Mission Bay Block 40 revised design: The "Exchange on 16th"

According to the attorneys for Kilroy Realty, the development team fully understands “the pressing need and political importance for transportation and infrastructure improvements” in Mission Bay, and their appeal of the $6.4 million Transit Impact Development Fee (TIDF) which the City has imposed on Kilroy’s 680,000-square-foot ‘Exchange on Sixteenth’ project “is not about not paying or contributing to them” (emphasis theirs).

That being said, Kilroy is asking San Francisco’s Board of Appeal to find that the aforementioned $6.4 million Transit Impact fee was “erroneously calculated and imposed,” and that “no TIDF is due” (again, emphasis theirs).

From the City’s response to the appeal which will be heard by the Board this week:

“Taking pieces of documents out of context, Appellant incorrectly interprets the [Mission Bay South] Plan Documents as prohibiting [the City] from charging, over the 30 year life of the Plan, a fee on new development to help pay for public transit services. To encourage development in the early years of the Plan’s implementation, the Plan limited the imposition of fees and exactions. Since 2011, however, the Plan has authorized OCII to impose new or increased development fees in Mission Bay South and DBI has collected the TIDF. Appellant should have been aware of the applicability of the TIDF when it bought the property in May 2014.”

Kilroy’s 3.1-acre development, which will include enough space for around 3,500 Millennial employees and parking for 680 cars, will rise up to 12 stories in height upon Mission Bay Block 40 (a.k.a. 1800 Owens), just south of 16th Street and east of Interstate 280, two blocks from the Golden State Warriors’ proposed Mission Bay Arena.

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Comments from “Plugged-In” Readers

  1. Posted by unlivable city

    So every single resident (that includes babies and retirees) of San Francisco is on the hook to the tune of about $7000 apiece to cover unfunded pension liability for our bloated and mostly useless city government. How else can the city extract that from us except by literally smothering us with fees and surcharges.

    • Posted by Elitist Pig

      By not paying for transit? I don’t get your point…

    • Posted by farts

      it’s not housing — it’s offices. people will get to those offices using public transit. residents won’t pay – the developer will, over 30 years. that fee will be reflected in the rent tenants (read: wealthy tech firms) will pay over 30 years.

      • Posted by Stop Driving

        I work in one of the most expensive buildings in the city. We have zero tech tenants here because tech companies cannot afford the ridiculous rent other sectors pay for office space. Sorry, your ‘wealthy’ tech firms aren’t as ‘wealthy’ as you think.

        • Posted by farts

          fine, wealthy law firms, wealthy trust firms, wealthy whatever firms. i work in a pretty expensive building, too – because of it, we’ll probably have to move when our lease runs out at the end of the year. the point is – new buildings (offices, housing, whatever) will always go to the wealthiest, and the additional strain on transit should be incrementally offset by these projects. huge tax proposals on the ballot will *always* get shot down, especially in today’s economy. the only way to improve transit is incremental fees – cashing in on the development boom.

        • Posted by Really?

          Work at 555? TransAmerica? 101 Market? Think only lawyers and Wall Street types make money? Where have you been for the last 30 years? Worst comment on socketsite I’ve ever seen. Tech companies have plenty of money – Salesforce Tower ring any bells? Wow.

      • Posted by Oh Dear

        Perhaps the commenter is reflecting on whether transit impact fees go directly to fund capital projects, or to pay operating and retirement expense.

        • Posted by spencer

          Bingo. Before the city imposes more fees and taxes on anyone, i would like to see city employee pensions cut in half and any employee under 50 be switched to a 401K. Why is no one talking about these ridiculous pensions?

          • Posted by nortonsempire

            Yeah seriously. Destroying retirees quality of life is definitely the way to go. I mean, it’s the least we could do for the poor developers.

          • Posted by moto mayhem

            no one wants to hit a fair pension for retirees, but you can retire from SFPD at age 50 and get $200K/yr forever. that’s just not reasonable. The pensions are bloated and is limiting the city’s ability to fix basic infrastructure and transportation. so the current city mgmt does a crap job with what they have and teh former mgmt dines off outrageous pensions.

  2. Posted by quietsnow

    Every set of major developments (for every ~15,000 additional people per day) on this corridor pushes demand so much on the T line that another train car is needed. It’s already standing room only from 2 miles South of Mission Bay. So who pays for that investment and the OpEx for running it? It’s totally reasonable to have developers help to offset these costs. Otherwise, they’re just externalizing internalities and we need to stop doing that.

