San Francisco Redevelopment Agency

107-09506-002                                                                                   Agenda Item No. 4 ( g )

April 27, 2006                                                                                      Meeting of May 2, 2006

MEMORANDUM

TO:                  Agency Commissioners

FROM:           Marcia Rosen

                        Executive Director

SUBJECT:      Approving the proposed budget for the period of July 1, 2006 through June 30, 2007 and authorizing the Executive Director to submit the budget to the Mayor’s Office.

Enclosed is the Agency’s fiscal year 2006/07 proposed budget being submitted for Commission approval at the meeting of May 2nd. Request for approval and authorization to submit the proposed budget to the Mayor’s budget Office follows two workshops held by staff on the budget, the first such workshop was held April 4^th and the second April 18^th. At the meeting of April 4th, Agency staff presented and overview of its 06/07 budget and briefly discussed the budgets for Affordable Housing, Hunters Point Shipyard, Mid-Market Survey Area, South of Market, Transbay, and Visitacion Valley Survey Area.  The second workshop on the Agency’s fiscal year 06/07 budget was presented at the Commission meeting of April 18^th and covered Western Addition A-2, Bayview Hunters Point Survey Area, Hunters Point, India Basin, Mission Bay North and South, Rincon Point – South Beach, and Yerba Buena Center.

Very few modifications have been made to the budget heretofore submitted to the Commission and public for review.  Staff Associate III was replaced by the Public Affairs position, a computation error was corrected in the Visitacion Valley budget, reducing its total budget by $89,000, and estimated total tax increments for Transbay were included in the table appearing in Section VII of the budget.

Modifications to the Agency’s proposed budget for fiscal year 2006/07 are likely to be made by   the Mayor’s Office and/or the Board of Supervisors.  Staff will keep the Commission informed of these changes.

The following summarizes the Agency’s budget format, budget process, and proposed budget for the next fiscal year.  

Budget Format and Funding Sources

The Agency prepares its budget to conform to the requirements set forth in the Community Redevelopment Law (CRL).  Accordingly, the Agency prepares a budget for each of its projects, survey areas, and programs, such as the Affordable Housing Program and Community Economic Development. The components for each budget includes a description of the project activities and/or program, a comparison of the current year’s goals and achievements, and tasks to be undertaken and goals to be achieved in the following fiscal year.  Revenues and funding needs for each project/program are captured in a separate worksheet.  Lastly, all project/program budgets are added to form the consolidated budget for the entire Agency.  Agency staff and administration costs (e.g., office rent, supplies, phone bills) are shown separately in the Agency’s budget.

The Agency finances its work activities primarily with tax increment and the sale of bonds secured by tax increment. The tax increment requested in any year will be used primarily to pay debt service on outstanding debt and a smaller portion to fund Agency personnel and administration costs, also referred to as operating costs. The amount of tax increment available to the Agency has dwindled to very small amounts in Rincon Point-South Beach and Western Addition. The former project’s tax increment will be exhausted in fiscal year 2006/07, while Western Addition’s tax increment is projected to be exhausted by January 1, 2009. Thereafter, the CRL prohibits the receipt of tax increment except to pay outstanding debt. CRL does allow the Agency to amend the Rincon Point-South Beach and Western Addition plans pursuant to SB 2113 to continue to receive tax increment for the sole purpose of funding the replacement of approximately 7,000 housing units lost through redevelopment activities prior to 1976.  Agency staff proposes amending the Rincon Point-South Beach in the spring of 2007 pursuant to SB 2113.

Other revenue sources of lesser significance include the intermittent sale of Agency-owned property, rents/lease income, interest earnings, loan repayments, and bond fees.  A portion of the Agency’s staff and administration costs is funded by the master developers responsible for development in the Mission Bay North and South and Hunters Point Naval Shipyard Redevelopment Project Areas.  The Agency avoids using bond proceeds to pay for operating expenses by utilizing a combination of “pay as you go” tax increment and other revenues to fund such expenses. The Agency is requesting a loan of “general fund” money to pay for costs related to Visitacion Valley and Bayview Hunters Point Survey Areas for fiscal year 2006/07, to be paid back with future tax increment receipts from the respective project areas.

