Post image for The Treasure Island End Game

The Treasure Island End Game

by Larry Bush on 05/06/2011

in Paper Trails

Ever since San Francisco regained authority over its waterfront with the 1968 Burton Act, City Hall has moved deals by ignoring voter-approved requirements, using tortured legal interpretations offered by the City Attorney, buying the support of convicted felons with subcontracts, and whistling past the courthouse when its preferred bidders are on trial. Still, local push-back sometimes reined in City Hall, trimming or killing deals.

The Treasure Island proposal changes all that. Not the scandal and the sleaze, but the ability of San Franciscans to curtail developers whose plans reward themselves at the expense of the city’s future. CitiReport reviews how we got there and the choice before City Hall to change the rules for one developer so that citizens and city officials will have no leverage for the next 20 years. Illustration from Malrite rendering of 2000 proposed San Francisco at the Wharf for Pier 45 knocked out of contention following strong local objections.

Illustration from Maltrite’s proposed San Francisco at the Wharf derailed by citizen opposition in 2000.

It didn’t start with that potato stand, and is certainly didn’t end with that potato stand, but the potato stand is an important part of the story.

It was 1978, and a new district-elected Board of Supervisors had been in office for only a few months. Already they were faced with decisions that would alter San Francisco for decades to come – decisions that just ten years earlier were out of City Hall’s reach.

For generations, going back to the 19th century, the State of California had taken from City Hall the authority to decide what could be done on its waterfront, who would be allowed to own or lease it, and what purposes it would serve. Local control had been forfeit as a result of corruption and self-dealing that shocked even 19th century Americans.

Now in 1978, ten years after then-state assembly member John Burton passed the 1968 Burton Act returning local control to City Hall, albeit with some conditions, City Hall was debating what to do about a group of decrepit warehouses serving a ghost maritime industry. The proposal by a group of investors required that first the area be rezoned from warehouses to allow other uses.

On a first vote, the rezoning failed by one vote. Then a vote switched, and in a second vote, the rezoning passed by one vote.

Pier 39 was born. And, with a motto declaring that this pier of restaurants, shops, even a small theater, held “something for everyone,” why shouldn’t that mean something for the supervisor who switched his vote to allow Pier 39 to become a new waterfront destination.

With that, then-supervisor Dan White, who cast the deciding vote, received a lease for a hot potato stand in the new tourist mecca and a shot at adding to his measly $9,000 annual supervisors salary.

It wasn’t exactly a gold mine. In fact, it was pretty much – as the saying goes – small potatoes. The supervisor would spend hours there peeling potatoes.

And it was never determined that Dan White struck a deal for his vote in exchange for a piece of the action at Pier 39, although the matter was under FBI investigation at the time when, only months later, White went to City Hall with regrets and a gun seeking to be reappointed to the seat he had just resigned, and ended killing Mayor George Moscone and Supervisor Harvey Milk.

But the general murkiness of the deal, fragrant with the scent of unclean hands, has remained a feature of San Francisco City Hall’s decisions regarding its waterfront ever since.

While scandals and sleaze existed before and after the Pier 39 vote, it nevertheless marked a critically important change in the status quo.

The Burton Act that returned the city’s waterfront to local control set guidelines that required that waterfronts be devoted to maritime uses on the not very novel notion that landside property could handle other purposes while maritime uses pretty much had to be at the waterfront.

The city, under the Burton Act, held its waterfront under a State Lands Trust that included outside oversight to ensure that the intent of maritime use was honored.

The conversion of maritime warehouses, decrepit or not, was able to became a virtual midway of tourist attractions because of a ruling by the state lands trust that laid out a very elastic view of what constitutes maritime use. Maritime use, according to this expansive interpretation, was just about anything that encouraged people to come to the waterfront.

It couldn’t be office buildings that had no maritime connection, or routine residential housing. But it could be entertainment centers, hotels, restaurants, shopping centers – anything that might draw in the populace.

The table was laid for a feast and there was no shortage of those who wanted to pull up a chair and begin to gobble. The cost of a hot potato stand was simply the price of admission.

City Hall: Old Style Deal Maker

It is an undoubted aspect of the deal that awarded Lennar control over the former Hunters Point shipyard, that awarded development rights to well-connected and well-heeled political donors at Treasure Island, that somehow rewrote a public deal for the America’s Cup behind closed doors and then named the mayor a “Special Ambassador” with perks and payments that aren’t being disclosed, and which is allowing the historic 63-acre Pier 70 to be developed now by a bidder whose former officials are front and center in a corruption trial involving City College money laundering.