    • Posted by Flash

      Good points. And I’m all for this transit impact fee to cover the expansion investment but ideally the fares should at least cover the operating expenses. If MTA can’t even do that, maybe they should raise the fares or operate more efficiently.

      • Posted by HousingWonk

        There isn’t a transit system in the country where farebox recovery covers 100% of operating costs. Its called “public transit” – not “private shuttle service” for a reason.

        • Posted by Flash

          It’s called “public” because it is operated by the government, not because it has to lose money. Many public services break even or make a profit on usage fees. A number of major public transit systems around the world make a “profit”, including Hong Kong, Tokyo Metro, Singapore, etc. London Underground is almost break-even. And BART does fairly well, recouping about 2/3 of its costs. I believe BART and Muni could do better if they had the political will to negotiate harder with their unions for more efficient operational rules and they could also raise fares if necessary. For what it is worth, I also think auto subsidies (especially dedicating valuable real estate to free auto parking) should be reduced. (stats are from: https://en.wikipedia.org/wiki/Farebox_recovery_ratio )

          • Posted by zig

            Comparing to Tokyo is pretty useless. Actually comparing BART to Muni is pretty useless

            What percentage of Muni lines do you figure would be cut if it started to be run like a business?

  3. Posted by Jim

    Except the developers don’t pay for anything – a developer is just a middle man. The fees are payed by the office tenants in terms of future rent, or in condos by the purchasers in terms of purchase price, or in apartments, again in terms of rent. Why should the capital costs be imposed on this small segment of society? Did “new” residents pay for the Muni Metro system as it was being initially built? No, everyone did. Today few want to invest in the future, and vote NO on taxes to pay for infrastructure, so its easier to impose fees on future residents or office tenants who aren’t here yet to vote no.

    • Posted by farts

      it’s not a small segment of society — any office that’s able to afford rent in a brand new building should pay for the public transit its employees will require.

      • Posted by BobN

        You have it entirely backwards. Anyone in a brand new building which DOESN’T have access to transit is who should get penalized.

        • Posted by Jake

          How would you determine “access to transit” in SF? Just about every office building in SF is within a 10 minute walk of a MUNI bus or train stop. Isn’t it the job of city planning and politicos to coordinate private development with public services?

    • Posted by two beers

      That’s not how property is priced. Rents and condo prices reflect what the owner can get for them, not what their costs are.

    • Posted by Elitist Pig

      Excellent point Jim. We should just keep building and filling the city with people / jobs, then when the transit system is in total collapse we vote if people want to spend money on fixing it. Trying to take care of these things before they become a problem is such a short sighted solution.

      • Posted by Miah

        I disagree with Jim, too, but can we [avoid being] sarcastic and mean-spirited? I look forward to the discussions, but many people on here fume, and that is not productive discourse. Can we be civil?

        • Posted by Anon12

          I think you guys are missing Jim’s point. Yes, we should be proactive, but the city as a whole should share the burden. Most municipalities would welcome the growth, as clearly it will equate to greater tax revenue.

      • Posted by spencer

        Already a mess because our politicians dont care about public transit. They just care about being elected. SF wastes so much money and no accountability from city officials. Of course they wNt others to blame for lack of vision and planning

  4. Posted by david vartanoff

    Don’t like the transit fee? How about the developer must pay the total (BART tix, Caltrain, Muni Fastpass,etc costs for every employee for 50 years? Don’t like that? Sell the property, we don’t need you.

    • Posted by mdg399

      What an angry and (Unrealistic) view of how to apportion costs. Good thing you’re not on any policy making committees.

    • Posted by spencer

      Seriously? How about the city, with its $9B a year budget do something useful instead of leeching off private enterprise. With $200M our city employees cant even make a dent in the homeless population of 8000 people. Not even a 5% drop

  5. Posted by soccermom

    Seems like a good risk/reward in fighting it. If there is only a 5% chance you win, ($6.4mm *.05) = $320K of expected value. Spend $100K/200K in legal fees, why not?

    I saw John Kilroy speak last week at a conference (dead ringer for Roger Sterling on Mad Men). Host asked him a goofy warm-up question about what his favorite song is, and Kilroy replied that lately it was Daft Punk’s ‘Get Lucky.’ So yeah, get lucky on this. Downside is small in fighting the fees.

  6. Posted by Jim

    I guess I wasn’t clear, EP. What I was trying to observe is that we, as a society, are off-loading what should be societal expenses to one segment of society, whether it is new or expanding companies (e.g., Transit Impact Fee) or young people in the household formation stage of their life (Inclusionary Housing). Probably not a very good way to do it.

