By Tim Redmond
SEPTEMBER 9, 2014 — The Board of Supervisors will vote today on an item that seems incredibly dense and bureaucratic, and it took me almost two days to figure out what the controversy is about. But at stake in this deal are hundreds of millions of dollars in public money for transportation projects.
Here’s the language of the item:
Public hearing of persons interested in or objecting to the proposed Resolution of Formation for Special Tax District No. 2014-1, establishing the Transbay Transit CFD and determining other matters in connection therewith; Resolution determining necessity to incur bonded indebtedness for the CFD; and Resolution calling for a special election in the City and County of San Francisco to submit the issues of the special tax, the incurring of bonded indebtedness and the establishment of the appropriations limit to the qualified electors of the CFD.
There are a couple of other related items, but the bottom line is this: The city wants to move forward with a special tax district that will hit the developers of new highrise buildings in the Transbay Center area with an annual levy to cover $1.4 billion in news bonds.
And the developers who would pay the taxes are now balking.
The bonds would pay for the completion of the transit center, and possibly the extension of Caltrain tracks (and tracks for the someday high-speed rail project) into what will otherwise be a very fancy bus station.
The way this all works is byzantine, based on the state’s 1982 Mello-Roos Tax District law. The developers at the Transbay site – in exchange for getting some very nice benefits, including valuable land and the right to build far taller than any existing limits allow – agreed in principle some to accept a higher property-tax assessment.
Now they want to re-negotiate the deal – in large part because the city is basing the tax assessments, and the amount of money it can raise, on the current value of the property. Needless to say, the current value is pretty high compared to what it was a few years ago, when this was all first discussed.
Initially, Boston Properties, which owns most of the building that will house Salesforce and will be the tallest building West of the Mississippi, hired the law firm of Reuben and Junius to write long letters and complain about the higher taxes. The city wasn’t budging, so now the developer has brought on Willie Brown, who will get a huge paycheck in exchange for trying to cut the assessments and reduce the amount of bond money the city can raise.
Boston Properties is also represented by Platinum Advisors, and the play, sources tell me, is to get the supervisors to delay action and send the deal back to the Mayor’s Office (where Brown practically has a door key) for “renegotiation.” Even a small reduction in the tax rates could add up to a huge amount of money: The developers, for example, would like more than $600 million cut from the deal. If the city “compromises” and settles for half, that’s still $300 million that won’t go for transit projects.
Another interesting element: Under the Mello-Roos law, a majority of the property owners in the district have to vote to accept the new taxes. Part of the deal that gave the developers the right to build a tower more than 1,000 feet high included a promise to support the Mello-Roos vote. If they now decide to reject that, the whole project could be in a messy situation.
Except: Boston Properties isn’t the only property owner with a vote. In fact, the city, through the Transbay Joint Powers Authority, is the largest single landowner in the district. And part of what Brown, Reuben and Junius and the rest of the developer team will argue is that public agencies don’t get a vote.
That’s why part of the discussion at the board will include a closed session with City Attorney Dennis Herrera to discuss the potential for litigation.
So far, we don’t know where the mayor will come down on this. But it will be a defining moment for his administration: Back down on an agreement the city has carefully negotiated and reopen it to save the developers money – or stick it to Willie Brown and say no.
We will be watching.