Mission Bay - Redevelopment in the Heart of San Francisco

[ By Thomas T. Marshall ]

Many of the 6,000 housing units at Mission Bay overlook Mission Creek.

Mission Bay, a former brownfield turned mixed-use project situated on 303 acres near downtown San Francisco, hasn't always been considered prime real estate. Despite its ideal location on the historic waterfront, the area was unofficially named "Dumpsville" in the late 19th century when it transformed from a navigable body of water - complete with a water taxi service - into a landfill contaminated with trash, sewage and rubble.

Mission Bay had been a hot spot for heavy industrial use and rail yard operations. When the shipping industry moved from San Francisco to Oakland in the early 1960's, Mission Bay was abandoned almost entirely. The land lay barren and polluted for the next three decades until 1998, when the city and county of San Francisco adopted a redevelopment plan for Mission Bay. Catellus, now a ProLogis company, led the project through the entitlement and planning process. Today, the company oversees the implementation of all public infrastructure and coordinates the efforts of numerous third-party residential and commercial vertical builders.

Mission Bay before its redevelopment. Planning and regulatory control over the project is now exercised by many governmental agencies - land is under private, City and Port ownership and some land is subject to the public trust.

"The land that comprised Mission Bay was once owned by Santa Fe Southern Pacific Corporation, the former parent company of Catellus, which served as the real estate arm for the railroad," said Amy Neches, manager of project area planning and development for the San Francisco Redevelopment Agency. "Mission Bay is an excellent example of a public-private partnership, with a committed property owner helping the city of San Francisco realize a vision." During the past several years, Catellus has worked hard to market the site and sell available lots to third-party builders, a process that has drastically accelerated development. Mission Bay is currently 10 years into a 30-year build-out, and already more than 20 businesses and 3,500 people, ranging from college students to Baby Boomers, have relocated to the area. It is home to a number of biotech companies, including Pharmion Corporation, Merck & Co., Fibrogen Life Science and Elon Pharmaceuticals.

Open, green space is abundant at Mission Bay with 750,000 square feet of new parks, some featuring recreational sports and boating facilities.

When complete, Mission Bay will house up to 12,000 permanent residents and support a workforce of 30,000 people. It will include 11.3 million square feet of residential, commercial and retail space; a 500-room hotel; a 550-bed hospital; a 43-acre research campus for the University of California, San Francisco (USCF); and 42 acres of parks and open space.

Progress Isn't Always Easy
Mission Bay is beginning to look like a thriving metropolis, but the road to success has been long. The current plan being carried out by Catellus, now the development manager, is the fifth such plan devised for Mission Bay since 1980. Until the late 1990's, the site was plagued with development delays. Each of the previously proposed plans was abandoned or significantly altered through the land use and community input processes. In the interim, markets changed and plans lost their viability.

"Previous plans fell victim to significant changes in the real estate market," said Kelley Kahn, project manager for the San Francisco Redevelopment Agency. "Understanding this, Catellus worked with the Redevelopment Agency to create a flexible plan that incorporated feedback from the community and was supported by local government."

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The current Mission Bay redevelopment plan was completed in 1999 following a series of extensive public workshops and community meetings that allowed Catellus to gather input from the community and its leaders about their visions for the area's future. The plan, which was created in conjunction with many local agencies and groups, even received an endorsement from a formal citizens' advisory committee. It was ultimately approved by the city of San Francisco and accepted by the citizens. "Creation of the current redevelopment plan was a complex, challenging endeavor that required coordination with the multiple governmental agencies that exercise regulatory control over the site," said Kahn. "Allowing for a mix of uses, including residential, office, bio-science and public facilities, we built in an appropriate level of flexibility and phasing ability to help accommodate fluctuations in the market."

Entitlement for the land use plan wasn't the only development-related hurtle. There were also environmental concerns. Once a shallow bay surrounded by marshlands, Mission Bay had been gradually filled with soils excavated from the expanded street grid. The area was full of San Francisco's garbage and sewage and things got worse in the early 20th century when the 1906 earthquake added large amounts of rubble and debris.

