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Report regarding a facility condition assessment, seismic study, operating cost analysis, environmental analysis, and Housing Element opportunity sites analysis for the Municipal Services Building, and options for how to proceed with reopening or redeveloping the site (Sharon Ranals, City Manager; Eunejune Kim, Public Works Director; Greg Mediati, Director of Parks and Recreation; Jake Gilchrist, Director of Capital Projects; Nell Selander, Director of Economic and Community Development)
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RECOMMENDATION
Staff recommends that the City Council receive a report from staff regarding a facility condition assessment and seismic study conducted for the Municipal Services Building (MSB), as well as an update on environmental site assessment data collected on the property, operating cost analysis, and evaluation of alternative Housing Element opportunity sites. The report also includes options for how to proceed with reopening or redeveloping the MSB site. Staff recommends Council receive this information and provide direction on whether to proceed with reopening or redeveloping the MSB, or alternatively to take no action for a period of time while the City’s budget position is stabilized.
BACKGROUND
The Municipal Services Building (MSB), located at 33 Arroyo Drive, is a concrete tilt-up building constructed in 1969 as a retail store. In the late 1970s, the City purchased the property to convert it into a public facility to house the Parks and Recreation Department, Police Department, and Fire Department, which it did until the Police Department relocated in 2022 to 1 Chestnut Avenue, and the Parks and Recreation Department followed suit in 2023 with the opening of the new Library | Parks and Recreation Center at 901 Civic Campus Way.
In 2018, as part of the overall Community Civic Campus planning, staff completed a design development package for Fire Station 63 and then paused the project to develop a funding strategy for construction. At the time, the site for Station 63 was imagined to be the northwest corner of the MSB property at Camaritas Avenue and Arroyo Drive. In late 2020, staff learned that the property across the street at 71 Camaritas Avenue was on the market. While Economic and Community Development staff negotiated with the property owner, the Capital Projects team worked with the Fire Station architects to confirm that the 71 Camaritas site was an appropriate location, including an Engineering Review with the San Francisco Public Utilities Commission, which holds an easement on the back side of the property. City Council approved the purchase of 71 Camaritas Avenue at the July 28, 2021 City Council meeting.
Currently, planning and design for Fire Station 63 is in progress. The project is expected to cost more than $36 million due to inflation and current market volatility created by the recent implementation of new trade tariffs. Assuming that full funding can be secured, staff expects to advertise the construction project for bid in Summer 2026 and construction will take approximately 2 years, with the move into the new Station 63 at 71 Camaritas Avenue to be completed by the end of 2028. For more information on the history of Fire Station 63 and the scope of the redesign, see Attachment 1).
Because of the City’s intended vacation of the MSB and use of the L|PR site for community uses rather than housing, the City included the MSB site as a Housing Opportunity Site in the City’s 2015-2023 and 2023-2031 Housing Elements. While inclusion of the MSB as a Housing Opportunity Site does not require its redevelopment for housing and the City has taken no action to solicit a developer or pursue its redevelopment, the City Council has nonetheless received significant public comment regarding preserving the MSB and reopening it as a senior or community center.
Considering this community interest in the MSB site and City Council direction to engage the public in a dialogue regarding its future use, staff prepared a staff report on the MSB and West Orange Library, which was presented to Council on June 26, 2024. That report included a recommendation to proceed with engaging a consultant to facilitate community conversations to inform future use of these sites. On August 28, 2024, staff returned to City Council with a professional services contract with a highly qualified firm to facilitate these community conversations. At that meeting, Council chose not to take action on the contract and instead directed staff to return to Council with a facility needs assessment and cost estimates for reopening the MSB, as well as potential alternative sites should Council desire to remove the MSB from the City’s list of Housing Element opportunity sites.
The preparation of this information - facility condition assessment, seismic study, environmental site assessment, and Housing Element opportunity site alternatives - is in response to Council feedback and direction provided in August 2024. This Background section includes the results of these various analyses, while the Discussion session of this report provides a more concise description of the City’s options to proceed, or not, with reuse or redevelopment of the MSB site.