At each stage the City Hall family has been what in other circumstances might be considered La Familia, as the City Attorney issued opinions that blocked actions by voters to have a greater say, as the Board of Supervisor ignored citywide elections that mandated a more competitive process, and as city commissioners and department heads with dubious ties to major beneficiaries of their decisions moved the agenda forward.

If that seems to be an overstatement, a misreading of City Hall doing the people’s business, consider some of the specifics in each of those deals.

Hunters Point

The agreement for the 720 acre Hunters Point shipyard was decided by Lynette Sweet, the Redevelopment Commissioner who convinced colleagues to throw out the top bidder in favor of a deal that included a convicted felon aligned with then-mayor Willie Brown.

Sweet, a Mayor Willie Brown appointee, was the treasurer of the Third Street Economic Development Corporation, a bogus nonprofit headed by Charlie Walker, a convicted felon with close ties to Mayor Brown. It’s second in command, Al Norman, was convicted on manslaughter charges for shooting a Housing Authority inspector who escaped a fatal wound when the bullet was deflected. Following a federal investigation of federal funds awarded to the group, the city was ordered to recover all federal funds. In actual practice, the group’s main activity was to host annual birthday fundraisers for Mayor Brown.

When Lennar made its pitch for development rights at Hunters Point, it lost out to another bidder. Sweet argued from the commission dais that the commission staff failed to take into account important views from the community. Among those appearing as important community voices was Charlie Walker.

As the old Examiner’s Lance Williams and Chuck Finnie reported in a 2000 article about FBI investigations in Willie Brown’s activities, Lennar’s proposal also included a contract for Charlie Walker.

“Under its proposal to develop the site, Walker’s Bayview Hunters Point Builders Exchange would serve as a local jobs broker for laborers seeking work on the project,” the investigative reporters wrote in a February 16, 2000 Examiner article.

The deal went through.

In San Francisco, battles are won but wars never are – they go on year after year. Lennar’s rights to develop Hunters Point has been no exception, as Lennar persuaded the city to trim back the company’s obligations for homeownership, affordable housing and other community benefits. A citizen petition that had more than 30,000 signatures to put the plan to a citywide vote in 2006 was ultimately ruled invalid by the city attorney who said that petition signers were not provided with copies of all ten separate measures referenced in the plan. In 2008, the city further renegotiated the plan to give up half of Candlestick Park, the city’s only state park, so that Lennar could use it to build waterfront market-rate homes with a view of the Bay.

Pier 70

Just about a mile north of the Hunters Point shipyard is Pier 70, site of an historic dry dock and century-old warehouses – – but more importantly, the site of 69 acres that can be developed into what the city hopes will be a “green campus” stretching from Lennar’s Hunters Point development to Mission Bay, a tech corridor.

In April, the bid was awarded to Forest City, a prominent developer involved in projects from the Westfield Centre to the Chronicle’s own hopes to revamp its newspaper properties into a real estate development.

Forest City’s former project manager also was in the news in April, facing felony charges of money laundering on behalf of City College’s political interests. The president of the City College Board of Trustees also is the San Francisco lobbyist for Forest City, and it was in Forest City offices that discussions took place on fundraising for a bond measure to benefit the college. It was this bond measure’s funding that is the focus of the current criminal charges.

Natalie Berg, the Trustee president at the time, has not been charged with any crimes in the case. A former chair of the city’s Democratic Party, Berg is a longstanding member of the city’s “official family” as an elected official in her own right.

Newspaper accounts of the City College money laundering scandal mentioned only once that a key figure was a former Forest City official recruited to work at the College, and no accounts have mentioned Berg’s role as both the Forest City lobbyist and the President of the Board of Trustees.

America’s Cup Gives Gavin Newsom His Own Berth

Sandwiched between Pier 70 and the Hunters Point shipyard is Pier 80, the southern-most pier that will be used in the America’s Cup races, and which now berths Larry Ellison’s winning yacht.

The America’s Cup events have set aside piers from the south to the north of the Ferry Building, including Piers 32-36, Piers 30-32, Pier 28, Pier 26, Pier 19, Pier 19 ½, Pier 23 and Piers 27-29 ½.

In other words, a clear swath from virtually one end of the waterfront to the other.

In a reverse of the process, this time it was San Francisco doing the bidding rather than weighing offers from prospective developers. The Board of Supervisors concurred with the outline of a bid package, with the caveat that the end result not add materially to the costs expected to be paid by the City.

Mayor Newsom claimed to have honored that provision even while changing the terms in a breath-taking interpretation that increasing the potential profits available to Larry Ellison’s America’s Cup Event Committee did not increase the city outlay. It simply reduced the income the city might have derived.

Newsom’s interpretation was backed by City Attorney Dennis Herrera, even while it was received with a raised eyebrow by the Board of Supervisor’s Budget Analyst.

