Draft Transit Center District Plan Released

Last week, the Planning Department released the highly anticipated draft of the Transit Center District Plan (“Plan”). The comprehensive plan aims to transform the area surrounding the proposed Transbay Transit Center into the new heart of downtown. The Plan includes a package of zoning changes, including height increases, expanded protections for historic buildings, and the elimination of maximum floor area ratio (“FAR”) limits. The Plan also includes an ambitious program of public improvements to be financed by an equally ambitious package of impact fees and exactions on new development.

Regional Smart Growth Goals

According to the Association of Bay Area Governments, San Francisco needs to accommodate 23.5 million square feet of downtown office space over the next 25 years in order to meet goals for regional smart growth. This is the minimum amount of office space that San Francisco needs just to maintain its current share of regional employment, which declined from 27 percent in 1970 to just16 percent today.

The amount of office space that can realistically be built downtown under existing zoning caps out at approximately 5.8 million square feet. The implications of the shortfall are significant. It means that San Francisco risks losing its preeminent position at the center of the Bay Area’s economy. Regional sustainability goals will be jeopardized as jobs move to suburban locations where workers generate far more greenhouse gas and other emissions.

The combination of height increases and reduced FAR restrictions in the Plan will move the City closer to meeting its smart growth obligations. However, significant shortfalls will remain. The Plan proposes a modest increase of about 2.5 million square feet of new office development, or enough for roughly 10,000 workers. This would still leave the City 13 million square feet short of the projected citywide need for office space.

Skyline Sculpting: Form Over Function?

Height increases are among the most publicized aspects of the Plan. On the site of the proposed Hines-Pelli Transit Tower, the height limit will increase to nearly 1000 feet to make way for the City’s tallest building. Smaller increases, ranging from 50 feet to 300 feet, would allow a handful of buildings on other sites to exceed the area’s current 550-foot height limit.

The Plan continues the Planning Department’s practice of deliberately “sculpting” the City’s skyline into a distinct “hill form” with the Transit Center at its peak. This configuration is intended to emphasize both the Transit Center as the center of downtown and to symbolize the City’s commitment to transit-oriented development. Heights on other properties were limited to achieve the desired effect, with height limits generally decreasing in 150 foot increments to create a distinctive mound of high rise development. On the flip side, the Plan requires that the Transit Tower reach a minimum height of 950 feet. If the developer were to downsize the project from the current proposal, it would have to “include an architectural feature that extends the effective height” up to the desired minimum.

The practice of skyline sculpting has been criticized as an arbitrary constraint on development where dense development is key to meeting planning goals. According to the Plan, the singular height of the Transit Tower reinforces the “primacy of public transit in organizing the City’s development pattern.” Ironically, however, the symbolic gesture here comes at the expense of building height-and potential transit-oriented development-on other properties.

New Development Controls

The Plan includes new design guidelines and zoning controls to shape new development:

• Rezoning to C-3-0(SD). The Plan will rezone most C-3-O (Downtown Office) properties in the district to C-3-O(SD) (Downtown Office Special District). The primary difference between the two is that the base FAR limit in the C-3-O(SD) is 6-to-1 and the base FAR limit in the C-3-O is 9-to-1. The practical effect of the change is to require project sponsors to purchase more transferable development rights (TDR’s) before they build.

• Limits on Non-Commercial Uses. Projects on development sites larger than 15,000 sq. ft. that are within a core subdistrict and with an FAR over 6-to-1 would be required to provide at least three square feet of commercial space for every one square foot of residential, hotel, or cultural space.

• New Minimum FAR Controls; FAR Maximums Eliminated. Developments sites larger than 15,000 sq. ft. in size would be subject to a minimum FAR of 9-to-1. Maximum FAR limits, currently 18-to-1 in most of the Plan Area, would be eliminated entirely. FAR above the base limit could only be built through the purchase of TDR and/or payment of impact fees. (See fee discussion below).

• Bulk Controls. The Planning Code defines three key building sections for purposes of bulk controls: a base, a lower tower, and an upper tower. The Plan would require that the tower of a building be setback from the base by at least 10 feet for at least 60 percent of the buildings frontage. Bulk controls on towers over 600 feet would be reformed to account for their larger structural cores. The lower towers would have to be set back from the base, but other bulk controls would not apply to the lower tower. The average floor-plate size in the upper portion of such towers could be, at most, 75 percent of the average floor-plate size in lower towers.

• Pedestrian-Oriented Design. Improving the “bleak” pedestrian environment is among the Plan’s major goals. Below 20 or 25 feet in height, buildings should include façade treatments that create a “pedestrian zone.” The street frontage devoted to lobbies would be restricted. Active retail or open space uses would be required at the rest of the ground-floor frontage. Certain non-active uses (notably banks and gyms) would not be allowed at the ground-floor.