    • Posted by SFNative

      We are all paying for important infrastructure in various ways…sales taxes, property taxes, etc. This is just another way to obtain needed funds, which makes sense. If one creates a development that will lead to more people using/needing transit, then it makes sense to contribute to the needed infrastructure. The business and development community should support good transportation as it will make their office and housing space more viable and valuable.

      • Posted by zig

        What about when it extends to highways. Should we all be forced to pay for these societal goods and they should be expanded without more user fees?

    • Posted by zig

      Who says they should be societal? Perhaps it is better to get closer the users and not choose what are societal expenses and which should be user based?

      Just Devil’s advocate as I happen to dig public transit as a societal expense but want more user fees for drivers (even though I am one every day now) but these are just my preferences

  7. Posted by Jake

    In relative boom times like 2013-14 SF TIDF yields about 1-2% of SFMTA budget. And the total of all development fees in SF for FY 2013-14 was $96 million, compared to a budget of ~$8 billion. It would be nice to not nickle-and-dime RE like this. Maybe after we repeal Prop 13 the costs will be shared more equitably and with lower costs to collect. Until then, every little bit or two bits….

    • Posted by farts

      the numbers help, thanks Jake. where do you find these numbers, out of curiosity? so, $6.4mil is about 7% of the overall TIDF – i wonder what percentage it is of new office space added to SF? is it similar to 7%? perhaps far lower? if far lower, than yes, they might be getting “nickle and dimed” – but if it’s around 7%, then i would say it’s a fair price.

    • Posted by Sue Yu

      If users of MUNI actually paid, the City might not need such excessive fees.

      I’d like to see an end the subsidies i.e. free youth & senior passes, and make everyone pay even if it’s just 50 cents. When you give the buses away for free some people think they never have to pay for a ride, and meanwhile the people who are paying get to pay for zoo onboard.

      Fund ticket collectors to enforce payment i.e. add jobs, and restore sanity to the buses, & maybe more people would ride them. Till then, many people will prefer to use their car than muni.

      • Posted by parklife

        Yes!

        Very few people boarding Muni buses even think to pay. Maybe it’s just the routes I ride but it’s a real issue.

    • Posted by Jake

      The numbers for the fees are from “FY2012-13 & FY2013-14 Biennial Development Impact Fee Report”, Table 1. Development Impact Fee Revenue Summary. SF and SFMTA budgets are easy to find.
      SF has 27 development impact fees and at least 8 SF gov entities (agencies, offices, commissions, depts, etc.) are involved in some aspect of administrating these fees. Would probably be simpler, reduce admin costs, and be more transparently obvious if we just ran it all through a Developer Shakedown Agency.
      FWIW, MUNI riders pay hundreds of millions $ per year. My non-self-driving-auto-mobile used billions of dollars of infrastructure today; parked for free on public streets in western SoMa, North Beach, Russian Hill, and Kentfield; and passed by at least 5 traffic cops, including one that pulled over two drivers on Bryant and another with a radar gun that wasn’t stopping cars going 70 in a 55 mph freeway zone. All I paid into the gov transport funds was $7-8 total between a GG bridge toll, some gas tax, and a day in the life of my car registration fees. If I hadn’t gone to Marin woulda been as close to a free ride as it gets or needs to be.

      • Posted by Orland

        Sounds like a fun day. And you call that “work?”

  8. Posted by anon2

    I’m curious what actually ends up happening with these transit impact fees.
    I highly doubt they would go to buying more rail cars for the T line.

    • Posted by unlivable city

      They will go to the general fund and from there they will help cover our billions in unfunded pension obligations for our bloated city government and its insanely expensive pension structure. The same can be said for a skyrocketing percentage of every dime of tax we pay, which is why departments are cutting budgets, rec and park is underfunded, pot holes line our streets, and on and on. The wolves running the henhouse will never fix it because they are major beneficiaries of that same bloated pension system.

      • Posted by dubdub

        @UC

        This is your second mention of the SF Pension obligations, but you also seem to be all over the place about city agency budgets, and yet back to the pension system. As someone who pays into the pension system I am hardly seeing where you see the bloat as it relates to infrastructure and transportation, considering that presently City employees are essentially paying to make up for past shortcomings in the system as seen in contributions shifts. It is why as a City employee I have seen my pension contributions go from paid by the City to the tune of 7.5% of salary (circa 2002) to paid by me to the tune of 10%. I have no argument that i provide my own pension, but pension funds are not connected to the general fund that i am aware of given that the pension fund is and has been fully flushed with payroll withholdings the better part of that last 8 or 9 years and for the effective future.

