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The Grid 

Wednesday, Jul 23 1997
Missionary Position
Across China Basin Channel from our stylish new offices is a gritty triangle of land bounded by the channel and Third and Fourth streets. On part of it sits a metal warehouse that serves as home to a hockey rink for in-line skaters. The rest of the triangle is an ugly empty industrial lot. There aren't many people around -- just the ragtag denizens of the RVs that line Fourth Street, and some folks who own metal detectors.

The people with metal detectors scour the area, looking for valuable things in the refuse and weeds. Until recently, their persistencehad seemed faintly deranged even by San Francisco standards. What treasure would you find here? A bolt or nut from the long-gone industrial past? A stray Saturday Night Special used in some wine-fueled SOMA stickup?

But now, we have to admit it. The metal detection men were right, and we were wrong. There is treasure south of China Basin Channel. The Catellus Development Corp. has proved it.

Catellus is the real estate subsidiary spun off from Southern Pacific Railroad, and as the spawn of railroad robber-baronry, Catellus inherited a huge part of the remaining undeveloped portion of San Francisco. For the past couple of decades, the firm had been trying, and failing, to build on its SOMA and China Basin holdings.

Then Willie Brown was elected mayor. And now we have Mission Bay, a 250-acre-plus, mixed-use development that will bring prosperity to San Francisco, a UCSF campus to the foot of Potrero Hill, peace to Bosnia -- and an enormous, sickening pot of public subsidies to Catellus.

As part of the Mission Bay development, Catellus plans to put up a 500-room hotel on the land south of the China Basin Channel. And yes, that hotel will block the bay view from our stylish new offices. And yes, that impending obstruction does irk us.

But that's just irk. We can live with irk.
What outrages us is the scale of the public subsidies heaped on Catellus to help it build Mission Bay.

Again we find Mayor Brown dipping into the Redevelopment Agency's bonding capacity to assist multimillionaires. (So far, he's used the agency to subsidize the Giants and the 49ers, poor, needy, blighted companies that they are.)

David Prowler, the mayor's point person on Mission Bay, says that "by the end of the day" the agency will most likely cough up $100 million in tax-increment-style financing for the Mission Bay project.

Interviews and documents from the Redevelopment Agency suggest the financing scheme will work this way: Catellus will pay upfront to construct infrastructure

needed to support the Mission Bay development. That means the streets, sidewalks, sewers, and parks that will benefit the development and make it salable will be built by the developer -- as they should be.

It's only after Catellus builds the infrastructure that the public will be asked -- well -- to pay for it. As Catellus is building the infrastructure, the San Francisco Redevelopment Agency will be selling approximately $100 million of bonds. The agency will use the bond proceeds to reimburse Catellus for the cost of the infrastructure. The bonds will be paid off by the property taxes generated by the development.

This process is all very complicated and full of qualifications. In general, though, most of the first $100 million of property taxes paid by Mission Bay will go not to the city treasury -- where it would help everyone -- but to pay for streets and roads and sewers that will help Catellus create a development that will make the firm incredible sums of money.

This little money-recycling program brings us to a nagging question: Why does a multizillion-dollar real estate company like Catellus Development, operating in a boom economic climate in the most beautiful and desirable city in the world, need help in financing its construction projects?

And that question brings us back to a request that we've made before, and that we now repeat as a demand: The Grid wants some financing assistance, too, dammit. Create the Grid Redevelopment Zone, and we'll build ourselves even swankier new offices than we already inhabit, using tax-increment bonds that will be retired with the taxes we pay on the new digs. This is exactly the kind of deal the Redevelopment Agency has given to the Giants and now Catellus. The Grid is at least as credit-starved as either of those firms. And the Grid has something to trade.

Give us a redevelopment zone to call our own, and we'll stop writing about all the sleazy deals the Redevelopment Agency is facilitating at the mayor's urging. Promise.

Until we get a Grid Zone, though, we'll just have to keep looking into Mission Bay. There's a lot to look at.

Aside from redevelopment-financing shenanigans, the Mission Bay deal involves land swaps that smell faintly of bilge water.

