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Uncategorized The other Twitter tax break -- and how it...

The other Twitter tax break — and how it cost the city $25 million

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Which means the affordable housing that would have offset some of the impacts of the new Twitter employees was never built, and the additional Muni service that the company headquarters requires was never funded.

All because 13 years ago, a city agency controlled by then-Mayor Willie Brown overruled the Planning Department staff, defied logic and precedent, and gave the building owner a $25 million gift.

COUCHES, NOT CUBICLES
The story goes back to 2002, when Salamon Brothers Realty, which owned the property, hired development lawyer Tim Tosta to try to convince planners that the Furniture Mart qualified as existing office space.

It was, by any reasonable standard, a stretch: Most of the structure had been open floors filled without couches and bedroom sets. The distinction was important: Under Propostion M, the landmark 1986 slow-growth law, converting showrooms or retail space to office use was essentially the same as building new office space: It required an application process and the payment of significant fees.

When the city said the building was never office space, Salamon appealed, taking its case to the Board of Appeals, made up at the time entirely of mayoral appointees.

The reason for the city’s decision was clear, as Badiner pointed out at the time: “This is a very low-density occupied building,” he testified before the Board of Appeals on April 3, 2002. “In fact, I think it matters a great deal because one of the things that the annual limit and the include fees such as office development, housing fee, and the childcare fee talked about is when you create office space, you’re creating impacts on the city.

“You create a demand for housing. You create a demand for childcare. You either need to provide that housing or you need to pay a fee that provides that housing. Converting this to an office is going to increase the density of the number of people here dramatically.

“That’s where the fees get triggered. That’s where the city needs the amelioration of the impacts.”

Now let’s remember: Larry Badiner was by no means an antidevelopment guy. Nobody reviewing his tenure in the department could ever argue that he was biased against or unfair to real-estate interests. But this one was so obvious, so clear, that he had no choice but to take the position that the developer needed to pay fees for a change of use.

Lawrence Kornfield, the chief building inspector, agreed. “In my view, it would fit into the mercantile rather than the office section of today’s code,” he told the appeals panel.

‘EMBARASSING AND DISGRACEFUL’
Brad Paul, a former deputy mayor and community activist, made the point even more clear:

“The nexus studies that set these fees are about the number of workers per square foot,” he testified. “An office, typically, is one worker for every 200 to 250 square feet. These kinds of showrooms are probably one worker to every 500 or 600 square feet.

“So office use generates two to three times as many workers … and at 1 million square feet, that’s the difference between 4,000 workers and 8,000 workers. The fees are there to pay for those extra 4,000 workers and the buses they take and the housing they need.”

Doug Shoemaker, an affordable housing activist who would go on to lead the Mayor’s Office of Housing, called the pitch by Tosta “embarrassing and disgraceful.” Filling the building with office workers, he said, would have “a massive impact on both the transit system and the housing supply.”
Tosta argued that there had been some offices in the building and that “sales” was a type of office use. He also said that, under the Planning Code, space that was “suitable” for office use could be considered office space.

And while others argued that even an ounce of common sense would say that his claim was ridiculous, four of the five commissioners agreed with Tosta and voted to overrule the city planning staff and designate the structure as existing office space.

Two months later, in June, 2002, the voters approved a measure to split appointments to the Board of Appeals between the mayor and the supervisors – in part because Brown’s board was so willing to do whatever developers wanted, even to the point of absurdity (and at great cost to the city).

The building was sold to the Shorenstein Company in 2011.
And now, as Twitter adds thousands of new employees – who have already had an impact on the housing market – nobody is paying the statutory impact fees.

That’s not so much a tax break for Twitter as for its landlord. But it’s a signal of why tax abatements and special favors for developers become a serious problem later on, when the impacts of those projects hit the city.

It’s continuing to this day: Thanks to a plan launched by former Mayor Gavin Newsom (designed to spur construction in the city during the recession) developers are allowed to defer their impact fees for two years. That’s happening at 350 Mission, where Kilroy Reality is putting up a tower for Salesforce. At least $8 million worth of fees has been deferred – and of course, by the time those fees get to the city’s coffers, the price of building affordable housing will have gone up even more, so the money will pay for even less.

And does anyone seriously think that we need incentives to spur development in San Francisco, in 2013?

Marke B.
Marke Bieschke is the publisher and arts and culture editor of 48 Hills. He co-owns the Stud bar in SoMa. Reach him at marke (at) 48hills.org, follow @supermarke on Twitter.

3 COMMENTS

  1. Hey Tim — You might also note that Larry Badiner took the fall for the porn-on-office-computers brouhaha (while his boss was out of town). A miniscandal to eliminate an honest public official?

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