Seismic Study
To accurately assess the costs of potentially reopening or repurposing the MSB and to augment the facility condition assessment, which does not take into account seismic retrofitting or ADA accessibility, staff engaged Biggs Cardosa Associates, Inc. to provide a preliminary seismic evaluation of the lateral load-resisting system of the MSB and determine how it complies with the seismic performance requirements of California Building Code Seismic Risk Categories. The report, included as Attachment 2, concluded that the MSB does not meet current earthquake safety standards. While this may be an alarming statement, it is true of many buildings across the Bay Area, especially concrete tilt-up buildings like the MSB. The seismic stability only needs to be addressed if the city voluntarily decides to increase seismic resilience, or if significant walls are altered, there is a significant change in use, or additional weight is added to the building.
Although the Municipal Services Building (MSB) met all applicable building codes at the time of its original construction and subsequent occupancy, it does not meet current seismic performance standards under the California Building Code. Importantly, there is no legal requirement to seismically retrofit the MSB unless the City initiates a substantial renovation, change of use, or structural alteration that would trigger mandatory upgrades. However, given the MSB's concrete tilt-up construction and known deficiencies in its lateral load-resisting system, the City determined that continued long-term investment in the facility would not represent a prudent use of public funds. Rather than risk ongoing maintenance and potential life safety concerns in a facility that fails to meet modern resilience standards, the City opted to invest in new, state-of-the-art public facilities-such as the new Police Department, Library | Parks and Recreation Center, and upcoming Fire Station 63-which are designed to meet or exceed current seismic safety and accessibility requirements. This approach ensures greater long-term value, safety, and service continuity for South San Francisco residents.
The report identified the following key issues regarding the MSB’s seismic resilience:
• Weak connections between the walls and floors and roof
• Gaps or breaks in walls that should help stabilize the building
• Concrete walls that are not strong enough to resist shaking
• Seismic upgrades done in the past warrant further attention
The California Building Code identifies various risk categories to evaluate seismic safety. Because of the issues identified above, the MSB does not meet current safety standards for any of the Risk Categories most relevant to its current and former uses: Risk Category II for offices, Risk Category III for assembly and essential community services, and Risk Category IV for critical buildings like emergency centers or fire stations. The report then identified the cost associated with bringing the MSB into compliance with safety standards to comply with the various risk categories:
• Risk Category II, office buildings, estimated upgrade cost is $5.6 million.
• Risk Category III, assembly and essential community services, estimated upgrade cost is $6.5 million.
• Risk Category IV, critical buildings like emergency centers, estimated upgrade cost is $7.6 million.
Even at the lowest level of seismic safety (“Collapse Prevention”), the building fails for Categories II and III. This means that in a strong earthquake, the building could suffer major damage or collapse, posing serious risk to occupants.
Voluntary versus Mandatory Seismic Upgrades
Seismic upgrades can be either voluntary or mandatory. Voluntary upgrades are chosen by owners to improve safety and protect their building. Mandatory upgrades are legally required by the California Building Code and are triggered by changes that significantly change the building's weight, lateral load resisting system, or by changes in use that result in a higher Seismic Risk Category. If building improvements do not significantly affect these factors, seismic upgrades are not required.
Past Seismic Upgrades at the MSB
In 2010, as part of the Federally funded remodel project for Fire Station 63, critical seismic upgrades to the Fire Station’s ceiling, exterior walls, and apparatus bay were performed. Based on the MSB’s age, it was recommended, through a seismic study, to further expand the seismic retrofit work to capture a much larger portion of the MSB, as it would provide additional protection for the station and surrounding areas. Due to the grant’s restrictions, this was not possible, as work outside of the station’s footprint was not allowable. The work that was performed strengthened the apparatus bay and provided a much higher level of protection with the intent of accessing the engine and ambulance post-earthquake. The work also allowed for a raised apparatus bay ceiling, providing access for any of the Fire Department’s engines and ambulances. Additionally, work was done to secure the exterior walls to both the roof and the second floor. This was done to reduce the chance of a wall failure that could prevent access and/or egress to the Station. While this work provided a significant benefit to the resiliency of Fire Station 63’s apparatus bay area and exterior walls, the 2010 seismic evaluation of the building indicated that the existing building has major lateral-force resisting deficiencies, which was also confirmed in the 2025 seismic evaluation.