Overview 

The Agency’s fiscal year 2006/07 budget assumes a plan amendment pursuant to SB 2113 for the Rincon Point-South Beach Project Area, such amendment requiring approval by the Agency Commission and Board of Supervisors. This latest amendment would mark the fourth such amendment to Agency project areas, the others being Hunters Point, India Basin, and Golden Gateway. Without such amendments pursuant to SB 2113, the city and Agency would have lost significant capability to fund affordable housing.  The plan amendments allow the Agency to (i) incur indebtedness until January 1, 2014, and (ii) collect tax increment for the repayment of such indebtedness until January 1, 2044, solely for the purpose of funding low-and moderate-income housing to replace an estimated 7,000 units lost in the early years of the Agency’s redevelopment activities.  Amendments pursuant to SB 2113 are planned to occur over the next four years for two other older project areas – Western Addition  and Yerba Buena Center.  For fiscal year 2006/07, approximately $48.6 million in housing funds is attributed to SB 2113 amendments.  

The Agency’s primary focus for fiscal year 2006/07 is (1) creation of housing for low-and moderate-income households, including two affordable housing developments in the Octavia Boulevard corridor, senior housing in Mid-Market family housing in the South of Market, senior housing in Bayview and homeownership in the Western Addition (2) completion of redevelopment programs in the Western Addition, Rincon Point-South Beach and Yerba Buena Gardens, (3) implementation of the new Transbay and the proposed Mid-Market, and Bayview Hunters Point project areas, and (4) construction of infrastructure and public improvements in Mission Bay and the Hunters Point Shipyard.  In addition, the Agency will continue its support of revitalization efforts that are ongoing, including a priority for job training and support of small businesses.

The Agency’s total spending program for fiscal year 2006/07 is $246.5 million, of which nearly $41.1 million is supported by non-tax increment revenue sources (land sale proceeds, leases, grants, developer contributions).  The Agency proposes funding the difference between the spending program and the non-tax increment revenue with $67.2 million in tax increment and borrowing about $132.6 million through the sale of tax allocation bonds, i.e. bonds repaid with tax increment. 

Furthermore, the Agency is requesting a loan of $1.5 million in general fund money for the purpose of preparing the analyses and studies needed for the creation of a new redevelopment project in Visitacion Valley and to fund planning work in connection with area “C” in the Bayview Hunters Point Survey Area.

Of the total tax increment request of approximately $67.2 million, the largest portion, $52.5 million, is required to pay debt service on outstanding debt, $6.6 million is needed to pay for operations (personnel and administration costs), over $845,000 is requested to fund primarily the work programs in Western Addition and Transbay, and the balance is requested to make “pass-through” payments  mandated by the state or required pursuant to developer agreements associated with Mission Bay.  As in recent years,  the Agency proposes selling next year’s tax allocation bonds at the end of the fiscal year, so that no additional tax increment will be needed to cover new debt service obligations in fiscal year 2006/07.  In addition to minimizing the impact on city finances, the Agency’s proposed budget will:

1. Pay for personnel and administration costs from non-borrowed funds.
2. Maintain Agency operations at approximately the current level.
3. Pursue a sizable affordable housing program that is consistent with the Agency’s available debt capacity.
4. Advance completion of the Agency’s work in the older project areas.
5. Initiate implementation of redevelopment plans for new project areas – Transbay and the proposed Mid-Market and Bayview Hunters Point – and pursue the creation of the Visitacion Valley survey area.

1. Complete the first phase of infrastructure development of the Hunters Point Shipyard and commence development of the 1600 housing units in this phase.
2. Fund the construction of infrastructure improvements in Mission Bay and maintenance of streetscapes and parks.

Following is a brief discussion of the major program activities included in the 2006/07 budget.

Affordable Housing. The proposed budget for fiscal year 2006/07 includes a total investment in affordable housing of $73.8 million. Of that total, $8.2 million is the federally funded HOPWA program.    The balance of the proposed housing budget would be used to fund development costs associated with two low-income housing developments in the Octavia Boulevard Area, fund development of an affordable housing site in the Bayview Hunters Point Area, finance senior housing in Mid Market, and fund the development of affordable ownership housing in Western Addition.   Affordable housing comprises nearly 40.0% of the Agency’s total work program budget for fiscal year 2006/07.  This share rises to 69.2 percent if the Agency’s budget is modified for Mission Bay infrastructure improvements, which is a non-discretionary item that the Agency is obligated to finance pursuant to an agreement entered into between the City/Agency and the developer.    Approximately $48.6 million of the affordable housing budget of $73.8 million is made possible by plan amendments made in 2005 to Hunters Point, India Basin & Golden Gateway project areas and the amendment to the Rincon Point-South Beach project area planned for the spring of 2007.  The entire housing budget, except for housing related to Mission Bay, is described in Citywide Housing and not distributed among project areas, though some of the housing funds will be used to fund housing developments within redevelopment project areas.

