By Steven T. Jones

Newly crowned San Francisco Board of Supervisors president Aaron Peskin got some resistance from a few of his colleagues on the board during a Jan. 11 hearing but ultimately found the support he needed to kill a controversial tax credit for the Chronicle Building housing proposal (see "What Is Preservation?," 1/12/05).

Peskin said he has championed the project as it won the various approvals it needed to move forward and even initially supported the tax credit, which developer Jim Hunter said was needed to make the project pencil out. But after Assessor-Recorder Mabel Teng challenged the credit and Peskin learned more about it, he had a change of heart.

"I think I made a mistake in bringing this legislation forward," Peskin said at the hearing, apologizing both to his colleagues and Hunter for the confusion. But Peskin said he doesn't believe the credit is proper or necessary.

"I hope this project goes forward. I think it's a good project," Peskin said. "But I have come to the conclusion that the Mills Act is not an appropriate instrument in this case."

Later, when pressed, Peskin said he no longer believed the developer's claims that the credit was essential to completing the project. (Developer spokesperson Michael Yarne said in an e-mail that Hunter is still analyzing his options in light of the board vote.)

"We shouldn't be in the business of subsidizing this. If they want to build it, they should go ahead and build it," Peskin said, later adding that project proponents "have not been very straight with the Board of Supervisors on many occasions."

Nonetheless, those proponents had clearly won the support of several supervisors, and Sup. Bevan Dufty argued to get the item sent back to the committee from which Peskin had pulled it. When Peskin asked Dufty if that was a motion, Dufty looked over at Sup. Sean Elsbernd, who nodded his head, prompting Dufty to formalize his motion.

Teng made the case that the "gutted" building shouldn't qualify for a preservation tax credit, something she said would be unprecedented in California. She said that the board could grant a partial credit just for the facade but that assessment would be difficult and legally problematic, so she recommended denying the credit entirely. The City Attorney's Office also issued an opinion supporting Teng's view, but she was challenged at the hearing by Sup. Michela Alioto-Pier and Elsbernd, who asked her about the building architect's claim that 65 percent of the interior is being maintained.

"[Teng's team of appraisers] have paid a site visit, and they have observed a gutted building," Teng responded. "There's just a skeleton left."

Beyond just the loss of revenue from this project, Teng also noted that this could set a bad precedent for San Francisco that could open the door for developers to gut and reuse more historic downtown buildings in hopes of getting big tax write-offs.

"There are a number of buildings downtown that are similarly situated," she said.

Ultimately, Dufty's motion to refer the matter back to committee failed on a 5-6 vote, with Elsbernd, Dufty, and Sups. Fiona Ma, Gerardo Sandoval, and Tom Ammiano in dissent. Sandoval then objected to how Peskin has handled the matter and made a motion to delay the vote for a week, but that motion failed on a 4-7 vote, with Sandoval being supported by Elsbernd, Ma, and Dufty.

Finally, the board approved the motion to deny the credit on a 9-2 vote, with Elsbernd and Sandoval in dissent.

E-mail Steven T. Jones at steve@sfbg.com.