City Hall Workgroup Looking at Selling SF Municipal Air Rights

When I attended the October 23 fire commission meeting I learned that the City is evaluating selling air rights over municipal buildings, which was news to me. I received information from John Updike, the head of the Department of Real Estate, that more than a million square feet of air rights above the Veterans Building are in the process of being sold.

Thanks to a public records request, I've received transcripts from that meeting which provide greater transparency about where the City is in terms of potentially selling off air rights over public properties. If the Board of Supervisors would pressure the fire department, whose current budget is $86 million, to air the commission meetings on SF GovTV, it wouldn't take public records requests to fully learn all that is discussed at the meetings.

First, let me explain that fire commission member Ken Cleaveland is the vice president of the Building Owners and Managers Association of San Francisco and their primary purpose is "advancing the commercial real estate industry through advocacy, professional development and information exchange."

It's no surprise that Cleaveland is urging movement on selling air rights, after all, it would be a financial boon to his association and its members. At the July 10 commission meeting, he made an initial inquiry:

Commissioner Cleaveland asked if the Department has ever looked at the value of any air rights they may have above fire stations and suggested deputizing someone to look into this possibility. Chief Hayes-White thought that would be a good idea and explained air right proposals were looked at in 2008, specifically to Station 13 on Sansome Street.

(Click to enlarge. Page 1 of excerpted transcripts.)

Here are excerpts of the October 23 transcripts that were provided to me by the commission's secretary:

COMMISSIONER CLEVELAND: And know what the status is of all of our -- of all of our properties, if you will. And the other thing was had we made any progress on determining if we have any transferable developmental rights, air rights above any of our fire stations? Have we done anything to determine or quantify or monetize that value? We might be able to sell. It's a very hot real estate market in order to get more money for the department.

(Page 2.)

MARK CORSO, Chief Financial Officer for SFFD, bolding added: Specifically we looked at it when it was first brought up with the Commission a few months ago, I believe. That comes up every now and then, and we discussed it with the Department of Real Estate and we are not the only department to discuss it with them. So there is a workgroup city wide looking at that. They've hired some consultants with regard utilities pricing and inventory. I believe there is a demand for, or there's actually a large want amongst many city departments to sell it so there is an issue of over saturating the market with those real estate options. And so that's one of the things with regards to timing that the Department of Real Estate is looking at. So they are working on it in conjunction with capital planning, the city's capital planning department.

(Page 3.)

COMMISSIONER COVINGTON: Thank you, Mr. President. Every time my fellow Commissioner Cleveland talks about air rights I want to bring up the fact that I would like to have us to continue to investigate the ability to build workforce housing for firefighters, police officers, and teachers.

Since developers are running out of land to build on and they can't very well construct new properties in the San Francisco Bay, it makes sense that they would look to purchase air rights for future projects. At the same time, can you blame the City for considering how to sell those air rights and produce more revenue for municipal coffers?

Now is a good time for historic building preservationists, affordable housing advocates, progressive social and urban planners, to demand more transparency from the City's workgroup looking air rights.

Since there's a workgroup and consultants have been hired, selling air rights is far enough in development to demand greater public scrutiny.

War Memorial Air Rights Up for Sale; City Hall Next? 
By Todd Swindell and Michael Petrelis

Thanks to information from John Updike who is head of the San Francisco Department of Real Estate, we've received a great lesson in potential development of the space above City property. We asked him to explain if City Hall is cataloging and evaluating such space over fire, health, police, etc, departmental property. Updike said:

"Some departments have opportunities to facilitate development above their lower level public use (such as a fire station in the financial district, for instance) through the sale and development of 'air rights', which usually require a redevelopment of the lower level public use in concert with the new vertical development."

"Other departments have an opportunity to offer something called Transferable Development Rights (TDR). TDR is available on city-owned historic properties that are under-utilized, and in such cases, if there is market demand, TDR can be sold to a developer of property of a small footprint but with allowances for great height under existing zoning (mostly in the Financial District or Civic Center Center areas)."

In January, Supervisors David Chiu and Scott Wiener introduced a resolution (http://tinyurl.com/BOS-TDR-reso), outlining the current state of TDRs, as part of a plan to sell the air rights over the Veterans Building at 401 Van Ness Avenue:

"On July 1, 2013, the City began renovation of the War Memorial Veterans Building, including seismic upgrades, accessibility, life safety and building code improvements, and replacement or improvements to building systems, at a current projected budget of $154.3 million. [...]

"Net proceeds from the sale of up to 1,100,000 TDRs would be used for the War Memorial renovation project, which is currently projected to have a $14.5 million funding shortfall. [...]

"In the mid-1980s, the City established the Transfer of Development Rights program to allow the sale of unused development potential from preservation properties. The goal was to generate income for the maintenance and preservation of historic buildings while allowing the developments to build higher. [...]

"Based on a recent study, the City has certified approximately 5.3 million square feet of TDR originating from 112 buildings downtown. [...]

"Mr. Updike also notes that the market conditions are very favorable now given the current real estate market. [...]

"Such additional TDRs are potentially available from City Hall, Asian Art Museum, Bill Graham Auditorium and 101 Grove Street (Public Health Building)."

The Chiu and Wiener resolution was unanimously passed by the board in late January (http://tinyurl.com/BOS-passes-TDR-reso).

What all this means is that we could see new developments built over City real estate in the coming years, the process for doing so is quite complex and involves many stakeholders, and the only current project slated for sale of air rights is the Veterans Building.

Still, we're nervous about City Hall leaders, who are too friendly in our opinion with the developers and tech firms looking for more construction projects, considering selling precious air rights over our iconic public buildings.

We need to keep our eyes on the TDRs and how they will impact San Francisco's landscape, along with the changes that will trickle down to ordinary citizens and potentially negatively impact low and moderate income renters.