• New Historic Designations and TDR Reform. The existing New Montgomery-Second Street Conservation District would be extended to the west to include several properties along Mission and Hunt Streets. New individual ratings would be applied to buildings throughout the district.

Although some newly designated historic buildings will be eligible to transfer development rights under the Plan, a significant shortfall in TDR’s are expected. Without changes in the program, new development would be stymied by the shortfall. The Plan will provide some relief by requiring TDR only for FAR between 6-to-1 and 9-to-1. Alternatively, developers could elect to pay a new city fee with revenues flowing to qualified preservation projects. The amount of the fee has not been set but would be set at a price higher than the historical average market price for TDRs. FAR over 9-to-1 would no longer be subject to the TDR program, but would be subject to new impact fees. (See discussion below).

• Open Space. Most commercial developments are now required to build one square foot of open space for every 50 square feet of development. The plan would leave the requirement in place, but allow an in-lieu fee payment to satisfy it. The fee has not been set but is expected to be between $500-$750 per square foot of required open space.

• Parking. The Plan includes many new regulations intended to discourage the number of cars entering and traveling through the area. These include new rules on the quantity and pricing of parking in commercial developments, as well as restrictions on the points of access to parking garages.

Ultimately, the Plan calls for an absolute maximum on parking in the area. Until the cap is established by a future study, the Plan would limit accessory parking to 3.5 percent of a commercial building’s gross floor area, i.e., half of what is currently allowed. In addition, new curb cuts on Mission Street, Second Street, and several pedestrian alleys would be prohibited. A conditional use approval from the Planning Commission and approval by the Board of the Municipal Transportation Agency would be required for new curb cuts on First and Fremont Streets or for non-accessory parking. New surface parking lots would prohibited, even as temporary uses.

The Plan calls for the parking tax to be applied to parking spaces that are provided at no cost to building tenants, or which are bundled in commercial leases. It also calls for more stringent enforcement of rules that prohibit new parking facilities from offering discounted rates for monthly or daily parking.

• Sustainability. The Plan calls for ratcheting up the City’s already stringent green building standards with an eye toward improving energy performance and water consumption.

Fees and Public Improvements.

The Plan outlines a new fee structure to fund its program of public improvements. The improvements include numerous upgrades to the streets (sidewalk widenings, potential street closures, landscaping)as well as public open spaces and transit improvements. Although these new amenities would create broad benefits for downtown and the City as a whole, the fees would apply only to new development projects in the Plan Area.

• Transit Center Impact Fee. The Plan includes two preliminary proposals for an impact fee. The first is a flat fee that would apply uniformly to all new development. The Plan floats fee levels ranging from $5 to $30 per square foot. Recent plans in and around downtown have included similar fees at $25 per square foot.

The second alternative is a tiered fee that would increase with building FAR. All square footage would be subject to a fee of $5. Square footage above an FAR of 9-to-1 would be subject to an additional fee of $25 for a total of $30 per square foot. Square footage above an FAR of 20-to-1 would be charged an additional $5 for a total of $35 per square foot.

• Mello-Roos Tax. The Plan calls for establishing a Mello-Roos Community Facilities District (“CFD”). New developments in the CFD would be required to pay a tax of 0.35 percent of assessed value, which would raise the effective property tax rate to 1.5 percent total.

• Benefit Covenant. A benefit covenant imposes a supplementary transfer fee that is payable to the City on the sale of a property. The Plan proposes that the fee be set at one percent of a property’s sale value. This fee would apply only to (a) properties transferred to private owners from public agencies, (b) properties located in Zone 1 of the Transbay Redevelopment Area, which overlaps the southern portion of the Plan Area, or (c) properties whose owners enter into a development agreement with the City.

Although the Plan contains lengthy discussion of the feasibility of new fees, its conclusions are largely based on 2007 property values and rental rates, which have dropped by as much as half and show no signs of rebounding in the near term. As well, the feasibility study did not evaluate the financial impact of existing fees and taxes, or the funding that would be generated by them. The net effect of these oversights is to understate the actual funding stream that would be created by newly built projects, while overstating their ability to absorb new fees.

The Planning Commission is expected to announce a series of public hearings to take public testimony on different aspects of the plan. The Planning Department is expected to release the Draft Environmental Impact Report on the Plan in summer of 2010.

If you have any questions about the Plan, please contact Daniel Frattin at 415.567.9000 or by email at “dfrattin@reubenlaw.com.”