Board delays Treasure Island financing district after officials cite $380 million affordable-housing gap

The San Francisco Board of Supervisors on Oct. 25 voted to continue consideration of a package of resolutions to create an infrastructure and revitalization financing district (IRFD) and related financing measures for Treasure Island and Yerba Buena Island after staff described a financing shortfall for the project’s affordable-housing commitments.

Why it matters: The board said it wants a clearer, written plan showing how the city and developer would close a multi-hundred-million-dollar gap before the resolutions proceed. The items were continued to the Nov. 15 meeting to allow additional analysis and written materials from the Mayor’s Office of Housing, the Office of Public Finance and the Treasure Island Development Agency (TIDA).

Bob Beck, director of the Treasure Island Development Agency, told supervisors the development financing picture has changed since the plan’s 2011 baseline. “We currently have a gap of around $380,000,000 and, [we are] looking at all measures that we can to close that gap. That’s on a total budget of $970,000,000,” Beck said. He listed state and federal funding streams that were assumed in earlier plans but have not materialized, higher construction costs than anticipated in 2011 and additional units needed to meet a higher affordability target.

City staff and TIDA described a range of strategies being explored to reduce the gap. Those include seeking a legislative change to allow the city to retain a portion of state property tax increment, extending the IRFD term from 40 to 45 years, pursuing the state Affordable Housing and Sustainable Communities (AHSC) grant program and new markets tax credits, using a subordinated 8% share of local property-tax increment dedicated in the plan, and leveraging motor vehicle license fee in-lieu payments tied to property valuations. Beck also said staff are examining targeted cost-containment measures and smaller grants to bring down per-unit construction costs.

Supervisor Jane Kim summarized the background, noting that converting the project from redevelopment to the IRFD framework reduced the amount legally available for affordable housing compared with earlier redevelopment commitments. Supervisor Aaron Peskin pressed for a written, detailed plan quantifying which financing measures are likely to be available and what the impacts would be to the general fund and other city accounts. “Throwing out general ideas...isn’t enough,” Peskin said, urging the controller’s Office of Public Finance to review the plan before final votes.

Beck and staff provided additional numbers during the discussion: the immediate need to support the first two affordable-housing parcels is roughly $29,000,000, which Beck said could be met with project-generated sources today but that grant funding would ease pressure on future phases. Beck said the city applied in the current AHSC cycle for a transportation-focused award of about $21,000,000 and would pursue housing funding in subsequent cycles.

Action taken: Supervisor David Campos moved to continue items 10 through 14 to Nov. 15, 2016; Supervisor Mark Farrell seconded the motion. The board approved the continuance by unanimous roll-call vote (11–0).

What’s next: The board directed staff to return on Nov. 15 (and to coordinate with Budget & Finance and Office of Public Finance work already in progress) with more concrete, written strategies and analyses that show how the gap will be closed or reduced before the board acts on formation and financing resolutions.

Funding and legal context: The item package as presented would create an IRFD and a related Community Facilities District (CFD) to reimburse the developer for qualified project costs and dedicate a share of proceeds to affordable housing (TIDA materials presented a planned 17.5% IRFD allocation for affordable housing under the current financing plan). TIDA and the Office of Public Finance will continue working with the Mayor’s Budget Office and the controller to refine the financing plan.