Developers don't even have to build low-income housing, as the city requires of all projects through its inclusionary housing ordinance.
"They have nothing, zero, no affordable housing in there," District 1 Sup. Jake McGoldrick told the Guardian. "It's just more expensive, market-rate housing. I would think they would want to be in sync with what we do on the other side of the road," he said. "They ought to really address affordable housing voluntarily, as a good neighbor gesture. There's no reason they can't rethink the whole thing. How much profit do you really need to turn?"
In the "Response to Comments" on the Draft Environmental Impact Statement of the project, published in May 2006, project proponents argue, "Alternative 3 is, at best, marginally feasible as a rental project because it would not generate a sufficient return to induce a developer to undertake the project."
PHSH is one of the last remaining large-scale renovations for the Presidio, and in order for development to be financially sufficient, trust staff says, it must net the trust at least $1 million annually in base rent. "That's why the Public Health Hospital is a key project," said trust representative Dana Polk. "For us, this is one of the only options for that kind of revenue."
From a strictly economic standpoint, the Presidio Trust is in the real estate business. Since its creation by Congress in 1996, it's been fixing up property to lease for the profit necessary to operate the park. In addition to Grubb, the six other Bush-appointed members represent a wealth of experience in real estate, investment banking, law, and finance. They know how to make money but not necessarily how to build a Presidio that works well for San Francisco.
It cost $43 million to operate the Presidio in fiscal year 2004–2005 — and that's just to keep the lights on and the doors open. In that same fiscal year, the trust received $56 million from residential and commercial rentals, with George Lucas cutting the largest rent check, for $5.6 million. After the additional revenue from PHSH, that $56 million isn't expected to change much and, according to Presidio spokesperson Polk, certainly won't double with the 40 percent of Presidio square footage that remains to be renovated.
Since its inception, the trust has received an annual financial allowance from the federal government as assistance while it attempts to achieve fiscal sovereignty. That amount, $19.2 million last year, will steadily decrease to zero by 2013, when the trust is scheduled to sever ties with the US Treasury. It has already exhausted the $50 million borrowing power it was also granted, so for the next seven years it only has what it can raise philanthropically or attract economically to rehabilitate the remainder of the park.
While the trust can occasionally handle retrofits and small-scale renovations, buildings like the PHSH and the cluster of barracks at Fort Scott aren't entirely feasible as in-house projects. "If we had the capital, we'd do it ourselves," said Polk, who explains that in most scenarios the lessee incurs the cost of renovations in lieu of rent, which also explains why that $56 million isn't expected to grow much: Rent revenues are disappearing as favors for renovations.
None of the Presidio property can be sold. It must be leased, but if the trust isn't raising enough revenue to finance its own public interest renovations, what kinds of development can be expected to continue? Who is willing to pony up cash for buildings they can never own? What kind of bank finances loans on property that can never be foreclosed? Only enormous real estate firms with very deep pockets such as Forest City can afford the Presidio scenario.
In the next couple weeks, McGoldrick is hoping to gather reps from the Mayor's Office, Rep.
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