In time, the filled-in Mission Bay area evolved into a heavy industrial site with major rail operations. The land was primarily owned by Santa Fe Southern Pacific Corporation, and had been leased to several oil companies for above-ground facilities and underground fuel pipelines that were used to store and transfer petroleum. The Mission Bay redevelopment plan brought with it concerns that a colorful land use history - combined with the largely undocumented composition of fill material - could mean toxin contamination. Catellus commissioned a comprehensive environmental assessment of the larger Mission Bay redevelopment project area, including soil and groundwater analyses, before moving forward with the redevelopment plan. The oil companies also conducted their own investigations. In the end, only one portion of the site, a former petroleum-storage tank farm located on 12.4 acres, required active remediation.

The UCSF campus includes well-designed courtyards and open spaces.

The majority of Mission Bay's redevelopment has been built under a risk management plan that was created in conjunction with municipal and state regulators to establish baseline measures for a broad array of chemicals and contaminants. The risk management plan also outlined extensive site testing requirements, addressed best practices in construction and land use controls and included a listing of mandatory site development and post-development activities designed to protect human health and aquatic environment.

Also under the risk management plan, builders are required to conduct further testing at each site as a condition of their building permits. This allows for the identification of any localized issues that need remediation. To date, issues have been rare and not related to industry contamination. Instead, they have resulted primarily from decaying organic matter in the bay.

With the initial cleanup now finished, the site is evolving with a series of public infrastructure improvements to support the redevelopment. Catellus is coordinating the development of public infrastructure, including 10,000 linear feet of new roads, 750,000 square feet of new parks - some featuring recreational sports and boating facilities - and extensive fiber and broadband communication networks to connect researchers, residents and businesses.

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Infrastructure and Transit Are Expensive; Public-Private Funding Is the Key
Even before redevelopment began, Mission Bay provided immediate access to major roadways like Interstate 280, which extends from San Francisco to San Jose, and was served by a Caltrain commuter rail terminal as well as seven bus and light rail lines.

Concurrent with the development of Mission Bay has been the construction of the new Third Street light rail line, which has supported revitalization efforts throughout San Francisco's formerly depressed southeast quadrant.

The redevelopment of Mission Bay has included the use of tax increment financing (TIF) and Mello-Roos financing to offset the costs of infrastructure and transit. At the outset of the planning process, the city of San Francisco and its Redevelopment Agency made a commitment to its citizens that it would not subsidize the development of Mission Bay from the city's general fund. But the city also recognized it could not expect the developer to bear the entire cost of infrastructure while meeting goals for affordable housing and open space without some sort of public financing.

To solve this problem, the city created two special districts around Mission Bay through which it can issue tax-exempt municipal bonds. The developer pays for infrastructure improvements up front to support each phase of development at the site. As infrastructure work gets completed and transfers to the city, the developer is reimbursed through these bond funds for its up-front costs. As new development is completed and generating tax and sales revenue, the district can issue additional bonds to further reimburse the cost of the infrastructure. Mello-Roos bonds were issued as the initial form of financing; other forms of tax-exempt bonds have been issued as the tax basis has grown.

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Top Three Mixed-Use Development Rules to Live By Mission Bay is a successful and thriving urban redevelopment project that includes mixed-use, mixed-density and transit-oriented design. Its success has largely been due to a well-coordinated planning effort between the city and its redevelopment agency, the community and Catellus and is closely aligned with the Bay Area's regional commitment to smart growth. Mission Bay has produced three overriding lessons for communities and developers who are undertaking a mixed-use development of comparable size and complexity:

1. Seek community input for a high-quality master plan. Mission Bay demonstrates that, if given a real stake in the outcome, community members can provide the feedback necessary to produce a successful project plan that is of a higher quality than would otherwise be achieved. Public input is desirable not only for political reasons, but also to improve the design quality and marketability of a project.
2. Create and follow a comprehensive risk management plan when undertaking brownfield redevelopment. Nothing is more important than the health of the people, plants and animals that will inhabit the redeveloped site upon completion. An ongoing, well thought-out risk management plan ensures that all necessary steps are taken to eliminate harmful toxins from the soil and water, making the area safe.
3. Never underestimate the value of tax-increment financing. Though the financial structure of mixed-use developments varies widely from project to project, all projects tend to have one thing in common - an expectation that the private developer will front the cost of cleanup and infrastructure improvements. These expenses can be enormous, and TIF is often essential to ensure the financial viability of a project.

Mission Bay is a testament to the fact that complexity and uncertainty should not be a deterrent. With care, commitment, expertise and true public-private partnerships, challenging, distressed properties such as Mission Bay can be rejuvenated into viable communities and valued assets.