        It will undoubtedly be argued that fees being “imposed” on developers is a “money grab”, but bear in mind with all the development that has gone into Mission Bay, a lot of existing infrastructure has been pushed to capacity if not exceeded, and while some developers have added to that infrastructure there are some significant capital projects that will have to accompany that development. Those projects will be funded entirely from rising fees to taxpayers and rate-payers, all while developers have moved along. Yes, those imposed fee’s may well get pushed along, but without the effort, those fees for infrastructure and transit will certainly be paid for by tax/rate-payers.

        • Posted by Brian M

          Too much rationality, dubdub. If it is not forcing a return to 1953, unlivable city is not interested.

      • Posted by spencer

        Exactly right. We need major pension reform

    • Posted by soccermom

      This is a great point. The impact fees paid by developers should be directed exclusively to infrastructure investment relevant to the development in question. Funding one more bus driver retirement is a cost that the system overall should bear.

  9. Posted by Stop Driving

    Let’s face it. That money gets completely wasted on the worst transit system money can buy. If we had a half decent transit system with drivers who were anything but surly, insolent slobs, I would understand contributing money toward the system. However, the ghetto slobs of muni don’t deserve another dime of private money until they show us they are actually capable of treating the ridership like humans.

    • Posted by farts

      my experience of NYC MTA employees hasn’t exactly been all that much better. plus, these fees don’t automatically raise the wage of drivers. muni has asked for money to double the size of their street car fleet – a T-train every 5 minutes during rush hour is way better than every 10 minutes.

    • Posted by cfb

      You’re a moron if you think Muni is “the worst transit system money can buy”, or that all the drivers are “ghetto slobs”.

      I know it’s cool to hate on Muni, but it actually works pretty well most of the time. It doesn’t have one of the highest ridership rates of any transit agency in the nation because it’s “the worst transit system money can buy”…It’s because it’s useful. And that’s because it has good coverage and frequency by US public transit standards, which you would know if you looked at things objectively instead of through your opinion goggles.

      • Posted by zig

        It’s a little slow but very extensive

      • Posted by frog

        As someone who takes the T frequently, I’d say that the problem is the other riders far more than it is muni.

      • Posted by Orland

        I was recently in Honolulu and had need to rely on public transit for one afternoon. I was shocked at how uniformly horrible the service was for that particular occasion.

      • Posted by spencer

        Muni is 3rd world! And i e been to many 3rd world urban centers

  10. Posted by HousingWonk

    This is not an argument about the relative merits of the TIDF. This is a simple story about one developer trying the welsh out on paying a fee that they legally have to pay and that every other Tom, Dick and Harry developer has to pay.

    • Posted by soccermom

      Of all the ethnic groups whose economic habits are questioned, the Welsh are my favorite.

  11. Posted by Jim

    “…every other developer has to pay.”

    Not exactly. All development in Redevelopment Areas was exempt from TIDF because Redevelopment had its own set of laws and fees. In addition, the City increased the Transit fee by about 50% effective January 2016. I am not a lawyer and cannot comment on the merits, but I would assume this is what the case is about. Any developer bids on a property based on what it will cost to develop, including City fees, what margin their financial partners require, and developer profit. Land cost is the residual. The higher the fees, the less the developer can pay for the land. In this case, the City was the seller of the land. When the fees change after the fact, when the land is already in contract, either the development is cheapened, the investor loses, or the developer loses, or some combination of these. So it is no surprise that the developer would sue in this case where the land seller and the taxing authority are one in the same, and the rules got changed. I suspect who knew what, when and who did what when will play into it also.

    • Posted by Orland

      I don’t know what, if any, effect this issue might have on the development, but it did recently occur to me that, although ground was broken for site preparation several months ago, precious little has actually been accomplished.

  12. Posted by mike

    The buildings in those renderings are trying way too hard to be cool…

    • Posted by Orland

      Bad renderings. The actual development is going to be very “cool.” Google it on vimeo for a great look at the “real” thing.

  13. Posted by TamarAnn

    The Mission Bay South Redevelopment Plan seems to make clear that new impact fees adopted 10 years after the first building permit was issued in Mission Bay South apply to new projects in Mission Bay – section 304
    .9 C ii. First building permit in Mission Bay South was pulled sometime in 2001. The transit impact fee was adopted in 2013. Seems like it completely applies and Kilroy didn’t do a good job with their due diligence.

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