San Francisco officials move to restore city’s luster

San Francisco City Administrator Carmen Chu started her keynote speech at last week’s California Public Finance with a love letter to the city.

In the letter with which she opened her speech, she described the city as if it were a person that sometimes let her down, but also one that contained the ingredients and forbearance to overcome challenges.

“What got us through the toughest times is ultimately we cared about the same things,” Chu said. “It’s been 12 years, since we have been together working side-by-side.”

Chu, who was sworn in as city administrator on Feb. 2, 2021, came to the position after working as the city’s assessor since 2014, as an elected official on the San Francisco Board of supervisors from 2007 to 2013, and as deputy director of the Mayor’s Office of Public Policy and Finance from 2004-2007.

“Sometimes, you did change for the greater good and let go of bad habits,” Chu said. “I remember we went through bad patches, like most couples do. I wanted to save for a rainy day, and you wanted to spend, spend, spend.”

Chu explained that spending was needed to solve city problems, and she accepted that sometimes it is necessary to spend in order to preserve the city she loves.

That letter, Chu said, was delivered to city hall interns upon completion of their stint.

As city administrator, she oversees over 25 departments comprised of 1,400 employees and helps craft the city’s annual budget of over three quarters of a billion dollars. She has over 17 years of governmental management and finance experience in the city and county of San Francisco.  She is the first Asian-American and first woman to serve in the role.

Though the letter, dates back to 2011, when the city was struggling to recover from the 2008 economic crash, it applies to similar challenges the city now faces.

Then, and now, the city has a high vacancy rate in its office buildings. Back then, it was because companies were laying people off in droves or shuttering during the worst economic crash the country had experienced since the Great Depression. Now, it’s because Bay Area companies have continued to allow workers to work from home, and that led many to shrink or let go of their office space.

San Francisco Mayor London Breed is working to make it easier to convert office space in San Francisco to residential, filling the empty buildings and providing needed housing, Chu said.

On Tuesday, Breed proposed a ballot measure to encourage investment in downtown by waiving the city’s transfer tax on buildings that have converted from non-residential to residential use. The mayor hopes it will incentivize more underused office buildings to convert into housing, which would create a more sustainable, vibrant downtown.    

The measure will go before voters in March, where it will need a simple majority to pass.

This proposal is part of Breed’s Roadmap to San Francisco’s Future, a nine-part plan to revitalize downtown San Francisco.

Breed authored legislation that became effective in August 2023 amending zoning codes by establishing an Adaptive Reuse Program to simplify the approval process and streamline requirements for converting underutilized office buildings into housing.   

Over the summer, the city also issued a request for interest (RFI) to learn more about the financial and regulatory challenges faced by specific residential conversion projects. Eliminating the transfer tax is the next step in this work to create a more diverse, thriving downtown, according a press release from the mayor.

“We are working to do everything we can to support a more diverse and dynamic future for downtown San Francisco,” Breed said in a statement. “By removing barriers to converting office to housing, we can take vacant spaces, turn them into homes, and bring more people into downtown, which is good for our neighborhoods and our small businesses.”   

“For downtown to be a true, 24-hour neighborhood, it needs more than just office workers,” said Sarah Dennis Phillips, executive director of the Office of Economic and Workforce Development. “The measure will give us another tool to incentivize capital investments in our downtown and allow the city to diversify the local economy by increasing opportunities to create a 24-hour dynamic neighborhood where people can live, learn, work and play.”  

The transfer tax — which is up to a 6% tax rate on transactions over $25 million — would be waived after a qualifying non-residential to residential conversion. The tax waiver would be limited to five million square feet of space converted, and require that planning approval be complete by December 31, 2029.

Projects would also have to get construction approval within three years of planning approval to ensure conversions are moving forward. If the entire building is not converted, the transaction would be prorated by converted square footage. The transfer tax would still be due on non-converted space. 

The city also faces one of the worst fentanyl crises in the country, but “earlier this year the mayor worked with police to take millions of doses of fentanyl off the streets,” Chu said.

The city also has hired 220 new officers, she said.

“Here in San Francisco voters have approved $5.6 billion in general obligation bonds since 2008,” Chu said. “The vast majority has been used for seismic retrofits, and $400 million will be used to protect the seawall along the Embarcadero.”

“San Francisco has never shied away from challenges, we embrace them,” Chu said. “We at the city love San Francisco.”