City planners outline contingency plan for Treasure Island as redevelopment funding faces state uncertainty

San Francisco planning staff and redevelopment officials told the Planning Commission on April 7 that continued uncertainty in Sacramento over the governor's proposal to eliminate redevelopment agencies has forced them to prepare an alternative financing approach for the Treasure Island/Yerba Buena Island redevelopment.

Fred Blackwell, director of the Redevelopment Agency, said the governor's plan would eliminate redevelopment agencies and redirect substantial property-tax revenues to the state, creating a funding gap for projects that relied on tax-increment financing. "We anticipate a pretty prolonged state of uncertainty, which in some ways is better than elimination, but in a lot of ways is not a good scenario," Blackwell said. That uncertainty, he added, has already slowed negotiations and chilled investor interest in large projects.

To preserve project momentum, city staff presented infrastructure financing districts (IFDs) as a fallback. Unlike redevelopment's tax-increment model (which diverts roughly 80 cents on the dollar to project areas), IFDs generally allow use of the city's share (about 65 cents). Rich Hillis, who led the briefing on project financing, said that shift would reduce the Treasure Island development budget by about $130 million. "We can do the same kind of projects with IFDs, but there is less money available," he said.

As a practical consequence, staff recommended temporarily reducing the project's affordable housing requirement from 30% (about 2,400 units under the plan's 8,000-unit buildout) to 25% (about 2,000 units). Staff emphasized the cut is a contingency: if state law is changed or additional revenue sources are secured, the plan includes mechanisms to restore the higher affordable-housing level and to return specific lots to affordable use.

Project leaders highlighted tradeoffs and mitigation options. The IFD approach preserves the land-use plan and most infrastructure sequencing but limits the amount of increment available for housing; it also shortens the bonding window (30 years for IFDs, 45 years under redevelopment) and places more reliance on developer contributions and other financing tools. Hillis said the team will pursue state legislation to allow IFD proceeds to support affordable housing and to extend bonding terms for large-scale projects.

Community advocates and housing providers spoke during public comment. Sherry Williams, executive director of the Treasure Island Homeless Development Initiative (TIE-DYE), urged protections for existing residents: "One of the most important parts of the TIE-DYE agreement was to make sure that our units are not demolished until they are replaced," she said, urging the city to preserve replacement housing commitments.

City staff stressed several program elements would remain under the IFD scenario, including the TIE-DYE replacement-housing plan, a jobs-and-equal-opportunity program, and community-facilities commitments. Officials also noted potential options to close the gap without cutting housing, such as deferring certain community facilities, reducing open-space scope, or seeking state ERAF or other contributions to backfill the shortfall.

Next steps include continued state-level advocacy, work on legislation to expand IFD authority for affordable housing, and detailed phasing and funding analyses before any change to the redevelopment financing model is finalized. Officials said they plan further briefings and to return to the commission with refined options as negotiations progress.