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Planning staff outlines three revenue options to fund Transbay Transit Center improvements
Summary
Planning staff proposed a three-part financing package for the Transit Center District — a tiered impact fee, a Mello-Roos (community facilities) district and a 1% transfer-tax-style benefit covenant — with projected net present values totaling roughly $700–$850 million over 15–20 years; commissioners raised concerns about market risk and preservation of the TDR program.
Joshua Switsky, a planning department staff member, told the San Francisco Planning Commission that staff is proposing three principal revenue mechanisms to pay for infrastructure tied to the Transit Center District: a tiered impact fee, a Mello-Roos community facilities district and a benefit covenant applied to property transfers.
"The first tier is a $5 per square foot fee," Switsky said during the presentation, describing a three-tier structure. Under the proposal, a $5-per-square-foot fee would apply across a building; a $25-per-square-foot surcharge would apply to all square footage above a floor-area ratio (FAR) of 9:1; and an additional $5-per-square-foot tier would apply to FAR above 20:1. Switsky said the tiers are cumulative.
Switsky framed the proposal as a partial alternative to the existing transferable development rights (TDR) system. He said staff proposes reducing the TDR increment to the difference between a new district base FAR and 9:1 and, where TDR supply is insufficient, allowing developers to pay an in-lieu fee that would be deposited into a historic-preservation fund.
On the tax side, staff proposed a Mello-Roos — a state-enabled community facilities district — that would add roughly 0.35 percentage points to annual property taxes for properties inside the district, raising the total tax burden from about 1.14% to roughly 1.45%, according to the presentation. Switsky described a separate "benefit covenant," akin to a transfer-tax levy, at about 1% of property value on transactions inside the district.
Staff presented revenue-range estimates under two build-out assumptions (15 years and 20 years). Net present value ranges shown in the presentation were: impact fees about $120 million–$125 million; the Mello-Roos roughly $120 million–$170 million; and the benefit covenant about $30 million–$50 million. Aggregate NPV across mechanisms was presented at roughly $700 million–$850 million over 15–20 years. Switsky emphasized that the estimates are sensitive to the pace of development and market recovery.
Commissioners pressed staff on implementation and fairness. Commissioner Antonini asked whether Mello-Roos participation would be required; Switsky said the premise of the district is that participation would be mandatory for properties in the district but that the city attorney and implementation details are still being worked out. When Antonini asked whether the 1% transfer levy would be measured at sale, Switsky replied it would apply "upon sale."
Several commissioners cautioned that the city’s revenue projections depend on a market recovery. Commissioner Catherine Moore warned that land values have plunged and that revenue assumptions could be optimistic: "I want to caution that some of the numbers we are seeing here create justification for a whole bunch of things which ultimately might not add up to be delivered," she said, urging care in adopting policy tied to volatile market assumptions.
Staff outlined likely spending priorities should the funds be raised: elements of the transit center (the train box and downtown extension), a significant redesign and refurbishment of district streets (estimated at about $110 million, plus or minus $10 million), open-space acquisition and improvements (initially estimated at about $50 million) and district utility systems such as combined heating/cooling and recycled-water infrastructure.
Switsky said the city is also considering in-lieu fees that would substitute for existing on-site obligations, such as open-space and TDR requirements, allowing funds to be pooled for larger coordinated projects such as the proposed plaza at Second and Howard and better connections to the Transit Center Park.
The presentation closed with staff saying a public workshop to discuss the financial program is scheduled next week and that a draft plan and draft environmental impact report will follow the public review schedule.
The commission did not take a vote; the item was presented for discussion only and will be the subject of further public workshops and the upcoming draft EIR.
