Deal reached in Transbay Tower tax district showdown

The deal almost sounds too good to be true. After threats of lawsuits, frantic backdoor dealmaking and a very harried week for the Board of Supervisors, a deal was finally reached yesterday on a dispute over taxes in the area around the new Transbay Terminal and the Salesforce Tower. 

The initial dispute started over the amount of taxes devlelopers around the new Transbay Terminal were required to pay for the project. A special tax district established in the area would require the developers to pay up to $1.4 billion for public infrastructure in the area, including San Francisco’s high-speed rail connection, in exchange for upzonings that allow them to exceed city building height limits.

This was a critical deal. That $1.4 billion sticker-shock is based on recent property values, which as any San Franciscan not living under a rock knows, have shot up with our housing boom. But the developers balked at the numbers, saying the higher taxes were not part of the original deal. The city, the supervisors, and the mayor disagreed, saying the original agreement was clear. At yesterday’s hearing, Sup. Jane Kim repeatedly hinted at a deal they had reached, saying “I’m excited for what we’ll be able to announce after the closed session.”

The stakes were high. If the developers managed to stall the deal, they may have managed to not pay any of these taxes at all.

“When I woke up this morning, I said there’s no way I’d let this stall,” Sup. Scott Wiener, who has taken the lead on trying to hold the developers to the original deal, told us.

But the deal actually turned out to be pretty rosy for the city, he said, at least at first blush.

The developers will still end up paying up to $1.4 billion (officials say the actual figure will be closer to $1 billion) in the special tax district, but now will pay over 37 years instead of 30, allowing them to make smaller payments. The developers would also be bound to a later vote, further cementing the tax deal. The developers may also forefit their right to sue the city over the negotiations. 

Pressure on the supervisors was strong. At yesterday’s hearing on the tax deal, advocates and developers alike showed up in force. Patrick Valentino, a staunch advocate of market-rate housing development in the city, reminded the supervisors that the initial agreement wasn’t exactly mystifying.

“It was made very clear in (the initial contract) that the fees could go up and down based on the market,” he said. “We certainly aren’t spending millions of dollars for just a bus station.”

Tom Radulovich, executive director of Livable City, threw some barbs the supervisors’ way as well. There’s no time for waffling,” he told them, in public comment. He then made an argument for the high developer fees. “Why don’t people make 1,000-foot skyscrapers in the Nevada desert? There’s no society there, no infrastructure, no water. The value for the land is created by the infrastructure from the Bay Area’s pockets, which added billions of dollars to downtown land. We need more capacity.”

But supervisors didn’t waffle, and a deal was reached.  But to be clear, it is still preliminary, with the devil in the myriad details.

The Board of Supervisors issued a continuance on the final vote for the deal for two weeks, in order to give Mayor Ed Lee and the developers time to cement all the details. 

So far, the deal looks great, Wiener said. “It’s not even a compromise,” he told us. “The phrase I used was, ‘this is too good to be true.'”

But, he said, “We’ll learn new details in two weeks.”