Public Infrastructure.  The Agency is budgeting $74.4 million in fiscal year 2006/07 for public improvements, of which $70.3 million represents major infrastructure improvements, including parks and open space, in Mission Bay North and South.  Additionally, $1.4 million is included in the Hunters Point Shipyard budget to provide temporary facilities for artists to be financed with federal grants and a like amount is budgeted for repairs and upgrades to Yerba Buena Gardens, which are financed from previously secured funding. The balance of the infrastructure budget is requested to complete the Jessie Square Plaza ($500,000) in Yerba Buena Gardens, to repair/upgrade sidewalks along Sixth Street in South of Market ($500,000), and to maintain streetscape along Fillmore Street in the Western Addition ($250,000). 

Business development funding in the amount of $1.6 million is being requested in fiscal year 2006/07, of which $1.2 million is earmarked for the Sixth Street business development and economic outreach program in South of Market. The program assists and encourages businesses to make physical improvements to their properties by providing an inexpensive source of financing.  The balance of $384,000 is programmed to fund the Renaissance Entrepreneurship Center.  Also, funds from appropriations received in prior years will be used to promote the Fillmore Jazz District through the Agency’s façade/tenant improvement/business assistance loan program.

Other sizable budget items for fiscal year 2006/07 include $7.2 million for the maintenance of Yerba Buena Gardens and on-going financial support of the Yerba Buena Cultural facilities and $901,000 for the maintenance and improvements of South Beach Harbor, both of which are self-financed, and $1.1 million for job training and placement.  Another $400,000 is budgeted for the maintenance of Rincon Point Park.

Personnel and Administration

The proposed fiscal year 2006/07 budget reduces the Agency’s total permanent full time staff by 2.6 full time equivalent positions (FTE), achieved by eliminating vacant positions. The personnel budget assumes no salary increase for staff in fiscal year 2006/07 and a 3.5% absorption by the Agency of the employee’s share of the retirement plan as requested by the Mayor’s Budget Office. The latter was achieved by the elimination of the positions just mentioned and termination of one long-term-assignment, reclassifying two other vacant positions, and delaying filling budgeted but currently vacant positions.  The increase in personnel costs between fiscal years 2005/06 and 2006/07 primarily reflects higher costs of health care, a rise in the retirement contribution, and the effect of a 2% salary increase due June 30, 2006 pursuant to existing labor agreements.

The Agency is requesting slightly over $3.0 million in fiscal year 2006/07, compared to $3.9 million in fiscal year 2005/06, to pay for administration expenses (e.g., office supplies, insurance, phone service, postage, office rent). The lower amount requested in fiscal year 06/07 is attributed to the lower costs of the new office space and the fact that the 05/06 administration budget included one-time costs associated with the Agency moving  to new offices.

Conclusion

Utilizing funds from prior year appropriations coupled with additional funds requested in the proposed budget for fiscal year 2006/07 will allow the Agency to move forward in completing work program activities in Rincon Point-South Beach, Yerba Buena Center, and the plan in Western Addition.  Adoption of the Transbay Redevelopment Plan and the anticipated adoption of redevelopment plans for the Bayview Hunters Point and Mid-Market will permit the Agency to move ahead in conjunction with the PACs and CACs in efforts to revitalize these neighborhoods.  After many years of planning, infrastructure improvements and development of a portion of the shipyard will become a reality in fiscal year 2006/07.  The Agency’s efforts in providing low-and-moderate income housing will remain a top priority, as indicated by the more than $70 million in funds requested in the 06/07 budget

Commission approval of the Agency’s fiscal year 2006/07 budget and authorization to submit such budget to the Mayor’s Office is recommended.

Originated by:  Mario Menchini, Senior Financial Analyst

Marcia Rosen

Executive Director

Attachment

RESOLUTION NO.  63-2006

APPROVING THE PROPOSED BUDGET FOR THE PERIOD JULY 1, 2006 THROUGH JUNE 30, 2007 AND AUTHORIZING THE EXECUTIVE DIRECTOR TO SUBMIT THE BUDGET TO THE MAYOR’S OFFICE

BASIS FOR RESOLUTION

1. County of San Francisco is required to establish and adopt a Budget for fiscal year 2006-07.

1. County of San Francisco.

RESOLUTION

ACCORDINGLY, IT IS RESOLVED by the Redevelopment Agency of the City and County of San Francisco that its proposed Budget for the period from July 1, 2006 through June 30, 2007 is adopted and the Executive Director is authorized to submit the proposed Budget to the Mayor’s Office. 

