On December 16, Mistermayor announced that San Francisco and the Navy had finally reached a deal for the transfer of ownership of Treasure Island. This was no small feat, seeing as how The City has been trying to take over the unwanted federal land since 1993, when I was in high school and promising young governor from Arkansas was being sworn in as President.
“Why now?” is thus the obvious question. (Aside from all the hard work by folks in the Mayor’s office, and it being the holidays 'n all.) The main point of contention all these years has been the price of the island. The Navy wanted “fair market value” for the land, and in 2007 with a grim smile unilaterally announced that the price tag was $250 million dollars. Which was not gonna happen. With no real incentive to sell the land, city negotiators have been up against the Navy’s airtight “Because I’m your mother, that’s why,” argument ever since.
Cut to 2009: people are in desperate need of jobs and state and local governments are itching to begin developing federal land. Some members of congress thought it would be a good idea to officially tell the military that “fair market value” isn’t the only metric for negotiating deals to give over former bases. Other sorts of compensation models are now permitted as part of the Defense Authorization Act of 2009, which was passed in October. The Act also requires the Department of Defense to issue a report on its land shedding progress in about 6 months.
In the case of Treasure Island, in addition to the $105 million dollar set amount that developers will pay to the Navy on our behalf, some (as yet undetermined) amount of the net profits from development of the island will go to the Navy. This smacks of, “Oh, yeah? If you’re sure the island is such a treasure (worth $250 mil?!?) put your signature where your mouth is and agree to some profit sharing.” Obviously, I’m on board if that’s the message.
Once the Act directing the Navy to grow an imagination was in place, you can bet that The City’s request to get the island so we can create an eco-sustainable-Xanadu that runs on recycled unicorn horns was at the top of the list. The Democratic Party controls the White House, the House of Representatives and allegedly the Senate, plus our Congresswoman is the Speaker of the House and our Senators are senior stateswomen. (Suck it, rest of nation!)
According to Director of Joint Development, Jack Sylvan, the next step is to draw up the paperwork and get the Board of Supervisors to sign off on the project. Hopefully, that process will not take another sixteen years. In 2006, the Board agreed to the basic terms of the development plan with only one dissenting vote: Ed Jew.
Defense Authorization Act Provision in .pdf format here: Download Funding Provision in DAA
2006 Board Approval in .pdf here: Download Treasure Island Term Sheet Approval
Also: Check out Michael Cohen's response to Tony Hall's editorial on the subject of Treasure Island.
WEBSITE BONUS: Interested to understand how the financing for this works? Sure ya are! Here's the deal:
Under the new plan, a development entity made up of 50 percent Lennar and 50 percent Wilson Meany Sullivan, will pay the Navy $105 million dollars and provide somewhere between $250 and $300 million to get the project up and running. Then some public financing will come in: the island will be subject to a special (read: extra) tax zone and the City will sell bonds based on that special tax revenue. Also, the overall amount of new taxes coming in to The City because of the development will be estimated and bonds sold on that revenue as well.
To sum up: it looks to me like paying for the project won’t hurt the City’s general fund, but the new tax dollars generated by the project won’t really help The City's coffers, either.
Melissa - I think your basic analysis of the financing is right (I haven't looked at those documents, at least not since I was tangentially working on stuff related to T.I.). But I would note that while the risk is low at the outset, and the payoff uncertain, these TIF (tax increment financing) style deals have garnered their share of criticism, for at least two reasons. 1) The municipality often guarantees those bonds and can be on the hook if the project does not generate the expected tax revenue. 2) Sometimes they become really sweet deals for the businesses inside the affected district - because essentially the taxes generated go directly into those districts' infrastructure and improvements, instead of being filtered and apportioned out to needy municipal services and functions that would normally get a piece of the tax revenue.
We'll have to see with T.I. Lennar is Lennar. WMS did an amazing job with the Ferry Building and the Flood Building, but T.I. is a different breed from anything on the SF mainland.
Posted by: Alek | January 03, 2010 at 23:25