Facility Condition Assessment
In 2015, the City conducted a Facility Condition Assessment (FCA) with a consultant team from EMG Corporation of most City-owned facilities to determine the growing deferred maintenance backlog. At that time, there was a perception that the backlog had grown, in large part due to austerity policies enacted during the Great Recession of 2008. The deferred maintenance assessment determined that there was a $7.5 million dollar deferred maintenance backlog for the MSB building for the next 10 years, and the facility had a $25 million replacement cost. At the time, staff believed both figures were low, and did not account for the cost of new construction in the area and seismic upgrades, nor costs borne by municipal projects, such as prevailing wage requirements. This FCA also did not consider building code upgrades necessary with a change in building use. (When a building substantially remodels or the use changes, building code upgrades are often triggered.)
Understanding the inventory of deferred maintenance items had grown in the ten years since the 2015 report, which only looked at a term of 10 years out from the report date, and the construction market is immeasurably disparate than it was in 2015, a new Facility Condition Assessment was completed in 2025, included as Attachment 3. The City contracted with Group4 Architecture and Planning (Group4) to lead this effort. Group4 subcontracted with Bureau Veritas, a facility inspection and certification services consultant, and TBD Consultants, a professional cost estimating firm to provide a third-party assessment of the MSB.
In September 2024, the consultant team visited the MSB to conduct a visual assessment of the facility. No destructive testing or opening of walls or other facility components was conducted. Preliminary cost estimates produced by Bureau Veritas were then vetted by TBD Consultants, and adjusted for local construction, labor, and material costs.
While Facility Condition Assessments provide a reasonably accurate cost estimate, it is possible unforeseen conditions may be experienced during design, construction, and bidding. For this reason, they are considered estimates and may vary from actual expenses.
Summary of Findings
With their visual assessment complete, Bureau Veritas consultants studied architectural, mechanical, plumbing, and fire/life safety building systems. Not included in the report were costs associated with updated furnishings, fixtures, technology, and loose equipment (FF&E), nor study of seismic or ADA code deficiencies.
Based on approximate current construction costs of $1,200 per square foot of new floor area, and a building area of approximately 120,000 square feet (including subgrade parking, mechanical, electrical, and plumbing (MEP) and storage), consultants estimated that the facility has a current replacement value of $142 million if reconstructed as a like-sized modern replacement facility.
Additionally, near- to mid-term deferred maintenance and capital needs to operate the facility for the next 10 years was valued at $41.4 million. For the next 20 years, this sum grows to $44.5 million. It should be noted this estimate did not include soft costs (design, permits, testing, commissioning, or other fees), contingency, or any seismic upgrades, as the seismic evaluation was not completed in time for their report. Generally, it is recommended to include an allowance of 30% of the construction budget for soft costs and contingency. In this case, it would escalate the full project cost by an additional $12.4 - $13.3 million, resulting in a total budget of: $53.8 million for years 0 - 10, or $57.8 million for the next 20 years. As noted earlier, seismic work, if warranted, would add another $5.6 - $7.6 million, totaling conservatively $65.4 million over 20 years.
According to Bureau Veritas’ Facility Condition Index or FCI - a generally accepted formula to assess building condition based on the cost of deferred maintenance divided by the facility’s replacement value, the facility is indexed at near end of life. This is, as mentioned above, not including seismic or certain accessibility related deficiencies not included in their analysis, which would only increase the FCI. It should also be noted that in the report, the “current” time period is 2024, as this is when inspections took place, and many items considered for replacement in the three-year period are due in the current year, 2025.
