As neighborhoods’ makeup shifts, new taxes will follow 

New property taxes will be needed if sufficient transit, street, park and school improvements are provided for an expected population boom in The City’s eastern flank.

In 2008, San Francisco leaders cemented into law a new vision for thousands of acres of land covering the Mission, Potrero Hill, Showplace Square, eastern South of Market and central waterfront neighborhoods.

Plans to provide hordes of expected new residents with hundreds of millions of dollars worth of needed improvements in those neighborhoods, largely by taxing development projects, were found to be underfunded by more than 50 percent.

The neighborhoods once formed the backbone of San Francisco’s manufacturing- and industry-based economy. But The City’s economy shifted during the past half-century toward research and development, light industry, niche manufacturing and professional services.

Much of the land that’s now dominated by underutilized factories and warehouses is planned to be reused for high-density apartment and condo complexes, under sweeping zoning changes adopted by lawmakers in early 2009 as part of the Eastern Neighborhoods Plan.

But accommodating the new residents will be expensive because their needs are starkly different from those of the industrial tenants that long dominated the area.

Factory and warehouse operators require wide streets for trucks but have little need for schools, public open space, transit networks and landscaping.

As a result of the change to residential uses, $244 million to $395 million worth of such facilities and infrastructure is planned to be built, often from scratch, Planning Department official Sarah Dennis Phillips said during a Board of Supervisors hearing this month.

“That doesn’t include the maintenance funds that would be needed to take care of all these pieces of infrastructure,” she said.
Fees planned to be charged to developers to build housing in the area will raise $116 million, according to Dennis Phillips. And up to $45 million in additional funding was identified.

To bridge the massive funding gap, a variety of new or redirected land-based taxes are being considered.

Recommendations are expected to be provided to supervisors within several months, according to Planning Department official Ken Rich. Most taxes of this variety would require ballot-style approval by property owners.

Funding transition from industrial to residential

Eastern Neighborhoods Plan falls short of funds for public facilities.

2,200 acres Affected land

10,000 Expected new housing units

$244M to $395M Cost of planned new infrastructure and facilities

$8 to $16 per square foot Development-impact fees charged for new residential buildings

$6 to $14 per square foot Development-impact fees charged for new commercial buildings

30 to 50 percent Funding needs available from expected development-impact fees

12 percent Additional funding available from other sources

$99M to $234M Funding shortfall

Source: Planning Department

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John Upton

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