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Boondoggle by the Bay 

Why the tacky political giveaway called Pier 39 shouldn't be used as a model for the coming redevelopment of San Francisco's waterfront

Wednesday, Jan 28 1998
Even on this wettest of winter Saturdays, Pier 39 is bloated with tourists. Undaunted by the damp misery, they wander past the Stagg canned chili cart and the plastic "Venetian" carousel by the hundreds, pausing to admire the "I SF" T-shirts, crab-shaped refrigerator magnets, and other pieces of "San Francisco" displayed in store windows throughout the commercial enclave. The faint but distinctive odor of waffle cones, Chinese takeout, and deep-fried cod mingles with the bay breezes.

Inside the Shell Gallery, a woman with Raggedy Ann red curls and frosted pink fingernails clutches a thin wad of cash and inspects a turquoise starfish. She sports a sweat shirt with "Property of Alcatraz Penitentiary Swim Team" emblazoned on the front and a matching black and white striped "Alcatraz" cap.

No on the starfish, she decides, and exits the fishy fragranced shop. She leads her husband, a sheepish fellow in stiff bluejeans, to the "photo film photo Kodak" shop across the way to pose for Alcatraz "inmate" snapshots.

The woman is Pier 39's dream: a tourist, a shopper, a spender -- one of 11 million people who will visit this year at Pier 39, the multimillion-dollar development controlled by the billionaire Bass brothers of Fort Worth, Texas, and other financial luminaries. Last year, this so-called "entertainment center" generated more than $125 million in gross revenues.

The Bass-led consortium owns the movie theater and three of the 11 restaurants at Pier 39: Alcatraz Cafe and Grill, Dante's, and Neptune's Palace. It also controls UnderWater World, the financially troubled 707,000-gallon aquarium next door.

The Blue and Gold Fleet, another Pier 39-owned entity, operates most of the commuter ferry service between San Francisco and the suburbs. And under contract with the National Park Service, Blue and Gold has exclusive rights to operate tours of Alcatraz (last year's gross revenues were $8 million).

To say the least, the Pier 39 limited partnership is doing nicely. Just how nicely Pier 39 has done, is doing, and will continue to do is spelled out in the leases the partnership has struck with the Port of San Francisco. To rent Pier 39 itself -- 1.4 million square feet of property, which includes 200,000 square feet of retail shops -- Pier 39 Limited Partners paid the port $1.4 million last year, or roughly 8 cents per square foot, per month. And that lease, which has an overall term of 65 years, is in effect until 2042.

Pier 39 has good deals with the port for its other holdings, too. To rent the pier just west of Pier 39, where the Blue and Gold Fleet is harbored, Pier 39 pays $38,000 per month, or 64 cents per square foot -- well below the average market price, in a city where monthly commercial rents now run from roughly $2 to $25 per square foot.

Deals like that don't come around too often. In fact, for the last seven years, developers haven't had any deals at all because of the moratorium on waterfront construction that voters approved in 1990. Now, though, the San Francisco waterfront has reopened for development. All along the city's 7.5-mile waterfront, the deal-making is about to begin.

Earlier this month, city officials signed off on a new Waterfront Land Use Plan, lifting the moratorium on construction along the bay. The city is now seeking developers -- preferably large ones -- to help build a waterfront for a world-class city.

The new plan provides a one-time opportunity for San Francisco to create a revitalized waterfront -- perhaps along the lines of Seattle or Vancouver, where city planners made sure that the developments fit the cities, and that the cities would benefit from those agreements.

But San Francisco has no such history of judicious waterfront planning. The new Waterfront Plan is particularly vague when describing what can be built on the piers between Fisherman's Wharf and the Ferry Building, and how "commercial bay-oriented recreation and public assembly" developments will be chosen.

Port Director Douglas Wong has talked of a grand vision for the waterfront, a vision that includes hotels, restaurants, and other nonmaritime diversions. That kind of talk makes public interest groups and development watchdogs nervous, and a look at the last large-scale development on the waterfront, Pier 39, makes this concern seem reasonable.

In 1977, San Francisco developer Warren Simmons proposed a turn-of-the-century-style retail center on the waterfront next to Fisherman's Wharf. He promised cobblestones and street lamps.

What the city has today could not be more different from that original proposal. And the government agencies that will scrutinize land deals along the newly available San Francisco waterfront are the very agencies that all but gave Pier 39 away to politically influential investors who now make astonishing amounts of profit on a development that is about as authentically "San Franciscan" as Rice-A-Roni.

The deal was sweet from the start. It began in the mid-'70s, when Warren Simmons, the developer who would later establish the Fresh-Mex empire known as Chevy's restaurants, sold the city on an idea to develop the underused waterfront area between Piers 37 and 41. Other developers had approached the city, but all had been rejected. Simmons' proposal, called North Point Pier, would have the character and feel of a turn-of-the-century San Francisco street scene, Simmons promised. It would have stained-glass windows, turrets, wooden walkways, and cobblestones.

The Board of Supervisors and the Port Commission approved the agreement in 1977, and gave Simmons a lease good for 60 years, with fixed rental fees at a low "preferred rent," plus a meager percentage of the center's gross revenues to be paid to the city.

The length of the lease was not surprising, given that Simmons would need time to repay the $29 million he had borrowed to finance the development. The sweet part, however, was the low "preferred rent" set in the lease and the small percentage of revenues that Simmons was required to pay the city.

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Tara Shioya


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