Source: Municipal Services Building Facility Condition Assessment, Bureau Veritas, 2025.
In addition to the Bureau Veritas report, in order to have another data point to reduce the possibility of an outlying cost estimate, a peer cost estimate was conducted by Group4 and TBD Consultants based on per square foot cost estimates. Coupled with information from the seismic study, escalating cost estimates from the City’s ADA Transition Plan, and including typical allowances for FF&E, soft costs, and contingencies, Group4 created two cost estimates: one for updating and opening the entire MSB for public use, and another for opening the portion of the facility formerly operated by the Parks and Recreation Department (Recreation wing) only for public use. These cost models are detailed in Attachments 4 and 5 and summarized below.
As noted above, seismic upgrades would be a voluntary effort. It should be noted that as part of this analysis, the most stringent seismic risk category was selected for the full renovation cost, as the intended use following a full renovation is unknown and the seismic risk category may change. By contrast, the model focused on repurposing the Recreation Wing anticipated no seismic work, as that assumed no change of use.
Per the Group4 estimates, the full renovation cost with structural updates (assuming Risk Category IV seismic upgrades) would be $73,037,000. While the partial renovation cost of the Recreation Wing only without structural upgrades would cost between $29,380,000 and $35,100,000.
In summary, comparing the two estimates, one could reasonably expect an investment of $65 million to $73 million in the next 20 years for the entire facility. In comparison, the new Library | Parks and Recreation Center, which also houses the Library and a new park, and was funded by Measure W, cost $101 million.
Operating Cost Analysis
City staff performed a cursory cost analysis to approximate what additional costs could be expected if the MSB was to be reopened as a community center site. Some of the assumptions used for this analysis are noted below:
• The City would only operate the former Recreation wing of the facility. Additional costs would be incurred if the former Police Department portion was occupied by City programs, offices, or if leased to a tenant.
• The facility would conservatively operate Monday through Friday, 9:00 a.m. - 5:00 p.m. with classes, for 20 hours of programming per day throughout various rooms.
• Facility rentals, such as community gatherings, birthdays, and dances would occur on weekends.
• Some fees for classes may be necessary to sustain programs.
• The following staff would be required to deliver programs at a comparable level as other recreation programs:
o Recreation and Community Services Program Coordinator: 1 FTE
o Administrative Assistant: 1 FTE
o Recreation Instructor (hourly): 2.5 FTE
o Recreation Leader III - Classes / Class Aide (hourly): 2.0 FTE
o Recreation Leader III - Rentals (hourly): 0.80 FTE
o Building Maintenance Custodian (day shift): 1 FTE
o Building Maintenance Custodian (swing shift): 1 FTE
o Senior Building Maintenance Custodian: As needed
• Materials would be needed for programs and maintenance.
• No additional landscape maintenance personnel would be required for the site’s grounds, as the building’s landscape is currently being maintained by the Parks Division as it was prior to closure.
Based on these assumptions, staff anticipates, at a minimum, annual operation and maintenance costs to be approximately $1.1 million per year, based on the following:
• On-going Supplies and Services: $253,425 per year
• On-going Personnel Costs: $884,537 per year
These ongoing operating costs would be in addition to one-time supplies and services startup costs of $90,000.
In this scenario, staff anticipates approximately $170,000 to $300,000 in annual revenues, depending on service models and desired level of subsidy.
Environmental Investigation
As part of planning for the future of the MSB, in 2021, City staff commissioned a Phase I environmental site assessment (ESA), which is a standard method of assessing the environmental condition of property. The City had information at the time about a City-owned underground diesel fuel tank that had been removed from the property and a chemical plume nearby from the former My Cleaner site at 1053 El Camino Real. Additionally, the relocation of the Police Department to the new station at 1 Chestnut included the decommissioning of the firing range at the MSB. State regulatory requirements for decommissioned firing ranges include testing for lead contamination and subsequent remediation and closure, which was completed by a qualified firm and documented with the County of San Mateo Office of Environmental Health.