Then, as Newsom days later resigned as mayor, Ellison announced that Newsom would be the first “World Ambassador” for the America’s Cup Event encouraging participants and visitors with undisclosed terms, including payments or expenses provided to Newsom.

Newsom himself also did not divulge any of the benefits he might receive from this arrangement, suggesting that any information would be revealed 15 months later in April 2012 when his next Statement of Economic Interests would be filed as Lieutenant Governor.

The specifics of the deal itself also have yet to be clearly stated, although it is increasingly apparent that costs may be shifted to the city’s General Fund.

At its April 12 Port Commission meeting, a new MOU was presented for approval that acknowledged that the Port can not afford either the costs or the lost revenue due to America’s Cup events.

“Port staff and the Controller agree that these costs are greater than the Port’s ability to pay with the Port’s Harbor Fund. Since the benefits of the AC34 are expected to accrue to the City’s General Fund and to the broader regional economy beyond the jurisdiction of the Port Commission, the Port, the Controller, and the Office of Economic and Workforce Development recommend that the City’s General Fund and the nonprofit San Francisco America’s Cup Organizing Committee fund the majority of the Port AC34 Costs.”

When Deals Fell Through

While the record strongly suggests that San Francisco rubberstamps the contracts of the well connected, not everything is such smooth sailing.

There remains a process of public hearings by commissions and usually a vote by the full Board of Supervisors to approve the deals that go through.

Not all deals go through. Local opposition can change or even kill some deals.

In 2000, a proposed “San Francisco at the Wharf” by the Malrite Corporation at Pier 45 was moving forward when city voters passed an advisory measure opposing it. The plan was strongly supported by then-mayor Willie Brown, whose Port Commission simply ignored the popular vote and signed the deal. However, it floundered with a new Board of Supervisors. In 2001, at Pier 27-31, Chelsea Piers and the Mills Corporation viewed for a lease to create another shopping and recreation center, in one case including an ice skating rink.

When that fell apart, the Shorenstein Corporation picked up the pieces in 2006 with a plan to create office space, which the State Lands Commission thoughtfully decided could be permitted if it helped fund other activities. However, local opposition killed that as well.

A proposed hotel on the waterfront was killed after the Board of Supervisors lowered the height limits for the site.

Each of those projects had a green light from the State Lands Commission and the Attorney General but died at the Board of Supervisors or as a result of local opposition.

The Game Changer: Treasure Island

Enter the Treasure Island deal now wending its way to the Board of Supervisors.

Treasure Island is not just the latest chapter in the history of political deal making along San Francisco’s waterfront.

Not that there haven’t been deal making and loophole hunts along the way. When newly elected Mayor Gavin Newsom sought to retire $400,000 in campaign debts after the election, a fundraiser was organized by bidders for a Treasure Island contract. While city law bans contributions from companies seeking contracts, Newsom’s campaign attorney claimed no law was violated because Treasure Island was a state, not a city, agency and because the contributors were the individuals who owned the company and not the company itself. To no one’s surprise, Newsom got his money and they got the contract.

Earlier, when Willie Brown was mayor and earned a reputation for installing compliant commissioners, voters passed a ballot measure calling for competitive bidding on all Treasure Island contracts. The Board of Supervisors concluded that the public vote was merely an expression of views and promptly shelved it. When Brown’s own handpicked head of Treasure Island raised questions about conflicts, Brown forced him to resign. A former Brown girlfriend was installed in housing on the island.

Last month, the Treasure Island EIR on environmental concerns drew significant testimony and news coverage, but a second agenda item on the agenda of a joint Planning-Treasure Island commission hearing received very little coverage.

The second agenda item was the actual 535-acre Treasure Island Development Agreement that can be put into effect with acceptance of the EIR.

Aaron Peskin, former Board of Supervisors President, testified to the Commission with an analysis that spelled out the impact of the proposal:

“You are creating a virtually separate government with its own entitlement ability that is virtually unaccountable to the Planning Commission…The Development Agreement usurps the power of the executive and legislative branches of government. I hope you are all aware that even if the Board of Supervisors and Mayor pass new fees or new laws, they will not affect Treasure Island for 20 years. This is without precedent in the city and county of San Francisco’s history.”

City officials, testifying to the Commission, got down to some of the additional specifics, noting that approval of the plan put Treasure Island’s proposed 100,000 gross square feet of office space on the priority list for automatic approval.

“Granting such approval would provide priority for any such office space ahead of other office projects citywide in any particular year except for…Mission Bay and Hunters Point and behind the Transbay Tower.”

“The development agreement establishes the rights being vested to the developer to develop the project with its current proposed program of land use building form and parking for the term of the development and freezes in place current development fees for 20 years with certain exceptions.”

