A Balm In Gilead

gilead

Not sure how that title relates to the post itself…but it sort of sounded good, so what the heck! Anyway, the point is that Foster City’s own Gilead Sciences  has officially gained approval for nearly doubling it’s Vintage Park campus. It’s going to grow from a little over 629,000 square feet to over 1,200,000 sq ft in a total of 17 buildings. Construction is expected to take place over the next 10 years. Gilead also purchased an additional 30 acres of land adjacent to it’s current campus.

To me at least, this all means a continued healthy Foster City economy and yet another reason to feel optimistic about the maintenance of home values in this area. Gilead’s plan is to expect an increase in employees from 1200 right now to more than 3000 in 10 years. This, in a town where there are currently only 10 single family homes actively listed for sale. It seems obvious to me that this kind of growth is going to keep home values stabile at the very least. I wrote a post  in 2008 about a great book by a guy by the name of Richard Florida called Who’s Your City? that really nails the strength of this area and why it’s dynamic energy bodes well for our futures here. What we’re seeing with Gilead is living proof.

How’s it Going?

fostercity

If you’ve read this blog for awhile you’ve no doubt noticed the participation of the great and wonderful Steve Toler, Foster City’s director of Aministrative Services. Steve’s a really terrific guy and a few weeks ago he e-mailed me some information about the state of Foster City in this current downturn and I thought it would be pertinent to print it “As Is” It’s good news, by and large, and speaks to how solid this community is…and will be going forward. Here we go, in the words of Mr. Toler himself:
 
“We presented our mid-year financial picture to the Council this week.  In case it’s interesting info to add to a blog entry in the near future about the impact this economy is having locally, here are the big issues we are facing:
 
The executive summary is that the City is in a healthy financial position.  We have $18 million in General Fund reserves (I explain why that’s important below), and have been blessed with good decision making the past 40 years to have a healthy mix of revenues.  It is not planned to reduce any services at this time.  Nevertheless, we are being conservative in our financial projections and are going to be vigilant in the next 5 years in ensuring we stay financially solvent while maintaining services at their existing levels.
 
Other than water, sewer, and certain capital projects, for the most part the City relies on property taxes, sales taxes, vehicle license fees, franchise taxes (from AT&T, Comcast, PG&E) and transient occupancy (hotel) taxes to pay for police, fire, parks & recreation, and the various other services residents enjoy.  This is known as the City’s “General Fund”, and is the most important fund we balance in any given year. With that as background…
  • Property taxes are holding their own at a 4% growth from the previous year, right on target with what the City projected.  Our total property tax revenue is about $11 million.  As you’ve indicated in your blog, we are seeing relatively few foreclosures and vacant properties, so the taxes are being paid at their assessed values back in January 2008.  That being said, real property transfer taxes (the one-time “make up” you have to do when you buy a home) is significantly down from last year, by about 50%, given the slowdown in the market.
  • Sales taxes are hurting … we are currently about 15% below our original projections, and I expect we will be 20% below projections by year end, that will be about a $1 million shot across the bow.  We assumed $5 million at the beginning of the year, but it’s looking more like $4 million.
  • Vehicle license fees, what we pay to the State for our car registration each year, come back to the cities to fund road projects, street maintenance, etc.  Those revenues are holding their own (~ $2.5 million), but the impact of fewer and fewer new cars being purchased may drop that next year.
  • Franchise taxes (~ $1 million) are holding their own, and we may even see a bit of an increase as more people spend money on television services like Comcast and AT&T UVerse during a recessionary period.
  • Transient occupany taxes ($1.5 million) are also holding their own, predominantly due to the fact that the Crowne Plaza has successfully negotiatied contracts with various airlines to house their flight crews.  However, if the economy takes its toll on business and personal travel, those revenues could slip in future years.  FYI, Foster City’s TOT rate is 8%, the lowest in the County.  In fact, every other city has their TOT rate at 10%, with some at 12%.  Cities hurting financially are looking at increasing their TOT rates right now.  Council has indicated they are not interested in doing that at this time.
Given all of this, the City’s General Fund reserves remain healthy at over $18 million.  To put this into perspective, cities and non-profit agencies strive to maintain 25% (or 90 days) of annual expenses in their reserves to allow them time to “tack and jibe” if revenues were to dry up.  The City’s reserves are ~ 60% of annual operating expenditures.  We have been, and intend to continue to be, good stewards of the financial resources we have been entrusted to manage.  That being said, we believe that we probably won’t see the bottom of this economic recession for at least another 18-24 months.  We’ve already seen a delay in the Mirabella / Parkview Plaza project for at least one year as the developer assesses the credit crunch that is impacting its ability to fund the project.  The lease agreement would have pumped $2 million into the City’s General Fund to allow us to proactively fund capital improvement projects like parks, roadway improvements, and city facility improvements.  We are now determining what impact the delay in development may have on long-term capital financing requirements and city services over the next 5 years.
 