APPROVED AS TO FORM:

_________________________

James B. Morales

Agency General Counsel

108-07006-002                                                                                   Agenda Item No. 4( h )

April 25, 2006                                                                                      Meeting of May 2, 2006

INFORMATIONAL MEMORANDUM

TO:                 Agency Commissioners

FROM:           Marcia Rosen

                        Executive Director

SUBJECT:     Workshop updating the Commission on the proposed formation of community benefit districts in the Fillmore Jazz Preservation District and Japantown in the Western Addition Redevelopment Project Area A-2

PURPOSE OF INFORMATION

The purpose of the workshop is to update the Commission on the proposed formation of Community Benefit Districts, or CBDs, in the Fillmore Jazz Preservation District (“Jazz District”) and Japantown in the Western Addition Redevelopment Project Area A-2 (“Project Area”).  This memorandum will provide a brief background on San Francisco ’s CBDs and will also bring the Commission up-to-date on CBD formation activities since the date of the last Informational Memorandum to the Commission on March 23, 2006, attached as Attachment 1. 

This Informational Memorandum also provides the basis for a future Commission action item related to the formation of a CBD in the Jazz District.  The Agency owns two parcels within the boundaries of the proposed Fillmore Jazz District CBD.  Because the Agency is a property owner, it will be asked to cast a vote in the mid-June CBD election if the Fillmore Jazz District CBD formation process proceeds as scheduled.   Therefore, in early June, staff anticipates returning to the Commission to seek its authorization to vote in the affirmative for the establishment of the Fillmore Jazz District CBD.  Details about this future action are discussed later in this memorandum. 

BACKGROUND

San Francisco ’s CBDs

In early 2004, the San Francisco Board of Supervisors unanimously adopted an ordinance to streamline CBD formation procedures.  Upon signing the legislation, Mayor Newsom said that the legislation “is a spectacular way for the local businesses and property owners to take charge of the improvement of their neighborhoods, speed up economic development, and bring vitality to their communities.”  Prior to 2005, San Francisco had only one CBD in the Union Square

area, which was formed in 1999 and re-established in 2004 with overwhelming support from property owners.

Last summer, the Board of Supervisors voted to establish five new CBDs:

These new CBDs have been in operation since January 2006.  If passed, the Fillmore Jazz District CBD will include about 80 properties and have an annual budget of approximately $369,000. 

Activities Since the Last Commission Informational Memorandum

On March 29, 2006, the Fillmore Jazz District CBD Steering Committee (“Steering Committee”) voted to proceed with the formation of the Fillmore Jazz District CBD by adopting a draft Management Plan.  The proposed CBD’s boundaries are illustrated on the attached map (Attachment 2).  The Management Plan is required to 1) identify the CBD boundaries and 2) provide a description of the anticipated services, the assessment methodology, and budget.  The most recent version of the final draft of the Fillmore Jazz District CBD Management Plan is provided as Attachment 3. 

In addition, the Steering Committee based its decision to proceed with CBD formation upon receipt of certain information from the Agency.  To comply with this request, Agency staff provided the Steering Committee with 1) a draft spreadsheet showing existing and projected Project Area funds potentially available to fund projects and programs through January 1, 2009 (provided to the Commission by Informational Memorandum dated April 4, 2006), 2) a matrix of existing City and Agency services, and 3) a chart of the Agency’s past expenditures related to streetscape improvements, and other related information.  Also, staff is assessing the Steering Committee’s concerns related to the condition of sidewalk improvements along Fillmore Street installed during the Agency’s $5 million streetscape capital improvement project in 2002.  

DISCUSSION

Proposed Future Agency Action

In early June, staff intends to return to the Commission with a request to authorize staff to vote in favor of CBD formation.  As mentioned earlier, the Agency owns two parcels in the proposed Fillmore Jazz District CBD: 1) the Muni Substation site on the corner of Turk and Fillmore Streets (“Muni Substation Parcel”), and 2) the small parcel that serves as a driveway between Safeway’s parking lot and Fillmore Street, which is a vacated portion of Ellis Street (“Ellis Street Driveway Parcel”).  These two parcels are identified on Attachment 2. 