The Planning Commissioners at their April 21 hearing made it clear they knew what was at stake.

It strips away authority held by city commissions, the Board of Supervisors and the voters in favor of the terms spelled out in the new Treasure Island agreement.

It throws out most of the rulebook that asserts local control and hands it to the developers for the next 20 years. No vote by the Board of Supervisors can change its terms, as happened in other cases. No ballot measure can affect its terms, not even on something as minor as a surcharge on cigarette sales citywide – but which would not apply at Treasure Island markets under this agreement.

No effort can stall plans to build hotels of any height along its waterfront, or to build an amusement park like the one Malrite tried and failed to do at Pier 45.

While developers, businesses and residents can face fee increases, no such increases will be allowed at Treasure Island for 20 years.

The Deal Spelled Out

The Public Utilities Commission, in its April 26 agenda, spelled out more clearly what authority the Treasure Island developers would have – and what authority the city was giving up.

“The City agrees that it will not impose any new fees and exactions other than those agreed-upon in the DA and will not impose changes in law that would adversely affect the project, including the following:

• Alter or change any land uses, including permitted or conditional uses, of the Project Site from that permitted under this Agreement, the Applicable Regulations and the Project Approvals;

• Limit or reduce the height or bulk of the Project, or any portion thereof, or otherwise require any reduction in the height or bulk of individual proposed buildings or other improvements from that permitted under this Agreement, the Applicable Regulations and the Project Approvals;

• Limit or reduce the density or intensity of the Project, or any portion thereof, or otherwise require any reduction in the square footage or number of proposed buildings, residential dwelling units or other improvements from that permitted under this Agreement, the Applicable Agreement:

• Materially limit or control the availability of public utilities, services or facilities or any privileges or right to public utilities, services, facilities or Infrastructure for the Project, including but not limited to water rights, water connection, sewage capacity rights, and sewer connections;

• Except as otherwise provided herein, in any manner control, delay or limit the rate, timing, phasing or sequencing of the approval, development or construction of all or part of the Project as provided in the DDA;

• Increase any Development Fees or Exactions, except as permitted in Section 2.4 of the DA [Section 2.4 permits the increase of water and wastewater capacity charges];

• Preclude or materially increase the cost of performance of or compliance with any provisions of the applicable Development Requirements.

The City Attorney responded to CitiReport’s inquiries about the basis for the Treasure Island authority.  In an April 28, 2011 response, the City Attorney’s office concluded that Treasure Island is a city agency, except when it functions as a state agency, and also has the authority to act as administrator of public trust lands.

Further, the City Attorney points out that the city’s Ethics Commission has voted to allow Treasure Island contractors to make contributions to the political campaigns of local officials, although the Board of Supervisors has not yet endorsed their recommendation. A loophole closed in 2006 would be re-opened.

By this summer, with the Board’s approval, Treasure Island developers could obtain what no other developers have been able to gain from the city – a 20-year freeze on all fees, a 20-year hands-off rule toward interference with their building and land use plans, freedom from oversight by city boards, commissions and the Board of Supervisors on the type of concerns that have sunk the plans of other developers, and an ability to wield influence with their checkbooks.

San Franciscans will simply be spectators, watching what developers decide will give them the highest rate of return for themselves, and the city accepting the consequences.

One Time Deal or All-Time Dealing

Under proposals authored by Supervisor Scott Weiner, which he champions as offering a more “flexible government,” the charter would be amended to curtail the ability of voters to set policy and terms for the city. Instead, several years after a voter-approved requirement, the Board of Supervisors with a supermajority could amend it. After seven years, the Board — with a simple majority — could actually eliminate it.

Weiner draws no distinctions on what decisions need to be more flexible — land use, rent control, historic preservation, open space requirements, police staffing, city ethics and conflict of interest laws — and to date his effort to open a dialogue was markedly one-sided.

In a recent hearing he called on historic preservation policies and their impact on general city policy, Weiner allowed extensive time for city departments to testify — except for the Historic Preservation Commission itself, which was given one minute for its testimony. Public comment also was limited to one minute each. It was policy debate by bumper sticker.

At the same time, Weiner has introduced a measure to overturn the voter requirements governing political consultants in favor of allowing the city Ethics Commission to write the rules as it wants. The background for that is that the Ethics Commission has never held a public hearing on a political consultant issue, and most recently appeared to be completely unaware of its own filings by a political consultant who also represents groups seeking city approval for their projects in what may be a violation of the city’s ethics rules. That issue now is being referred outside of San Francisco by the City Attorney, and so far no one has suggested that the Ethics Commission even put it on its agenda. Based on the record, turning these matters over to Ethics has the practical effect of eliminating all rules entirely.

Treasure Island may be the template for where this game will end.

















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