A ray of sunshine, however, was the sale of one of the EFI buildings plus its undeveloped land to Gilead Sciences, which closed on January 29.  This will pump approximately $800k in additional property tax revenues into the City’s General Fund annually, and will allow Gilead to continue their plan to develop the Lakeside Drive area into a prime research facility and campus.”
 

Keeping The Conversation Lively


Foster City Planning Commission – Traffic Study from Foster City Television on Vimeo.

Isn’t it interesting that for every action, there truly is an equal and opposite reaction? It would appear that along with the proposed new developments in Foster City is also coming opposition to that growth. There’s a website called Save Foster City that’s expressing opposition to, it appears, the new developments coming to this town. These projects being an expanded Gilead Sciences and Chess Drive ProjectThe Mirabella/Parkview Plaza Project , and the Pilgrim-Triton Project   It’s kind of unclear to me whether they want these projects scaled back, want just some projects scaled back…or don’t want any of them at all. I’ve been on record here as being excited about the possibilites that these projects, in my opinion, will bring to Foster City. I can’t imagine bringing this many jobs to Foster City having a negative impact on anything. Having a heavyweight like Gilead Sciences, for example, make this kind of an investment in FC is a terrific thing.

The problems that have been articulated fall this way: Too many buildings, too much height, big traffic problems, too expensive for citizens, public land used for private residences, and reduced property values. I know that this is just one guy’s opinion but here goes: The 15 acre site has been vacant forever. Unfortunately, there’s never going to be a public High School built there. What better use could there be for that site than a senior/town center type of development? It will certainly pay for itself. Why is the 14 story building a problem? Because it’ll effect the views from a small handful of condos on Foster City Blvd at the Admiralty? Aren’t they currently impacted by the JCC, City Hall and the Fire Station? Wouldn’t they have been impacted just as much if a public High School was built on that site? I guess you could say that the views from condos at the Islands have been effected by the Metro Center or Parkview Towers…but it sure didn’t impact their values.

The traffic issue is certainly a very valid concern. Above, you’ll find a 34 minute video of a presentation given to the planning commission by Fehr & Peers transportation consultants that pretty much covers this whole issue…including Pilgrim-Triton. If you’re of a mind too, I would encourage you to watch it. Even though it plays at times like, well…a traffic video, it’s very informative. Their recommendations, if enacted, sure look like they would have the desired impact insuring that “gridlock” will be avoided. I realize we have the issue of who’ll pay for it…I’m sure there will be plenty of discussion about that going forward too.

There’s a lot of things that I’m not sure of in these details, but here’s one thing that I am sure of. These projects will not negatively impact property values. I’ve said this before, the biggest single objection I get as a real estate agent about Foster City is “there’s no there there.” Mirabella/Parkview Plaza and Pilgrim-Triton will offer possible destinations for people to go to. If they’re done right I guarantee you that one day homes will be sold on Goldhunter or Pilgrim or Comet and condos will be sold at the Admiralty or City Homes and the listings will say “great location close to shopping and dining” or “walk to downtown” or something in that vein. There’s plenty of other Peninsula communities that have similar projects near residential and they’re thriving. I don’t know, I don’t think this is “paving paradise and putting up a parking lot”. Assuming that these projects are done right they’ll be a good thing for Foster City for years to come. Below is a link to the hard copy on thr traffic study, just in case you would like to read it.

TrafficReport

 

Chess Drive and Gilead Projects

 

Just in case you thought the 15 acre site-Village Square project, the Pilgrim-Triton project and the newly filled Parkside Towers reflected a booming Foster City business environment, look out, because here comes two more. The Chess Drive project, which is in the area north of highway 92 and east of Foster City Blvd, will replace 190,000 square feet of office and warehouse space with an 800,000 square foot office building that could rise as high as 10 stories. On top of that the big biotechnology company Gilead Sciences plans to double it’s research and development facility on Lakeside Drive from a little over 600,000 square feet to 1,200,000 square feet. Yowza! So here’s what Foster City’s got on the table right now in terms of future square footage in just the newest developments:

Parkside Towers……400,000 sq ft

Gilead Sciences……..1,200,000 sq ft

Pilgrim-Triton………..319,000 sq ft

Village Square………..30,000 sq ft

Chess Drive……………800,000 sq ft

                      Total    2,749,000 sq ft of office and retail space on the horizon!

Needless to say, Foster City is in the process of hiring a consultant to study the anticipated outcome on local traffic from having all of these projects converge in this town. Here’s a link to a San Mateo Daily News story about this issue:

TrafficStory

Um, let’s think about this for a second…almost 3 million square feet of new office space, a new downtown environment, a second retail live-work hub and maybe even a Peets Coffee. It would seem that our home values are going to be OK? I think we can count on it.