Supervisors’ budget committee backs $15 million loan increase for Treasure Island veterans housing

The Budget & Finance Committee on Nov. 30 voted to send to the full Board of Supervisors a resolution to increase the city loan for the Maceo May apartments on Treasure Island by roughly $14,983,000, bringing the not-to-exceed loan balance to about $39.2 million. The amendment would cover storm damage repairs, additional construction costs and lost permanent financing after an October 2021 atmospheric river damaged partially built modular units.

The committee heard from Bob Beck, director of the Treasure Island Development Authority, who described the project as the island’s first 100% affordable development and said the additional funds would allow Silicon Valley Bank, the construction lender, to continue underwriting and enable payment to the general contractor so mechanics’ liens do not delay occupancy. “We’re committed to fulfilling the affordable housing vision for Treasure Island,” Beck said.

The Budget and Legislative Analyst reported that total project costs have increased by about $35.8 million and that the loan increase is primarily funded with 2019 general obligation bonds. The BLA recommended amending the resolution to require the Mayor’s Office of Housing and Community Development (MOHCD) to report back by May 2023 about the loan amount, actions taken to mitigate development risk and financial updates; the committee adopted that amendment.

Public testimony was overwhelmingly supportive of the loan increase from veterans and service providers who said the building—104 units intended for veterans, including formerly homeless veterans—would provide urgently needed housing. Jeff Farber of Swords to Plowshares said the project would pair housing with on‑site and off‑site supportive services, including case management and medical and psychiatric care. “By funding the project, Swords to Plowshares and our community partners will be able to increase housing capacity and provide our veterans with in‑house and off‑site support,” Farber said.

Construction and labor representatives, however, urged closer scrutiny of the modular construction approach used on the project. Alex Landsberg, research and advocacy director for the San Francisco electrical construction industry, said documentation he reviewed shows the current request is several times the amount originally paid to the factory contractor and alleged that building‑code violations and site‑management failures contributed to water damage. Larry Mazzola, business manager of Local 38 Plumbers and Pipefitters, called the result “a disaster” and said leaving units exposed to rain led to mold and additional cost. The BLA and MOHCD presenters acknowledged repair costs and described a plan that bifurcates loan proceeds to pay off the contractor and hold back funds for financing costs while sponsors pursue insurance recoveries.

Committee chair Supervisor Hillary Ronan and Member Chan said they supported the amended loan with the BLA’s reporting requirement and emphasized a desire for lessons learned about modular construction and stronger oversight for future projects. The committee voted to forward the amended resolution to the full Board with a positive recommendation.

The Board’s final action is scheduled on a future agenda; MOHCD and project sponsors will report back to the committee in May 2023 as requested by the Budget & Legislative Analyst.