Port of S.F. looks to new projects to net revenue
By: John Upton
June 4, 2009
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| Ready to work: Port planner David Beaupre points out the crumbling area at Pier 70, which is on the short list of long-neglected southern waterfront in The City that will see improvements using Prop. A bond funding. (Cindy Chew/The Examiner) |
SAN FRANCISCO — After years of failed efforts to convince developers to build a new cruise terminal, the cash-strapped Port of San Francisco is banking on a new plan to bring vibrancy to the aging waterfront.
The Port has tried in vain for years to rely on infusions of private capital and expertise to back a new cruise terminal.
That luck could change: With a large slab of debt due to be retired next month, a new stack of revenue bonds could be sold to finally fund a terminal.
The existing cruise terminal near Fisherman’s Wharf is built on a 94-year-old pier that is too small to accommodate the larger cruise ships that are fast becoming the industry standard.
Visitors and tourists are San Francisco’s greatest source of revenue, and the cruise industry has been growing rapidly during the past decade.
Most major West Coast cities, including San Diego, Los Angeles, Seattle and Vancouver, Canada, have invested in recent years in new terminals, according to Joe D’Alessandro, executive director of San Francisco Convention and Visitors Bureau.
“The cruise companies that we’ve talked to have said that if San Francisco is going to get competitive and get a larger share of this market, then we’re going to have to invest in it,” D’Alessandro said. “The existing terminal is literally falling into the Bay.”
Any cruise-terminal construction project in The City would require a significant injection of capital to restore and seismically reinforce aging piers, which are the legacy of decades of funding shortfalls at the Port of San Francisco.
Although passengers spend plenty of money on meals, gifts and attractions while they tour San Francisco — which supports scores of jobs in the hospitality and related sectors — the cruise industry does not spend prodigiously on docking fees at terminals.
As a result, in an effort to achieve commercial viability, developers have in recent years been forced to incorporate additions into cruise-terminal plans that would bring in more money, such as office space, stores and restaurants.
However, the projects have failed because developers have not been able to recoup and profit after their initial construction investments, or because residents objected to overdeveloping the waterfront.
So the Port now plans to take advantage of an upcoming bond sale to help fund the $40 million-plus conversion of Pier 27 from a cavernous limousine storage lot into a modern cruise terminal.
Under the latest plans, the portion of the building facing the street would be toppled to make way for a public plaza, and several surrounding buildings would be demolished or relocated. The interior of the warehouse building would be refurbished and improved with an elevated mezzanine level to allow cruise passengers to step from their ship directly into the terminal.
The most recent terminal plan calls for the Port to pay for needed infrastructure improvements without relying on the assistance of the private sector, according to Finance Director Tina Olsen.
“We’re thinking, ‘Why don’t we act like a developer?’ We’ll do the investment, we’ll bring in the tenants and do the build-outs,” she said. “We don’t need a rate of return, so perhaps we can do a development that’s more palatable.”
The Port has been in arrears since its management — and its debt – was transferred from California to San Francisco in the 1960s, as a once-bustling cargo trade drifted across the Bay to Oakland.
Since then, the Port has struggled to maintain or improve the aging piers and other infrastructure that line its vast stretches of waterfront.
But three financial blessings have converged to give Port officials new hope that they will finally be able to begin digging their way out of their perpetual financial quagmire.
The Port is the beneficiary of $33.5 million of voter-approved, city-issued bonds to spend on parks and open space, which will help make long-shuttered or neglected patches of shoreline accessible to the public.
Additionally, the Port has applied for tens of millions of dollars in federal stimulus funds, and one project worth nearly $2 million has already been approved. That infrastructure work will see fish waste funneled from Fisherman’s Wharf into the sewer system, after being dumped for decades directly into the Bay.
And, the Port plans to issue new revenue bonds later this year, after it makes its final repayment on decades-old bonds in July.
Because of the tumultuous economy, it’s difficult to tell how much money the Port will be able to raise, according to Olsen, but she figures the bonds could bring in $60 million.
The amount of money the Port could raise depends on the amount of revenue it earns, and a recent rash of vacancies in Port-owned properties — which account for three-quarters of revenue — could cause alarm.
The vacancy rate for the Port’s buildings, many of which are built on piers, rose from 2.2 percent in May 2008 to 15.5 percent last month, Port real estate data show.
But Olsen said the unique nature of the Port’s properties means the vacancies should be easy to fill, in part because it has an abundance of lower-quality office space that is significantly cheaper than rent space generally available elsewhere in The City.
Olsen and her staff recently issued recommendations to the Port Commission on how to spend the $60 million in new bond revenue. The five projects proposed include the cruise terminal and infrastructure improvements for the far southeastern waterfront, where an industrial park featuring concrete, rendering and recycling operations is beginning to mature.
Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association, which has conducted extensive studies into the Port’s finances and priorities, praised the proposed allocation of funds.
“Those are really economic-development projects — those are important projects for basic job creation,” he said. “They’re picking two big economic engines.”
Port plans to use Prop. A funds for waterfront parks
Mission Bay residents in several years could amble across Terry Francois Boulevard to picnic in a park with a waterfront view of preening birds, rotting piers and a massive industrial ship repair operation.
The Port of San Francisco is preparing to spend more than $33 million to build and improve parks that front San Francisco Bay using money made available after city voters passed the $185 million Proposition A neighborhood park bond in 2008.
The Port will use some of that money to replace crumbling concrete shoreline along the southern waterfront with rocks and landscaping. The changes will be made at the edge of a park near Mission Bay that’s being planned by the San Francisco Redevelopment Agency, according to Port planner David Beaupre.
“Now we’ll be able to build a park with a decent shoreline,” he said.
An imposing chain-link fence that presently surrounds the waterfront will be torn down after the coastline is rebuilt, according to Beaupre. Without the bond funds, that fence would likely remain, he said.
Other Port projects will also be funded on the long-neglected southern waterfront using Prop. A funds, including improvements at Heron’s Head Park, Islais Creek, Warm Water Cove and Pier 70, Port documents show.
Farther north, a promenade will be built along Pier 43 between Powell and Taylor Streets using the bond funds, documents show.
Additionally, the unremarkable and dilapidated wharves at the end of Brannan Street, near South Beach Park, will be dismantled and replaced with new public wharves using funds that include some from Prop. A. That project is expected to be completed by 2014, according to Beaupre.
— John Upton
Port of San Francisco funding proposals
$22 million Development of a cruise terminal at Pier 27 (another $20 million is already set aside for this $42 million project)
$18 million Redevelopment of nearby Pier 19 or Pier 23 to create new leasable office, retail and restaurant space
$10 million Driveway repairs at Pier 50, which is located near AT&T Park
$8 million Improvements to the Backlands area, which is underutilized industrial land that includes piers 94 and 96
$2 million Refurbish the second floor of a Pier 33 building to allow space to be leased
Source: Port of San Francisco