The initial Phase I ESA recommended an additional Phase II ESA to sample soil and soil vapor below the foundation slab. Subsequently, soil vapor probes were installed under the foundation slab and have been monitored routinely over the past two years to evaluate potential seasonal and temporal variability to confirm consistency in the results. Results from these soil vapor probes have identified volatile organic compounds (VOCs) consistent with prior petroleum uses on the site associated with the automotive repair in the former department store at the Camaritas side of the MSB, as well as chemicals associated with the former My Cleaners abutting the MSB. Monitoring of the soil vapor probes in December 2023, May 2024, and November 2024 found levels of Tetrachloroethene (PCE) above acceptable residential thresholds, but generally below acceptable commercial thresholds with some exceptions. The most recently completed report (November 2024) is included as Attachment 6 and provides a summary of the previous investigations and monitoring.
Throughout this testing and monitoring process, the City’s consultant, Ninyo & Moore, has continually assured staff that operating the MSB with its current uses is appropriate while site monitoring continues roughly every six months. While the acceptable limits of certain chemicals including Benzene and PCE exceed the residential threshold and at certain soil vapor probes the commercial thresholds, the reporting limits are extremely conservative and not the same as the levels at which a VOC presents a health threat. They are levels for reporting and screening and are used in the field to identify the presence of VOCs at concentrations that would justify further testing and reporting. Second, the chemicals at issue are in soil below the slab in the underground garage, and that is where the testing occurs. The slab itself acts as a barrier that VOCs would have to get through to interact with people. Put differently, the presence of VOCs in the MSB garage should be even lower than in the sampling areas, if they are present at all. Third, because the MSB garage is open on one end to the outside, there is airflow that would further dilute the concentrations of any VOCs present in the garage itself. Ultimately, the findings do not change whether or not the MSB can be reopened and used consistently with how it has been operated in the past. However, if the site is redeveloped, mitigation and further monitoring will need to occur.
Notably, Ninyo & Moore recommends the City share its testing data with County Environmental Health in order to inform the remediation and closure plan for My Cleaners. The City expects to share this data with the County in the days that follow.
Alternate Housing Element Opportunity Sites
The MSB has been identified as an opportunity site for future housing in the current (and previous version) of the City’s Housing Element. While this does not require that the site is actually developed within the 2023-2031 timeline, it does require permissive zoning standards. The State requires cities to show a yield analysis for each opportunity site - particularly, the number of very-low-, low-, and moderate-income units that are possible. Under this Housing Element’s assumptions, the MSB is nearly two acres and identified as a workforce housing project. With a zoning density of 80 units per acre, this could result in up to 150 units with 56 very-low, 56 low and 38 moderate income units.
Numerous public comments have recently requested that the City Council consider removing this property from the opportunity sites list. Commenters have suggested this would serve as confirmation that the City is not prioritizing 33 Arroyo Drive for development, which the City Council has indeed stated over the last year of public inquiry. It is possible to remove the site if the City can show the State’s Department of Housing and Community Development (HCD) that an adequate site exists to replace it. Staff has identified a few alternatives, and indicated a potential yield analysis, positive and negative site traits, and any costs associated with amending the City’s General Plan or Zoning to allow high-density residential on the sites. This matrix of sites is provided in Attachment 7.
None of the alternative sites are ideal due to zoning deficiencies, location, or ownership. The City has greater control over a site it owns, and this fact is prioritized by HCD reviewers when they consider a Housing Element plan amendment. The best option would be the shuttered West Orange Library as a development site. But it would likely require a higher density than the immediately surrounding area to match unit yields on the MSB site. That upzoning and related environmental study could be expensive and cause outcry transference - the change may satisfy Serra Highlands neighbors and upset Avalon residents.