Since the Agency is a property owner and would be subject to CBD assessments, it will be asked to cast a vote in mid-June’s CBD election, assuming the CBD process proceeds as scheduled.  Only the Commission can authorize staff to cast an assessment ballot.  However, if a majority of property owners representing over 50% of the total proposed CBD assessment vote to establish the CBD, the Agency will be assessed the initial annual amount of $10,752 regardless of the Commission’s action in early June (i.e., an affirmative vote, a negative vote, or no vote at all).  This is because the Agency owns relatively little land within the proposed Fillmore Jazz District CBD compared to other property owners.  Although the Agency is exempt from paying property taxes, it is not exempt from paying CBD assessments for as long as the Agency owns these two parcels.  Additional assessment details are provided in Attachment 7.

Next Steps

Petition Mailing

By adopting the final draft Management Plan, the Steering Committee authorized a petition mailing to all Fillmore Jazz District CBD property owners in an effort to gather sufficient support to trigger the Board of Supervisors’ CBD formation proceedings through a Resolution of Intent.  The mailing will go out by the first week of May along with 1) a copy of the Management Plan and 2) a notice of a community-wide meeting discussed later in this memorandum.  Petitions from property owners representing at least 30% of the total proposed CBD assessment are required, in this case about $110,700.  A complete breakdown of the proposed Fillmore Jazz District CBD properties and assessments is provided in Attachment 3, the final draft Management Plan.  If and when this threshold is reached in mid-May, the Board of Supervisors will initiate the CBD election process and mail ballots to all Jazz District property owners.  A timetable of the key steps in the formation of the Fillmore Jazz District CBD is found in Attachment 4.   

Community Outreach

By adopting the final draft Management Plan, the Steering Committee members also began a community-wide outreach campaign to ensure widespread education on the proposed Fillmore Jazz District CBD.  Members of the public are invited to a community meeting on May 8, 2006, where the main topic of discussion will be the Management Plan and related CBD activities underway in the Jazz District.  Announcements for this meeting will be mailed to all property owners with the petition mentioned above and also to the Agency’s Project Area mailing list.  In addition, a copy of the flyer, which is provided in Attachment 5, will be hand-distributed to businesses along Fillmore Street.  Additional details about the Steering Committee’s outreach campaign are found in Attachment 6, Property Owner and Community Outreach Plan.

Presentations by Agency staff, the Mayor’s Office of Economic and Workforce Development, and New City America, Inc., in partnership with MJM Management Group, will be made at the following meetings of the Western Addition Citizens Advisory Committee (“CAC”):

• April 27, 2006 – Planning and Development Subcommittee
• May 11, 2006 –   The full CAC

Since early 2005, New City America, Inc., and MJM Management Group have provided at least five informational updates to various committees of the CAC and/or the full CAC.  Agency staff will provide the Commission with feedback from the April 27, 2006 Planning and Development Subcommittee meeting at the May 2, 2006 workshop.

Proposed Future Agency Action

Finally, as mentioned earlier, assuming the Board of Supervisors issues its CBD Resolution of Intent, Agency staff will return to the Commission in early June seeking its authorization to cast a Fillmore Jazz District CBD assessment ballot in the affirmative for the Muni Substation Parcel and the Ellis Street Driveway Parcel.

Japantown CBD Update

New City America, Inc., the Agency’s CBD consultant, has been working closely with the Japantown Task Force, Inc. to explore the feasibility of establishing a Japantown CBD.  Although there is strong community interest, progress has been temporarily slowed due to the pending sale of the Kintetsu and AMC Kabuki properties.  Agency staff and New City America, Inc. intend to work with the new owners of Kintetsu and the AMC Kabuki properties once the sales have been finalized.    

Originated by Denise Blades, Development Specialist

Marcia Rosen

Executive Director

Attachments:

Attachment 1 – Informational Memorandum dated March 23, 2006

Attachment 2 – Map of the Fillmore Jazz District CBD

Attachment 3 – Fillmore Jazz District CBD Management Plan

Attachment 4 – Fillmore Jazz District CBD Timetable of Activities

Attachment 5 – May 8, 2006 CBD Community Meeting Flyer

Attachment 6 – Property Owner and Community Outreach Plan

Attachment 7 – Agency Parcel Projected Assessments

CC:      Mayor’s Office of Economic and Workforce Development

            Supervisor Ross Mirkarimi – District 5

            Western Addition Citizens Advisory Committee

            Fillmore Jazz District CBD Steering Committee