jonathan Stern, assistant deputy director for waterfront development. “Now we’re saying, ‘Here’s the land… here’s some public money in terms of revenue bonds or in terms of park bonds or some source,” he said. “It creates a virtuous cycle” that gives projects a better shot at completion.
The port is now “in a far different place,” said Ann Lazarus, a port commissioner, thanks to its broader array of financing tools. “I don’t have any doubt that all these projects will move forward.”
Port needs project successes
The port’s success or failure in pushing through big-ticket projects on the waterfront will have huge implications for its future. Successful developments – especially an ambitious mixed-use project envisioned next to AT&T Park – are seen as a source of money to help the port meet huge bills for repairing its infrastructure.
The port estimates it needs $2 billion for deferred maintenance and seismic strengthening on some of its piers, most of which are a century old. The port has about $650 million in funding set aside for the work, leaving a massive shortfall. Already the port has roped off some piers that are too weak to support vehicles or people. More closures will follow if the port can’t bring in more money.
“The question becomes, if we don’t get to some of these facilities, how long will they last?” Stern said.
An example of a project that saved some of the port’s piers is the relocation of the Exploratorium. The unique hands-on museum plans to build an estimated $175 million facility on Piers 15-17 totalling 230,000 square feet in coming years. The museum is still getting the required permits for the site, said spokeswoman Linda Dackman. But it has already gotten 50 years of rent credits from the port because of the sizeable investment the museum will be making in the dilapidated piers. The Exploratorium, currently in the Marina, could open in 2013.
A project with the greatest potential to generate money for the port is one being championed by the San Francisco Giants on Seawall Lot 337 close to AT&T Park. Now used for stadium parking, the site could have new offices, housing, open space, shops and an entertainment center, said Jack Bair, the Giants’ lawyer. After being sidelined during the recession, the port recently entered into an exclusive negotiating period with the Giants-led consortium on the project.
The overall project is expected to be about 2.4 million square feet. The precise allocation of space for various uses is in flux, Bair said.
The economy’s uneven recovery could still pose challenges for the project, Bair added. “But we’ve determined that we want to press forward.”
The port could be a big winner from the deal because the new development would generate millions of dollars in new tax revenue, which in turn the port could collect and use to fund other projects, port officials said. It’s unclear how much money would come from the deal because the specifics of what will be built are still being worked out.
Rounding out the development team with the Giants is the Cordish Cos., a Baltimore-based developer that has built several mixed-use villages near baseball parks; hedge fund Farallon Capital Management of San Francisco and developer Wilson Meany Sullivan.
Another massive project moving forward is Pier 70, a 64-acre site where 19th century brick buildings once used for ship building now lie empty. The site could accommodate 2.5 million square feet of new office construction – space for thousands of job.
The port is preparing to solicit developers interested in building on the site. The location will pose challenges. In addition to the historic nature of some of the buildings, the site’s grounds are polluted from the remains of steel and iron forged there. But given its attractive location – close to the Mission Bay neighborhood and 3rd Street light rail line – port officials think it will attract the interest of developers.
Finally, the city’s cruise ship terminal is in its design phase. The new facility, approximately 70,000 square feet, will be built at Pier 27 and have one berth, accommodating ships coming to town during the May to October high season. Construction would begin in 2012 and wrap up in 2014.
The current plan for the terminal is scaled back from what was originally envisioned for Piers 30-32 a few years ago. At that time, port officials considered having two berths.
The facility could be put to use as a site for corporate parties when ships are not using it, Stern said. Port officials got a big boost for the terminal project when they sold $36.7 million in bonds earlier this year.
At least $10 million from that bond sale is expected to go toward cruise terminal work.
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