Title
Report regarding a proposed Development Agreement to extend approved entitlements to construct a new Office/R&D Campus at 800 Dubuque Avenue in the East of 101 Transit Core (ETC) Zoning District for a period of ten (10) years in exchange for pre-payment of Community Benefit Program Fee obligations in accordance with Title 19 and 20 of the South San Francisco Municipal Code and a recommendation determining consistency of the proposed action with the adopted Initial Study/Mitigated Negative Declaration (IS/MND) pursuant to the California Environmental Quality Act. (Tony Rozzi, AICP, Deputy Economic and Community Development Director)
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MOTIONS TO ADOPT STAFF RECOMMENDATIONS:
(1) Move to adopt the resolution recommending approval of the Development Agreement.
(2) Move to determine the Development Agreement is in compliance with CEQA.
RECOMMENDATION
Recommendation
Staff recommend that the Planning Commission conduct a public hearing and take the following actions:
1. Adopt a Resolution making findings and recommending that the City Council approve the proposed Development Agreement to extend approved entitlements to construct a new Office/R&D Campus at 800 Dubuque Avenue in the East of 101 Transit Core (ETC) Zoning District for a period of ten (10) years in exchange for pre-payment of Community Benefit Program Fee obligations in accordance with Title 19 and 20 of the South San Francisco Municipal Code and a recommendation determining consistency of the proposed action with the adopted Initial Study/Mitigated Negative Declaration (IS/MND) pursuant to the California Environmental Quality Act (CEQA Guidelines Section 15070 and Public Resources Code Sections 15000 et seq)
Body
BACKGROUND/DISCUSSION
Project Description
The IQHQ project at 800 Dubuque Avenue (Project) is a transit-oriented commercial project comprised of three buildings for a total of approximately 857,000 square feet of floor area.
The Project will ultimately transform a nondescript, low-density commercial site with an office/R&D complex that will anchor the life science core along US-101. By locating high-density employment uses adjacent to public transit and integrating significant improvements to the public realm, the Project will also create an improved pedestrian-accessible gateway to the Dubuque Avenue corridor from the South San Francisco Caltrain Station.
The project was considered and recommended for approval by the Planning Commission in June 2023 and approved by the City Council in July 2023. Per South San Francisco Municipal Code Section 20.450.011 (Expiration and Extension), entitlements automatically expire if building permits have not been issued within two years from the date of final approval. This code section also allows a one-year time extension approval with Chief Planner approval, for a total entitlement timeframe of three years prior to expiration.
Development Agreement Request
City Council approved the 800 Dubuque project two years ago, as part of a second phase of development by IQHQ - the first phase of planning and construction is almost complete at 580 Dubuque Avenue with a 200,000 square foot building nearing final inspection.
Since entitlement in 2023, the Office/R&D sector has faced serious challenges - higher than typical vacancy rates, contraction in the capital markets, high borrowing costs and a glut of new Class A space in the Bay Area. Simply put, there is contracting demand and investment for new Office/R&D construction. Aside from the permit for 580 Dubuque Avenue, the City has issued no new permits for life science projects in the past two years. The applicant, recognizing that they first needed to lease their building at 580 Dubuque Avenue, approached the City several months ago to discuss a development agreement to extend entitlements on their 800 Dubuque Avenue campus to allow the life science market to steady and recover.
The draft Development Agreement (attached to the Resolution as Exhibit A) includes the following key terms:
• Ten (10) year extension from effective date
• Payment of all applicable Development Fee rates at time of permit issuance
• Pre-payment of Community Benefit Program Fees, as follows:
o First Pre-Payment of $1,000,000 by the 1st anniversary of the effective date
o Second Pre-Payment of $1,000,000 by the 3rd anniversary of the effective date
o Third Pre-Payment of 50% of the remaining fees by the 5th anniversary of the effective date (estimated to be $1,061,250).
• In lieu of paying the Third Pre-Payment as of the fifth (5th) anniversary date, Developer may elect to provide written notice to the City of its desire to terminate this Agreement.
• All fees paid are non-refundable but can be transferred to a new project owner/developer
These terms have the benefit of providing additional time for the applicant, and a small but steady stream of payments to the City for community reinvestment. The City Council may choose to use Community Benefit Program fees can be used broadly for public infrastructure, mobility improvements, local business support, affordable housing, public services and facilities, and even sea level rise mitigation.
Staff anticipate that several recently entitled Office/R&D projects that are now in their second year post-entitlements, or within the one-year extension will also seek similar development agreement terms under forecasted market conditions.
GENERAL PLAN AND ZONING CONSISTENCY ANALYSIS
The Project site’s land use designation per the ShapeSSF 2040 General Plan is East of 101 Transit Core (ETC), which is described as “Transit-oriented community with a walkable street pattern and a vibrant mix of high-density multifamily and employment uses with supportive retail, services, and amenities (minimum FAR from 1.0 up to 8.0 with community benefits; maximum residential densities up to 120 du/ac to 200 du/ac).”
The Project has been designed to conform with the ETC Zoning District’s standards and vision. The Project proposes an employment use development with a maximum FAR of 3.31, with a community benefits proposal, that is located adjacent to high-quality and regional transit. The draft Development Agreement does not propose any changes to the previously entitled project.
ENVIRONMENTAL REVIEW
Initial Study/Mitigated Negative Declaration (IS/MND)
An IS/MND was prepared by the City with assistance from Lamphier-Gregory, Inc. for the 800 Dubuque project and was adopted by the City Council on July 12, 2023. The IS/MND included mitigation measures to ensure any potential impacts would be less than significant with mitigation.
Extension of the entitlements will not result in any changes to the project currently - if, during the Development Agreement, the applicant proposes changes to the configuration of buildings, site planning, or operational features, a new environmental analysis may be warranted. But under the current circumstances, no further environmental study is required, and the project is consistent with the adopted IS/MND.
CONCLUSION
The draft Development Agreement is an opportunity to confirm the City’s commitment to the project entitlements at 800 Dubuque Avenue, recognize the unique economic circumstances facing the life science market, and ensure a stream of community benefit fee payments for reinvestment. Unfortunately, improvements to the life science sector may not be immediate - allowing an extension for entitlements through the Development Agreement should give the applicant the ability to persevere and ultimately construct the envisioned campus.
For these reasons, staff recommend that the Planning Commission take the following action:
1. Adopt a Resolution making findings and recommending that the City Council approve the proposed Development Agreement to extend approved entitlements to construct a new Office/R&D Campus at 800 Dubuque Avenue in the East of 101 Transit Core (ETC) Zoning District for a period of ten (10) years in exchange for pre-payment of Community Benefit Program Fee obligations in accordance with Title 19 and 20 of the South San Francisco Municipal Code and a recommendation determining consistency of the proposed action with the adopted Initial Study/Mitigated Negative Declaration (IS/MND) pursuant to the California Environmental Quality Act (CEQA Guidelines Section 15070 and Public Resources Code Sections 15000 et seq)
Exhibit to Associated Entitlements Resolution
A. Draft Development Agreement