Falling for the Gap

San Francisco gave away the store to help The Gap Inc. and its politically connected chairman build an upscale headquarters with a bay view. But more than $18 million in subsidies apparently won't bring the city anything it couldn't have had free.

It is always difficult to say whether or how political giving affects particular governmental policy decisions. There is simply no way for an outsider to know how hundreds of thousands of dollars in political contributions might or might not influence politicians who might or might not play significant roles in the transfer of public property to private hands.

But it's clear that Fisher and his minions went after the Embarcadero site with a singleness of purpose.

In 1989, Fisher hired William Coblentz, widely considered the city's best-connected Democratic lawyer, to craft a strategy to control the vacant waterfront land at Folsom and the Embarcadero.

Coblentz drafted an option agreement to buy a 13,600-square-foot lot at the corner of Folsom and Steuart streets for $368 a square foot, or $5.1 million. The owners of the lot, Thomas Feeney, a retired lawyer, and William Blake, a former supervisor who is now dead, refused the offer. Coblentz wrote a letter to Feeney in November 1991 to renew the offer, again to no avail.

And so in August of 1992, Fisher turned to the Redevelopment Agency, inking a deal under which the agency would negotiate exclusively on The Gap's behalf to acquire all undeveloped property between Folsom and Howard along the historic South of Market waterfront.

Clifford Graves, a former executive director of the Redevelopment Agency who took over after the pact was signed but who worked on the deal thereafter, claims it was an innovation born of necessity.

The agency's old sources of capital -- federal urban renewal loans -- had long ago dried up. The Gap could provide the capital necessary to acquire underused property and get redevelopment off the ground.

"The Gap deal," Graves says, "is typical of what it [the agency] will be doing. It's the prototype."

But the deal could be seen another way.
In essence, San Francisco's Redevelopment Agency used its unique governmental muscle to acquire both public and private property -- for the benefit of a private business and at the expense of the public.

Back in November of 1989, a team of state transportation officials landed at San Francisco's Embarcadero to examine an irreplaceable public asset -- undeveloped waterfront property -- and prepare to do something nobody in their right mind would ever do voluntarily.

"If it were mine," recalls Clyde Ongaro, the divisional property manager of the California Department of Transportation, "I wouldn't have sold it."

But the land, a one-acre swath between Howard and Folsom streets that had great bay views, was not Ongaro's to hoard. CalTrans had no choice in the matter. It had held the land for decades as right of way for a long-planned freeway construction project. But the project had been scrapped, and the department became legally obligated to offer the land for sale, and governmental entities got first crack at it.

From the start, the San Francisco Redevelopment Agency was ready to take full advantage of the opportunity. So was Don Fisher.

The urban renewal agency entered immediately into negotiations to buy the right of way. It secured zoning changes to allow for the most lucrative form of development on the site -- construction of a commercial office tower. It signed an agreement under which The Gap Inc. would erect said edifice, and then, supposedly, occupy it as the company's world headquarters.

This apparent civic coup didn't end there. Before the agency finished its business, it had acquired not just the subject right of way, but additional land within that very same block. By the close of 1996, the Redevelopment Agency had assembled more than two acres of property at the heart of the South of Market waterfront.

Along the way, a civilian advisory committee, handpicked by the agency, put its imprimatur on The Gap's proposed 17-story, 540,000-square-foot office tower.

All that remained was for the Board of Supervisors to issue its final blessing, which occurred on March 17.

"This has many benefits to the city," Michael Kaplan, an agency representative, told the supervisors at the public hearing that day. In addition to keeping a major corporate headquarters in town, Kaplan explained, the Gap redevelopment deal would produce a litany of new tax revenues, fees, and levies for the city.

The supervisors listened, grinned, nodded, and gave their unanimous consent, never being told that there was little threat The Gap would leave San Francisco, or that all of those revenues, fees, and levies are part of the city's standard development policy and would be required of any developer who built on the property.

Public records show that the San Francisco Redevelopment Agency has granted The Gap the right to buy the last major parcel of undeveloped, South of Market waterfront property at a steep discount from what The Gap itself twice offered to pay for a portion of the property.

That earlier offer -- $368 per square foot for the 13,600-square-foot triangle at the corner of Folsom and Steuart -- was made in January 1990 and renewed in November 1991.

If The Gap goes forward with the deal put together by the Redevelopment Agency, which could occur within the next few weeks, the firm would pay just $207 a square foot for the corner lot. That 44 percent discount -- worth, roughly, $2.3 million -- is available to The Gap, and no one else, because the Redevelopment Agency used its condemnation powers on behalf of the firm.

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