Value Capture Case Studies: San Francisco’s Transbay Transit Center - Metropolitan Planning Council

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Value Capture Case Studies: San Francisco’s Transbay Transit Center

Value Capture Case Studies is an ongoing series highlighting ways in which cities and regions across the country are using value capture mechanisms to fund transportation plans. These case studies present novel learnings for the Chicago region as it grapples with how to pay for necessary transportation improvements. Each post will focus on real-life examples of value capture mechanisms at work.

To learn more about the basics of value capture read: Value capture case studies: What is value capture

 Value capture mechanisms referenced in this post:

  • Tax Increment Financing
  • Special assessments
  • Development impact fees

In 2030, the city of San Francisco is forecasted to have a total of 829,000 jobs, a 44 percent increase from 2005. People follow jobs, and traffic congestion all too often follows people. Realizing the high costs of traffic congestion to the economy and the environment, San Francisco planners embarked on one of the nation’s largest transit infrastructure projects, the renovation of the downtown Transbay Terminal. The new Transbay Transit Center or “Grand Central of the West” will coordinate the Bay Area’s numerous transit systems, increase capacity and accessibility, and create one of the most transportation-rich-neighborhoods in the region.

Transbay Terminal before demolition

Photo: Chris Carlsson

The former Transbay Terminal is an archaic bus facility that is seismically unsound and unable to house underground train platforms. The redevelopment will create a modern, multimodal transportation hub that will centralize the Bay Area’s 11 transit systems, extend existing Caltrain rail to key job centers, and serve as the future terminus for the High-Speed Rail route planned for San Francisco to Los Angeles. The Transbay Transit Center also will anchor a new transit-friendly neighborhood just south of San Francisco’s Financial District, including a 5.4 acre rooftop park and a 1,000-foot-tall office tower that will become the city’s tallest building.

Opened in 1939 as a train station, the Transbay Terminal’s construction was funded by Bay Bridge toll revenues. In 1959 the terminal was converted to a bus-only facility, and in 1989 it was severely damaged during the Loma Prieta Earthquake, resulting in the closure of several bus platforms. Because population, job growth and traffic congestion placed a growing demand on transit, in 1997 city leaders began to discuss a modern renovation of the facility. The passage of Prop H by San Franciscans in 1999 required city officials to fund and build a Caltrain downtown rail extension to a new or rebuilt terminal on the site of the Transbay Transit Terminal, turning the renovation plan into reality.

Transbay Terminal in 1939

photo courtesy of the San Francisco History Center, San Francisco Public Library

The Transbay Joint Powers Authority (TJPA), a historic collaboration of Bay Area government, development and transportation agencies, is leading the renovation. TJPA will design, build, operate and maintain the new Transbay Transit Center and associated facilities, extend the existing Caltrain commuter rail 1.3 miles into the new transit center, and make accommodations for California’s future High-Speed Rail.

The project consists of three interconnected elements:

  • Phase 1 - $1.6 Billion:  Replacing the former Transbay Terminal at First and Mission streets and construction of new bus storage facility (completed by 2017)
  • Phase 2 - $3 Billion:  Extending Caltrain and California High-Speed Rail underground from Caltrain’s current terminus at 4th and King streets into the new downtown Transit Center (funding still being secured, projected completion in 2018)
  • Ongoing:Creating a new neighborhood with homes, offices, parks and shops in the 40 acres surrounding the new Transit Center
    • 2,600 housing units (35 percent affordable)
    • 1.2 million sq. ft. of office/hotel space
    • 60,000 sq. ft. of retail

Once constructed, the new Transbay Transit Center will accommodate more than 100,000 passengers each weekday and more than 45 million people per year, adding an estimated 10,000 daily transit trips in the Caltrain corridor by 2030, about 80 percent of which will be diverted from auto travel. The final environmental impact statement estimates that the project will reduce vehicle miles traveled by 260,000 miles per day and reduce emissions by 28,200 tons per year. The project will generate more than 125,000 construction jobs and 27,000 permanent jobs.

Overall funding

Redevelopment of the Transbay Transit Center and development of the surrounding neighborhood are being financed in part through Tax Increment Financing, specifically 1.4 billion in property taxes (tax increment) over 45 years of which $171 million will be used to repay a federal TIFIA loan used for the Transit Center construction. The development plan identifies – and a proposal is currently in the works – to generate additional funds for the project through special assessments (called a Mello Roos in California) and development impact fees. 

Other local, state and federal sources make up the rest, including sharing of regional bridge toll revenues. This approach makes sense because additional transit capacity to downtown San Francisco will alleviate traffic on the city’s already congested bridges.

Transbay Transit Center Phase 1 and 2 Secured Funding Sources

Level

Source

Phase 1

Funding Plan

($ in millions)

Phase 2               Funding Plan                  ($ in millions) (additional dollars still being secured)

Local

SF Property K Sales Tax

 $                    98

 $                    50

San Mateo County Sales Tax

 $                      5

 $                    22

AC Transit Capital Contribution

 $                    39

 

Other Local Funds

 $                      7

 

Regional

Regional Bridge Tolls

 $                  347

 $                      8

State

Transportation Improvement Program

 $                    28

 

Land Sales

 $                  429

 $                  185

Federal

Federal transit Administration and Federal Rail Administration

 $                    65

 

TIFIA Loan

 $                  171

 $                  377

ARRA High Speed Rail

 $                  400

 

Total

 

 $              1,589

 $                  642

Transit-rich neighborhood development

An important part of the redevelopment of the Transbay Transit Center is the creation of an adjacent vibrant community. Since the construction of the original terminal in 1939, the area south of San Francisco’s financial district has been a mix of light industrial and commercial office space. When the Loma Prieta earthquake hit San Francisco in 1989, parts of the terminal that connected it with the Bay Bridge had to be torn down, freeing up public land parcels. These parcels were converted into parking lots. Today the area is a blighted neighborhood consisting of the deteriorated bus terminal, parking lots, and underutilized parcels of state-owned land.

Realizing the development potential of this area, in no small part due to its enviable location downtown next to the waterfront, Financial District, and Transbay Transit Center, The San Francisco Redevelopment Agency is moving forward with a transit-rich neighborhood development plan. Adopted by the City of San Francisco in 2005, the redevelopment plan will create 2,600 new homes (35 percent of which will be affordable), and new office and retail space. The redevelopment will transform the area into a vibrant mixed use neighborhood with public parks, plazas, tree lined widened sidewalks, and high-density retail and housing all connected to public transit.

The development of the new Transbay Transit Center, office tower, and surrounding neighborhood is a great example of using value capture mechanisms to fund both a transportation project and the surrounding transit-friendly neighborhood. The end result will be a neighborhood that connects people to places, commands higher land values due to the increased transit access, has decreased traffic congestion and air pollution, accounts for projected population and job growth, and creates a thriving business community that will grow San Francisco’s economy.

Keywords

Value Capture

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