Other options include encouraging development on the San Mateo County Courthouse complex, the Bay Area Rapid Transit (BART) parking lots, the closed South San Francisco Unified School District (SSFUSD) Foxridge site, or open space parcels along Skyline Boulevard. All of these identified sites are roughly in the same high resource area of the City, which is also prioritized by HCD reviewers. Put another way, HCD would likely reject a proposal that replaces the MSB with a site in Lindenville or East of US-101, which already has identified opportunity sites and is not considered as highly resourced.
DISCUSSION
Via this staff report and associated presentation, staff has provided Council with the data requested to inform a decision to reopen and reoccupy the MSB, pursue its redevelopment, or neither. At this point, Council is faced with a substantial decision - should the City pause discussion of the MSB until the City’s budget situation stabilizes (perhaps two to three years) or move forward with either reuse or redevelopment. Reuse, as discussed above, will require substantial financial commitment of the City. Redevelopment will require substantial public subsidy should Council desire the predominant use to be affordable rental or affordable for-sale housing. Given these potential paths forward, staff has three scenarios for Council to consider if it wishes to move forward immediately with expending funds on the MSB site: 1) rehabilitate the Recreation Wing and operate as a City facility, 2) rehabilitate the Recreation Wing and lease it to a similar user, and 2) redevelop with affordable for-sale or rental housing.
Staff does not recommend a full rehabilitation of the MSB including structural upgrades due to the extraordinary cost to improve and operate the facility and therefore that option is not more fully described below.
Rehabilitate the Recreation Wing and Operate as a City Facility
The most common request staff has heard from the community regarding the MSB, is that the City reopen the building and include programming for seniors. As described above, staff has analyzed what this may cost on an upfront and ongoing basis. To make this scenario a reality, the City would need to invest at minimum $29 million in the building over the next 10 years to operate it at the City’s current standard - clean, safe, and reliable. Ongoing annual operating expenses would total roughly $1.1 million. Staff recommends this level of investment because it would 1) extend the life of the building and 2) deliver a space and program that is consistent with other City facilities and programs. Staff does not recommend short-cutting improvements at the building that could result in hazards to the public, such as leaks from a roof that has exceeded its useful life, improper ventilation, an unreliable elevator, and lack of accessibility modifications for disabled community members.
Since the decision was made in 2015 to proceed with the development of the new Police Station, the Library | Parks & Recreation Center, and the new Fire Station 63 to replace the functions at the MSB, the City has not invested substantially in maintaining, updating, or replacing buildings systems such as the roof, HVAC, technology, and fixtures at the MSB. Instead, the City focused resources on bringing online new state-of-the-art facilities. Because of this lack of investment in the MSB over the past decade, the deferred maintenance is substantial. This explains the substantial cost to reopen even just a portion of the building.
Assessing Demand for Services
Over the past year, the City has expanded senior and multi-generational program offerings at existing Parks and Recreation sites, with additional fee-based programs at various sites, and no-cost programs specifically for seniors at the Teglia Center and Bulos Center, and future increased programming at the universally accessible new pool at Orange Memorial Park opening later this year. Additionally, when the preschool classrooms at the Bulos Center are relocated to a dedicated preschool facility at Westborough Park in Fiscal Year 2027-28, senior programs can continue to expand at the Bulos Center. Given these expansions in senior and multi-generational programming, staff would recommend further investigating how much demand exists for additional senior and multi-generational services and programming prior to investing substantially to reopening the MSB for this purpose.
Next Steps
Should Council direct staff to proceed with further evaluating reopening the Recreation Wing of the MSB and program it with typical City programs, staff would next identify potential funding sources and begin engaging design and engineering professionals to refine scope and cost proposals for building rehabilitation and modifications. The costs needed to undertake this effort would be borne by those same funding sources that are anticipated to contribute to other new parks and recreation facilities throughout South San Francisco, as well as the new Fire Station 63. These funding sources may include impact fees, General Fund reserve, Measure W revenue, or additional bond issuances supported by Measure W revenue. It is unlikely that a project like this one would be competitive for substantial grant funding.
