We thought this was settled two weeks ago, but now everything is a mess. As of today's Board of Supervisors meeting, the original, two-year-old understanding between developers in the Transbay District and the city has blown up, and developers are vowing to sue over what they're essentially calling a bait-and-switch. This puts completion of the Transbay Transit Center, as well as the essential rail extension from CalTrain to the Transit Center, in serious jeopardy if the two sides can't come back to the bargaining table.
As the Chron reports, the Board of Supervisors voted today to approve the original district plan, which included what's called a Mello-Roos district where developers are charged an annual local tax assessment that will help pay for necessary infrastructure improvements. The tax assessments were proposed two years ago in exchange for zoning allowances that allowed the developers to build higher than they normally would in that area. At issue is how much they want to pay now that the city's dependent on the Mello Roos money for the $2.6 billion rail extension. And while developers sounded amenable two weeks ago to keeping the assessments the same but spreading them over more years (37 years instead of 30), they've since been running numbers and as of yesterday there was a hint via Supervisor Mark Farrell that developers were reneging. That has come to pass.
Just a little background on the number details, via the Chron:
That district was dreamed up during the boom of 2006 and 2007 when the city was picking a developer to build the Transbay Tower and park next to a new transit center. As the city started talking about increasing heights on that property to 1,200 feet, neighboring property owners began wondering if the district might include other taller buildings. ... It wasn’t until 2012 that the Planning Department picked up where it had left off with the rezoning and the formation of the Mello-Roos district. At that time, the city laid out a proposed tax for the district: 0.55 percent of assessed value, or, at the time $3.33 per square foot.
But this year, the property owners all of whom had bought their parcels after the proposed tax rate had been set were shocked to see that the their financial responsibilities had changed significantly, in part because property values skyrocketed. The tax, for example, jumped from $3.33 per square foot to $5.11 a square foot.
[Update: The Examiner puts the figure at $4.91 a foot, and notes that one letter points to Salesforce Tower being on the hook for an extra $100 million as a result.]
From the city's perspective, the developers have known all along that the numbers were going to shift, this is hardly a surprise, and this is just their way of trying to force the city's hand in shifting the responsibility for the rail project back to taxpayers.
The 7-year negotiation point for the district was characterized as a giveaway to developers by the Chron itself in a Monday editorial, and now it sounds like the district plan voted on today includes the original, 30-year language, since developers had already decided to reject the compromise.
Now this will likely end in litigation, which could potentially delay both the Transit Center and the construction of some of these towers, and will most certainly delay the rail extension project something the city hopes does not happen since there are $1.5 billion in state and federal matching funds on the line.
Stay tuned, as this particular drama does not look close to over.