Continental divide
SoMa hotel project's backers have cut down community opposition with promises of cash, but ties to a scandal-tarnished former commissioner could be tougher to overcome.

By Matthew Hirsch

IN JUST TWO and a half years since the Continental Development Corp. unveiled its plans for a high-rise tourist hotel in the South of Market, the project that once was vilified by SoMa community organizations has been widely embraced. That transformation exemplifies how money can buy supporters, even though earlier political payoffs have now stalled the controversial project.

South of Market community groups have long been struggling to rejuvenate the impoverished neighborhood while guarding against projects that could gentrify the area and eventually drive out its poor residents. So when the El Segundo-based development company filed for permits to build at the corner of Howard and Fifth Streets in September 2000, most SoMa organizations fought the proposal.

The plans called for a 39-story building that would vastly outstretch the 160-foot height limit specified in zoning regulations. Continental Development also sought to install atop the hotel 70 market-rate condominiums for real estate buyers still enjoying the dot-com bubble. With the new federal building and restoration of the historic Emporium already approved, this multimillion-dollar project raised the specter of gentrification in yet another San Francisco community. Chester Hartman, who chronicled the early battles between the San Francisco Redevelopment Agency and the city's neighborhoods in The Transformation of San Francisco, said large tourist hotels are notoriously antagonistic toward low-income residents and homeless people.

"When I go back and think of what was being done in the Tenderloin [during the 1980s], the hotels were very active in ... making sure their guests didn't see [the poor]," Hartman said. "I assume that once the hotels are there, they are going to put all sorts of pressure to clean up Sixth Street." A new $65,000 Hotel Council advertising campaign against panhandling is one example of how hotels can make life difficult for poor people. Increased land values and trendy shops catering to a more affluent crowd may only compound the pressure on the neighborhood's residents to relocate.

Continental Development initially aimed to complete the hotel in time to draw visitors from the Moscone West convention center, which is set to open its doors to 3,000 meeting planners in August. But before construction could begin the developers needed approval from the city Planning Commission to change the zoning restrictions and create a special-use district on the site. The company lined up all of the support it could muster last May for a Planning Commission hearing, and the project sailed to approval – albeit without the condominiums and at a reduced height of 320 feet.

Six months later, however, former Planning Commission president Hector Chinchilla was indicted on seven conflict-of-interest charges brought by the District Attorney's Office. The charges stemmed from consulting work Chinchilla performed for three companies, including Continental Development, while they were applying to the commission for permits. The indictment cost Chinchilla his reappointment, but it did not hinder Continental Development from advancing its case to SoMa nonprofits.

Shortly after the company filed for building permits, several community groups – including tenant activists, cultural centers, health providers, and an employment agency – formed a loose alliance to oppose the project. It was reminiscent of the neighborhood campaigns that won concessions during the planning of the Yerba Buena Center for the Arts and the development of the Tenderloin and, most recently, the Mission District.

In response, Continental Development moved to protect its investment. The company hired local attorney Victor Marquez to offer the nonprofits financial incentives if they supported the project. When we reached Marquez on the telephone, he told us he would call back later but never did. Continental Development did not return our telephone calls either.

Marquez appeared at the South of Market Project Area Committee's housing committee in September 2001, asking committee representatives to negotiate a community benefits package. Antoinetta Stadlman, chair of the committee, concluded that the project would be detrimental to the neighborhood regardless of the money the nonprofits stood to gain. She also feared that most benefits, such as skilled jobs the project would create, would not help Sixth Street residents.

"I thought at the time that the downturn in the economy and the high vacancy rate would hinder the progress of the project," Stadlman said.

Instead, Continental Development used the poor economy to open new discussions with community organizations that were facing increasingly hard times. The company sent a representative to the South of Market Employment Center, which supported controversial development projects at the old Emporium and at Bryant Square. Soon SOMEC signed on, along with the South of Market Health Center and the Westbay Filipino Center. These groups all sent representatives to the Planning Commission in support of the project. After the developers signed a card check neutrality agreement with Hotel and Restaurant Employees Union, Local 2 – meaning management will recognize the union if a majority of hotel workers authorize it – the union also supported the project. (HERE actually broke with other supporters and urged the Planning Commission not to curtail the size of the hotel.)