Rehabilitate the Recreation Wing and Lease the MSB to a Similar User
Similar to the scenario above, staff anticipates the City would need to invest nearly $29 million in rehabilitating the Recreation Wing sufficiently to lease. While the City could market the property for lease and provide a tenant allowance so that the lessee could complete some of the rehabilitation work, the likely lease revenue would not offset the cost of the necessary repairs and upgrades. Below is a table illustrating three potential lease rates - $2 per square foot per month, which would be near market rent for this space, $1 per square foot per month, which would be a solid below market rent, and $0.50 per square foot, which may be closer to what a likely tenant would be willing to pay for such a large space. At 30,000 square feet, even a $0.50 lease rate would cost $15,000 per month. The calculations in the table assume a 3% escalation year over year.
At these rent rates, the maximum tenant improvement allowance the City could approve over a five-year lease is $3.8 million. That means of the $29 million budget to reoccupy the Recreation Wing, $26 million of that would still need to be borne by the City.
Additionally, in order to avoid having to upgrade the seismic infrastructure of the building, the lessee would need to propose a use similar to how the Recreation Wing was previously used - as office space, classrooms/studios, and gathering spaces. This would limit the pool of potential lessees.
Assessing Interest in Leasing the MSB
Last year, the City released a Request for Proposals for use of the West Orange Library space. It was limited to organizations providing childcare or community services, but it did not elicit a single response. Additionally, there is a glut of office space currently available in South San Francisco given current economic conditions. The City would need to engage a broker to market the site broadly and encourage offers. A typical City solicitation process would be unlikely to yield a paying tenant that could offset some of the rehabilitation costs.
Redevelop the MSB Site for Housing
The final option staff would like to present to Council is redeveloping the site for housing, which could be fully affordable or market rate with inclusionary affordable housing and include ground floor community serving uses - such as a senior center, community meeting spaces, or similar. As is typical for City solicitations for developers of City-owned properties, the City can prescribe exactly what type of development it is looking for. That might include for-sale housing, rental housing, community space, childcare, open space, or other uses needed by the South San Francisco community. Other deal points that can be prescribed in the solicitation is payment of prevailing wage or using union labor, local hire requirements, or other financial, but not physical requirements of the development. For example, a Request for Qualifications for this site might include a requirement that the property be ground leased and that the selected development team construct a senior center on the ground floor, with senior affordable housing above, paying prevailing wage during the course of construction, and including a local hire provision for the general contractor and larger subcontractors.
Several years ago, the City prepared financial analyses for different development scenarios at the MSB. Those were presented to Council on November 2, 2021 and July 13, 2022 and are included as Attachments 8 and 9. Ultimately, Council did not direct staff to move forward with soliciting a developer for the property or pursuing any of the development types discussed. These analyses, though, are useful in estimating the development capacity of the site as well as the land value and potential development costs. The estimated land value identified in 2021 and 2022 was between $5.5 and $10 million, and the total development cost of a 150 unit building on the site roughly $100 million.
Staff anticipates that if Council directs staff to proceed with soliciting a market rate developer for the MSB site, with the City’s standard 15% inclusionary housing requirement and only modest community uses on the ground floor, the City would be able to generate a sale price or ground lease payments from the transaction. While economic conditions have changed substantially since 2021/2022, staff believe that the property could reasonably generate a roughly $5 million purchase price or equivalent ground lease terms. However, should Council direct staff to pursue a fully affordable housing development on the site, public subsidy will be required to catalyze that development. This subsidy could come in the form of a discounted or $1 sale or lease price for the land, as well as a predevelopment loan or permanent financing for the project. Staff anticipates the loan would need to be between $5 and $10 million, which can be allocated from dedicated housing funds.
Ultimately, given the City’s Regional Housing Needs Allocation and the need to make substantial progress toward providing lower income housing in the eight-year planning period from 2023 through 2031, staff recommends pursuing primarily affordable housing at this site should Council direct staff to pursue its redevelopment.
