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Release date: February 14, 2013

*** Press Release ***

Mayor Edwin M. Lee, Board President David Chiu, and the San Francisco Municipal Transportation Agency (SFMTA) today announced the agency’s finalized lease terms with the owner of the Pagoda Palace property in North Beach. This important step brings the SFMTA closer to finalizing plans to extract its two tunnel boring machines (TBMs) that will be used to construct the Central Subway. The lease is subject to approval by the SFMTA Board.

“The Central Subway invests in a modern 21st Century public transportation system for San Francisco that will connect our City’s diverse neighborhoods and create thousands of jobs,” said Mayor Lee. “This next step will allow the project to move forward in building a transit system for the growing population and workforce of the future and minimizes the construction impact to the North Beach neighborhood.”

“This deal brings us one crucial step closer to moving the Central Subway construction in North Beach from Columbus Avenue to a much less disruptive site on private property,” said Board of Supervisors President David Chiu. “This is good news for North Beach, and I appreciate the countless hours of work by the SFMTA, the City Attorney’s office, the property owner and others to make this happen.”

The two-year lease, capped at $3.15 million, allows the SFMTA to demolish the existing structure and utilize the property to retrieve the TBMs.

The key lease points are as follows:

  • SFMTA will pay the owner $400,000 per year in rent;
  • The owner will be reimbursed for up to $450,000 in out of pocket costs;
  • The owner will be reimbursed up to $1,500,000 for possible inflationary construction costs resulting from the delay of its project;
  • SFMTA will reimburse owner up to $400,000 for partially removing and backfilling the SFMTA excavation shaft when the owner builds its project; and
  • Either party can terminate the lease if conditions for demolition do not occur by April 1.

Total costs to the SFMTA, including the lease, demolition of site and extraction of TBMs, will not exceed $9.15 million.

“The Pagoda lease agreement demonstrates the City’s commitment to investing in transportation options that support San Francisco’s neighborhoods,” said SFMTA Director of Transportation Edward D. Reiskin. “Extracting the TBMs in this location reduces construction impacts in North Beach while considering the City’s current needs and keeping options open for the future.”

The Pagoda Palace is the preferred location to remove the TBMs. As a result of community objections to the original plan that was approved in 2008, the SFMTA initiated a review of alternatives which called for the removal of the TBMs on Columbus Avenue near Washington Square Park. Removing the TBMs at the Pagoda Palace, a building that has been vacant for nearly 20 years, minimizes local construction impacts and leaves no physical impediments to a potential extension of the T Third Line to North Beach and Fisherman’s Wharf.

“My team and I have been working nonstop for many weeks with Mayor Lee, Supervisor Chiu, SFMTA and the North Beach community to make the Pagoda Palace site work for the Central Subway's extraction of their tunnel making machines,” said Joel Campos, owner of the Pagoda Palace site. “We are happy to be a part of this great civic project for the future of North Beach and San Francisco.”

The efforts to alter the TBM retrieval site involved a significant amount of work on a very tight timeline. In December 2012, the SFMTA board directed staff to negotiate with the property owner. Diligent work by several city agencies, including the Mayor’s Office, the SFMTA, the Planning Department, the City Attorney’s office and the Department of Building Inspection helped finalize lease terms that would be agreeable to the City. Board President Chiu, who represents District 3, provided crucial leadership in ensuring that voices in the community were heard and a resolution was found.

Finalization of the lease terms clears the path for several important events to take place on:

  • February 14: The Planning Commission will consider a related Special Use District (SUD) ordinance and Conditional Use application that enables the Pagoda Palace property owner to retain his existing development rights;
  • February 19: The SFMTA Board will meet to consider the lease agreement; and
  • February 25: The Board of Supervisors’ Land Use Committee will consider the Special Use District legislation.

The project will also require National Environmental Policy Act (NEPA) clearance by the Federal Transit Administration. If all of the necessary legislative processes and approvals occur by April 1, 2013, then the demolition of the Pagoda Palace site can then commence. Before any construction begins, the SFMTA will conduct building surveys on the properties adjacent to the Pagoda Palace site to assess existing conditions.

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