Westbay was originally aligned with groups opposed to the project, but Edwin Jocson said his organization switched sides because it had been left out of earlier deals and he didn't see anything to gain from holding out again. Westbay agreed to support the project in exchange for about $125,000, which Jocson said will help the organization hire somebody to raise funds for a new teen and family center. He said that's better than nothing: "I think the mere fact that they approached our organization in the first place, we commend them for that."

After the first round of deals was struck, several influential SoMa nonprofits still opposed the development, including the progressive Sixth Street Agenda, South of Market Community Action Network, and the Tenderloin Housing Clinic. Jeanne Batallones of SOMCAN pressed the Planning Commission to reject the hotel proposal because it would create haphazard "spot zoning" in the neighborhood and because community groups were deciding independently what development the South of Market really needed.

Meanwhile, Sixth Street Agenda was holding out until agreements were reached with various ethnic groups, and the Tenderloin Housing Clinic pursued a similar strategy. Randy Shaw, director of the housing clinic, said he would be willing to support the project, but he said appropriate mitigation would have to address an affordable-housing project that would serve as a buffer between the hotel and Sixth Street.

"I turned down Continental's offer to be a part of the deal so I don't know why negotiations did not point in this direction, but I suspect the hotel strongly opposed creating any nearby affordable housing," Shaw wrote in a leaflet after several groups broke from the nonprofit alliance.

This fracture in SoMa would place District Six supervisor Chris Daly in a precarious position if the project comes to the San Francisco Board of Supervisors for a vote. Daly's staff facilitated meetings among the nonprofits while Daly was biding his time before the impending decision. Tenant advocates were counting on the board to stop the project.

"Our analysis was that [Continental Development] had the Planning Commission. We knew that the fight was always going to be in the Board of Supervisors," tenant organizer Sam Dodge said at an emergency meeting with tenant activists last month. "This Board of Supervisors, whatever you say about their politics, what they do listen to is residents' concerns."

Finally, a group of six nonprofits dropped their objections to the project, among them SOMCAN and Sixth Street Agenda.

"We felt that Continental Development has agreed to provide a comprehensive community benefits package to a diverse constituency in the neighborhood," Batallones said. The deal stipulated that $700,000 be split between SOMCAN, Sixth Street Agenda, Senior Action Network, South of Market Child Care Center, Veterans Equity Center, and Senior Power. Batallones said the money would be used to help organize residents.

The latest agreements paid off doubly for Continental Development when Daly announced two weeks ago that he, too, would support the project. There would be displacement in the neighborhood, Daly said, and he had already raised concerns to the company about increasing land costs and traffic congestion that may result. But Daly, an affordable-housing organizer, said the neighborhood was not prepared to achieve anything more from community mitigation.

"In order to stop development like this it would have taken a significant effort. These are not groups usually going in looking for a deal, but they made a deal," Daly said. "It ain't where the Mission was three years ago. They were able to get [tenants] out to community planning meetings. Their neighborhood had the organizational capacity."

Now, although a year has passed since Continental Development's first deadline to begin construction, the project faces one last hurdle: the deal with Chinchilla. Sup. Jake McGoldrick, chair of the Board of Supervisors' Land Use Committee, where the project proposal now sits, has vowed to hold the project until the charges against Chinchilla are cleared up. After lining up nonprofit support from organizations that were once hostile to the project, the company's involvement with Chinchilla may be what finally sinks the investment.

District Attorney Terence Hallinan's office sent transcripts and materials Monday to the California Court of Appeal for three charges that were dismissed in March. A source in Hallinan's office said that after those charges are resolved it could still be weeks or months before the Chinchilla case is closed. Even then, McGoldrick said the board may send the project back to the Planning Commission, which has seen the arrival of several new commissioners since Chinchilla was president, to consider it again from the beginning.