Next Steps
Should Council direct staff to pursue housing development on the site, staff would engage an economic consultant to test out new development scenarios to best inform a Council decision as to what housing type and community serving uses the City would like to require as part of a future solicitation. Once this is complete, staff would return to Council to share the results of that analysis and provide a recommendation for how to proceed. Between conducting this additional analysis, returning to Council for additional feedback, and issuing a Request for Qualifications for the site, Council should expect it to take roughly a year to select a development team. Once selected, the development team would move forward with designing and financing the project, and engaging with an environmental consultant to plan for any remediation and ongoing monitoring associated with the detected contamination beneath the MSB.
Consideration of Replacing the MSB as a Housing Element Opportunity Site
Regardless of whether or not Council directs staff to move forward with the reopening or redevelopment of the MSB, or take no action for a period of time, there is still the matter of whether or not to replace the MSB site as a Housing Element opportunity site. Removing the MSB from the opportunity site list would be a largely symbolic action and is somewhat fraught - the property remains under City Council control and at any point Council could restart operation of the public building with a new community use or direct staff to seek a development partner. Excluding it from the Housing Element does not change what Council can decide to use the property for next and removing it from the Housing Element would raise attention at the State level, where the City is considered a good actor. If a new community use is preferred, the Council should prioritize reuse instead of development, or alternatively direct staff to move forward with a new development that has required ground floor community space to replace the aging MSB. This would not require removing it from the Housing Element opportunity sites list.
Ultimately, staff does not recommend removing the MSB as a Housing Element opportunity site because of the cost, staff time, and unfavorable attention it would draw from the State. Because removing it from the opportunity sites list does not change what the site can be used for, staff does not believe the symbolic gesture is worth the cost financially or to the City’s reputation as a Prohousing jurisdiction.
CONCLUSION
The information presented with this report reflects the efforts of several departments and divisions, including Capital Projects, Engineering, Facilities, Fire, Planning, and Economic Development, and the engagement of highly specialized consultants. Further professional study would be required to refine cost and potential revenue values; however, staff believe that the level of analysis provided is sufficient to provide preliminary estimates of the immediate, short term, and long-range investment that would be required to keep the MSB in the City’s portfolio of active civic assets.
As the City Council is aware, like many other cities in the Bay Area, South San Francisco is experiencing a structural budget deficit in which expenditures are escalating more rapidly than revenues, and the State of California will likely withhold significant property tax in-lieu of Vehicle License Fees (VLF). The Finance Department is working diligently to prepare the City’s budget for FY 2025-26, which will include the staffing and operation of the new Aquatics Center at Orange Memorial Park beginning in 2026. A draft budget will be presented to the Budget Subcommittee in May, and although not yet finalized, there will be a significant shortfall.
Continuing to provide the current level of services to the community, plus the added cost of operating the new Aquatics Center, will require a combination of expenditure savings and the use of the City’s limited reserves to close the shortfall. If the decision is made to reopen the MSB, there would need to be reductions in other services to cover the anticipated costs. Such budget trade-offs would warrant public input from residents potentially impacted by proposed service reductions. At this juncture, staff seeks Council direction on whether or not to pause discussion of the MSB until the City’s budget position improves or pursue its reopening or redevelopment.
Attachments:
1) Memorandum Regarding Replacement of Fire Station 63
2) Seismic Study
3) Facility Condition Assessment
4) Cost Estimate for Full Rehabilitation and Seismic Upgrade
5) Cost Estimate for Recreation Wing Rehabilitation
6) Environmental Monitoring Report
7) Alternative Housing Element Opportunity Sites
8) November 2, 2021 Staff Report Regarding Development Scenarios for the MSB
9) July 13, 2022 Staff Report Regarding Social Housing Development Scenarios for the MSB
10) August 28, 2024 Staff Report Regarding Consulting Services for Public Input for MSB
11) Presentation