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June 23, 2006

City hunting for treasure in middle of bay – Treasure Island ready for a transformation

San Francisco Business Times, by Steve Ginsberg

Treasure Island is often called some of the best real estate in the world, with arguably the most spectacular views in the Bay Area.  But today, the island is a “wasteland” with decrepit World War II Navy housing and weedy vacant lots, residents say.  But if developers and city planners have their way, this man-made island will go from wasteland to model community with vibrant neighborhoods and appealing parks.  They envision “the most environmentally sustainable, large development project in U.S. history.” Their ambitious, $2 billion development plan has a long road and ferry ride to go. It will take 12 to 14 years to build.

Difficult task: Treasure Island’s redevelopment ranks with Mission Bay and Hunter’s Point as the city’s most complex redevelopment projects, and its ultimate financial success depends on its mix of homes, shops, restaurants and hotels. With 8,000 proposed residential units, it’s the largest housing project in the city’s pipeline. Strong demand for market-rate housing will be needed to convince lenders to finance this expensive project. Unlike Mission Bay and Hunter’s Point, which have large office or industrial components, state regulations limit office development on the island. Less than 5 percent of its revenue will come from office leases for 25,000 square feet of space. In addition to housing, the plan calls for 250,000 square feet of retail and three upscale hotels.

The amenities the development will bring — including a 20,000-square-foot supermarket — can’t come soon enough for current residents. They complain that the island today is devoid of basic services: There’s no grocery store, gas station or Starbucks, and the city school board closed the elementary school last year.  But that will all change as the approval process starts this summer when the Board of Supervisors begins its review of the plan. Supervisor Chris Daly has the project in his district and has not objected so far; he is waiting to see the financial package the city receives from the developer before he approves it. Negotiations continue with the Navy on land acquisition and cleanup costs.

Claudine Cheng, head of the Treasure Island Development Authority, said breaking ground could be three to five years away. Pollution, including a small amount of nuclear waste and PCBs, must be cleaned up. Environmentalists object to anyone living on the island now because of nuclear spills dating to the 1950s.   City planners, architects and 135 public meetings over the last six years have shaped the plan. At once Draconian and futuristic, the plan aims to wean residents off their cars and conventional energy sources. To help solve the island’s transportation problem, officials are proposing special auto-use fees to make residents think twice about using their cars.

All residents will have to pay for parking and will be limited to one car per unit. A $5 peak-use fee for driving on and off the island is proposed. Residents and visitors will be encouraged to use a new ferry system and enlarged bus and shuttle systems. A new $25 million ferry terminal with be cut into the southwestern edge of the island surrounded by residential and retail buildings. Sustainable elements extend to energy with solar and wind energy proposed and a storm water system to treat sewage.

Treasure trove:  But this utopian vision won’t come cheap. The development carries a $10.0 billion-plus price tag… Infrastructure costs are so high partially because of extensive demolition of buildings. The island is highly vulnerable to earthquakes and its seawall and causeway need bolstering…

…The Navy will transfer the land to the city and it will become a new neighborhood with its own schools and retail core. To be successful though, it needs to attract tourists to its shops, restaurants and hotels. Cheng envisions TI becoming a recreational lure much like the Presidio and Golden Gate Park, but with superb water views.

History lesson:  Built in time for the 1939 Golden Gate International Exposition, Treasure Island was taken over by the Navy during World War II. After the Navy ended operations in 1997, several plans for Treasure Island’s rebirth were floated. Mayor Willie Brown envisioned a gambling casino there, but that idea never got off the table. Meanwhile, film and television production as well as housing have generated revenue.  In 1999, the John Stewart Co. invested $10 million to upgrade some of the Navy housing. Stewart pays the city $700,000 a month for the ground lease while getting rents ranging from $1,000 to $3,000 a month for 600 market-rate units and 200 for the formerly homeless.   Stewart describes the island today as a “grand social experiment” where double-income couples working in San Francisco live near the formerly homeless. The island’s lack of amenities for residents has been a problem, yet Stewart reports just 4 percent vacancy.   Because of the island’s isolation, luring retailers has been difficult, and a small convenience store serves the residents.   Island residents sound marooned as they look across the water at over-retailed San Francisco.

“I hope this (redevelopment) happens. I’m tired of living in a wasteland,” said Emily Rapaport, co-chair of San Francisco Island’s Community Association. “I like the plan with its narrow streets that is somewhat like a medieval city where people walk. It’s a beautiful plan, but the drawback is transit.”

Whatever evolves at Treasure Island, it will be better than what Rapaport has today. But she worries about whether she and her fellow residents will be to be part of it. Though the formerly homeless residents are guaranteed housing in the new buildings, residents like Rapaport are not guaranteed a spot.  “I’m hoping to be able to afford to stay,” she said.