Because Catellus needs a few city- and port-owned lots in Mission Bay, a real estate trade has been proposed. But at first and second glance, the swap looks just a tad one-sided. A letter from Mayor Brown to Nelson Rising, president and CEO of Catellus, says this swap involves 59 acres of city land and "approximately an equal amount of acreage" owned by Catellus. In the type of bureaucratic deadpan that makes any sane taxpayer guard his or her wallet, the mayor's letter goes on to make this assertion: "It is assumed that all of the land transferred will be an equal value per acre."

But there is a problem here. This trade would have the city and port give over prime real estate in a South Beach neighborhood exploding with growth potential -- even without Mission Bay -- for industrial slag way down south, near Islais Creek, within shooting range of the Potrero Hill projects and the generally dismal economic conditions of Bayview-Hunters Point.

So we have another suggestion: Why don't we just ask Catellus to sell its parcels on the open market and buy the public land it wants at appraised value? We know that this suggestion is shocking, in that it brings market economics into the workings of San Francisco government. Sometimes, though, shock treatment works.

A scan of public records on the Mission Bay deal makes it clear the plan is loaded with all sorts of other hugs and kisses for Catellus. In fact, the slobbering and smooching among Mayor Brown and his longtime pals (and former law clients) at Catellus is downright disgusting.

Our favorite fine-print giveaway: The city is going to largely pay for the relocation of railroad beds to make Catellus' life easier, sunnier, and generally more profitable.

But please, Lord, don't let us be misunderstood. We aren't against development, per se. We aren't particularly averse to the city priming the private-sector economic pump with city dollars.

All we ask is that there be a sensible and logical connection between the investment and the return. Wouldn't it be nice, for once, to see the mayor not give away the city treasury to a former law client and campaign contributor without even a ceremonial attempt to extract a return for the taxpayers?

In business, if you give your money to investment managers, and they perform badly, you fire them. Sometimes elected officials forget the same remedy is available in the public sector.

Willie Inc. -- Open for Business
Back in May, we criticized the Board of Supervisors for agreeing to allow the mayor to create and completely control a nonprofit corporation that would approve all land deals on the incredibly valuable Treasure Island, once it devolved from federal to city ownership ("Treasure Island Giveaway," May 21). Back then, some supes, notably Michael Yaki and Barbara Kaufman, said we were paranoid, that we saw abdication of duty and potential scandal where there had been -- and would be -- none.

Well, scandal hasn't happened yet, but some odd things have been transpiring out on the former naval base in the middle of San Francisco Bay. While critics were squawking at us like annoying blue jays, a close pal and former law client of our mayor was on the island, appraising and otherwise coveting the Treasure Island Marina, a 140-slip chunk of real estate that stands to be the premier sailing club in the Bay Area, once the TI development authority leases it out. (Current development plans for the island envision at least a 300-slip harbor and marina there.)

The aforementioned crony is Ron Cowan, who is one of the mayor's largest campaign contributors; his development company, Doric Group Inc., somehow heard about the sweet development opportunities of the island's marina before anyone else. Doric workers have been seen walking through the marina, taking notes and measurements and, generally, acting like they could own the place.

Larry Florin, the mayor's top aide on Treasure Island, says that other developers also have inquired about the TI marina, including the St. Francis Yacht Club. Mostly, though, Florin couldn't remember names.

So far, at least, Cowan doesn't seem to have gotten any permanent advantage in the race to lease the Treasure Island marina. Florin says he turned down Doric's request that the marina and associated property be handed over to the firm without anything so trying as a competitive bidding contest.

Instead, Doric will have to wait until the nonprofit that controls the leasing of the marina, the Treasure Island Development Authority Inc., sends out a request for proposals on the lease. Call us paranoid, and even cynical, but given that the Development Authority's board of directors is composed entirely of people appointed by Mayor Brown, we think it unlikely the terms of the RFP will be hostile to the Doric Group.

We didn't nickname the authority Willie Inc. for nothing.


About The Authors

George Cothran


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