In eco-friendly San Francisco — a city with an ongoing housing crisis — the Board of Supervisors may extend for 25 years a lease with a gas station on public land at the intersection of Portola Drive and Woodside Avenue.
The paradoxical nature of the proposal was not lost on members of the board’s Budget and Finance Committee Wednesday when they were asked to approve the lease with Twin Peaks Petroleum, Inc., otherwise known as Twin Peaks Auto Care, at 598 Portola Dr.
The lease agreement is supported by Board President Norman Yee, who represents the area and is termed out of office in January. His legislative aide praised the business as one of the few remaining independent gas station owners in The City and added that it was recognized as a “legacy” business in 2016.
But Supervisor Sandra Fewer said that “I’m a little apprehensive about it.”
“I don’t want to tie the hands of other supervisors that may come after us to actually fully develop that property,” said Fewer.
Fewer, however, said she could support a shorter term lease of 20 years with a five year option instead. She said shortening the lease by five years would likely help board members feel “more comfortable” with the lease “knowing that we have so few places of public land to actually imagine building affordable housing.”
A 2017 budget analyst audit of the Real Estate Division flagged the property as an example of how The City lacks “an explicit policy for use of City property for non‐government purposes.”
A 2013 appraisal of the property found the highest value of the property, at $1.8 million, was as a residential or mixed commercial and residential development of up to 26 units.
“This conclusion was based on the assumption that the site would be vacant and not impacted by environmental remediation,” the audit said. “At the time of the lease expiration in June 2014, the City missed the opportunity to reconsider the current property’s use as a gas station and pursue a mixed use development that would better conform to the City’s housing goals.”
The committee postponed for a week a decision on the lease to possibly amend the terms to Fewer’s satisfaction.
Supervisor Rafael Mandelman also raised environmental concerns.
“I had a little bit of heartburn over a 25 year lease for a gas station on public land in this moment in San Francisco and the world where we should be getting away from using gasoline,” Mandelman said. “It is my hope and expectation that 25 years from now this station is not a place where people go to get gasoline for their cars.”
Mandelman, however, said he would support the lease and noted that the terms do allow the owner to transition to alternative fuels.
“If this property is providing gasoline for automobiles in 25 years we are in even bigger trouble than we are now,” he said.
The third member on the committee, Supervisor Shamann Walton, said he would support the lease.
“I am supportive of this because of the fact that this business owner has been in the community for such a long time,” Walton said.
The current lease expires on Oct. 31. The proposed lease is for 25 years through October 2045, with a five year option. The owner currently pays $9,466 per month in rent, or $113,586 annually. That would increase to an initial annual rent of $200,200. Over 25 years, The City would receive $7.2 million in rent.
The City has leased the site near Juvenile Hall for a gas station for decades.
The Board of Supervisors first approved a 15-year lease with Mobil Oil to run the gas station there, according to the budget analyst report. The current owner, Michael Gharib, acquired the Mobil Oil franchise in 1985.
“I employ about a dozen San Francisco residents and look forward to being here for the foreseeable future,” Gharib said.
Gharib said he requested the more than two decade-long lease to help him finance the state requirement he replace the underground gas storage tanks by 2025.
“The tanks have to be replaced and that’s a significant cost and that was part of the reason we needed that many years to recover this investment,” Gharib said. He estimated the cost at up to $750,000.
“For me that is major,” Gharib said. “It is not something that I can recover in five or six years.”
Gharib was backed by the adjacent neighborhood group.
“The citizens in our area … love Twin Peaks Petroleum,” said George Wooding, president of the Midtown Terrace Homeowners Association. “It is an institution. It is a beacon on the hill. We identify with it.”
He added that Gharib is an “extraordinary good neighbor.”