• By Patrick Hoge : sfexaminer – excerpt (includes audio)

Chris Fraley was 26 when he returned from vacation in 1995 to find a memo on his desk with two paragraphs of fresh New York state law authorizing an incentive program for spurring conversion of offices to homes in lower Manhattan, which in the early 1990s had widespread office vacancies.

Over the next two years, Fraley played a key role in setting up a program credited with facilitating the conversion of offices into nearly 13,000 homes — and he said he believes something similar could happen today in downtown San Francisco, which currently has a historic office-vacancy rate of 36.9%, according to commerical real-estate firm CBRE.

“It was exciting,” said Fraley, who was founding director of the Lower Manhattan Residential Conversion Program…

“San Francisco has just unbelievable potential in its downtown, because it has such a strong foundation already,” he said. “Now is a real opportunity to create a vibrant, mixed-use 24-hour neighborhood.”

The honey that attracted all those New York property owners was a combination of time-limited abatements on existing taxes and exemptions on increased values following office-to-residence conversions. Recent studies have shown that the cost of conversions is generally too high to justify the investment without incentives.

San Francisco will have the opportunity next year to pursue its own tax-break initiative inspired by the New York program as a result of a new state law going into effect on Jan. 1…

Fraley said the development activity in New York City led to far higher property-tax revenues once the tax grace periods ran out… (more)