DEPARTMENT
Water Enterprise
AGENDA NO.
12 MEETING DATE
February 10, 2026
AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
Calendar: Regular Calendar
Contract/Project Manager: Julie Ortiz
Approve Water Supply Assessment for the Matson Block Project (located at 215 Market Street, 215 Market Street Annex, 245 Market Street, 50 Main Street, 77 Beale Street, 45 Beale Street and 25 Beale Street)
Summary of Proposed
Commission Action:
Approve the Water Supply Assessment for the proposed Matson Block Project (located at 215 Market Street, 215 Market Street Annex, 245 Market Street, 50 Main Street, 77 Beale Street, 45 Beale Street, and 25 Beale Street), pursuant to the State of California Water Code Section 10910 et seq., California Environmental Quality Act (CEQA) Section 21151.9, and CEQA Guidelines Section 15155.
Background: California’s Water Supply Assessment law (California Water Code (Water Code) Sections 10910-10915) provides a nexus between the regional land use planning process and the environmental review process. The law also reflects the growing awareness of the need to incorporate water supply and demand analysis at the earliest possible stage in the land use planning process. The core of this law is the requirement for a public water system, such as that of the San Francisco Public Utilities Commission (SFPUC), to prepare a Water Supply Assessment (WSA) of whether available water supplies are sufficient to serve the demand generated by projects of a specified size (water demand projects), as well as the reasonably foreseeable cumulative demand in the region over the next 20 years under a range of hydrologic conditions. The WSA is subject to Commission approval.
The San Francisco Planning Department carries out the City’s lead agency responsibilities under CEQA and is preparing an Environmental Impact Report for the proposed Matson Block Project (the Project) . The Project would occupy the entirety of the 151,390-square- foot (3.5-acre) rectangular block that encompasses Market Street to the north, Main Street to the east, Mission Street to the south, and Beale Street to the west. There are seven existing buildings on the project site, i
ncluding 215 Market Street, 215
Market Street Annex, 245 Market Street, 50 Main Street, 77 Beale Street, 45 Beale Street, and 25 Beale Street. The project sponsor, Hines, proposes to undertake a mixed-use project with the following components: (1) demolish the office building at 77 Beale Street and construct a new tower of up to 1,225 feet with up to 1,919,847 ground square feet of office uses of which up to 250,000 ground square feet could be institutional use; (2) demolish the existing 50 Main Street garage building; (3) convert 90,000 ground square feet at 25 Beale Street from office to residential use which would result in a Agenda Title: Approve Water Supply Assessment for the Matson Block Project Commission Meeting Date: February 10, 2026
range of 44 to 120 residential units; (4) demolish the existing 215 Market Street Annex building; (5) renovate the historic buildings at 215 and 245 Market Street; (6) construct publicly accessible open space and/or midblock pedestrian access paths and include up to 7,500 square feet of potential outdoor entertainment use; (7) add up to 250,000 square feet of new retail space in the 215 and 245 Market Street buildings; and (8) include two project variants that would construct a second stand-alone building along with up to 317 residential units or up to 350 hotel rooms.
In reviewing the Project, the Planning Department determined that it qualifies as a water demand project and therefore requires preparation of a WSA because it is a mixed-use development that includes more than 250,000 square feet of commercial floor space.
The content of a WSA is specified by the Water Code and includes identification of any existing water supply entitlements or contracts and detailed information about groundwater supplies. It assesses the adequacy of water supplies to serve the proposed project and cumulative demand.
The WSA must be completed by the public water supplier that would serve the proposed project and be approved by its governing body at a public meeting. Approval of a WSA is not approval of the development project for which the WSA is prepared. A WSA is an informational document required to be prepared for use in the City’s environmental review of a proposed project under CEQA. The Project has already been accounted for in SFPUC’s water supply planning as described in the 2020 Urban Water Management Plan.
Furthermore, the SFPUC prepared an interim set of retail water demand projections to account for housing unit projections associated with the Housing Element 2022 Update. The Housing Element 2022 Update Environmental Impact Report, which supported the City’s adoption of the Housing Element in January 2023, assumed slightly higher housing unit projections than those used in the 2020 Urban Water Management Plan.
Because the Project has already been accounted for in the 2020 Urban Water Management Plan, the Project is also accounted for in the 2023 Interim Water Demand Projections.
The attached WSA analyzes the sufficiency of long -term water supplies to serve the Project and cumulative development over a 20- year projection. In December 2018, the State Water Resources Control Board (SWRCB) adopted amendments to the Water Quality Control Plan for the San Francisco Bay/Sacramento-San Joaquin Delta Estuary (Bay -Delta Plan Amendment).
The City, along with multiple other water agencies, filed suit in early 2019 challenging the validity of the Bay-
Delta Plan Amendment. That lawsuit,
which is consolidated with other legal challenges, is currently pending before the California Court of Appeal, Third District. In January 2021, the SWRCB moved to implement the Bay-Delta Plan Amendment on the Tuolumne River Agenda Title: Approve Water Supply Assessment for the Matson Block Project Commission Meeting Date: February 10, 2026
by issuing a water quality certification under Section 401 of the Clean Water Act in the Federal Energy Regulatory Commission (FERC) licensing proceedings for the hydropower projects associated with the New Don Pedro and La Grange dams. The City and other water users on the Tuolumne River filed legal and administrative challenges to these SWRCB actions. The SWRCB has since set aside the water quality certification and withdrawn it from the FERC record, and FERC has not yet reissued a license for the New Don Pedro Hydropower Project. Alongside the water quality certification, on August 8, 2022, the SWRCB issued a CEQA Notice of Preparation for an alternative means of implementing the Bay -
Delta Plan Amendment. Any
future amendments to or implementation of the Bay-Delta Plan Amendment may be subject to further legal challenges.
Recognizing the obstacles to implementing the Bay-Delta Plan Amendment, the SWRCB, by Resolution No. 2018- 0059 adopted the Bay- Delta Plan Amendment and directed SWRCB staff to help complete a “Delta watershed- wide agreement, including potential flow measures for the Tuolumne River” by March 1, 2019, and to incorporate such agreements as an “alternative” for a future amendment to the Bay-Delta Plan to be presented to the SWRCB “as early as possible after December 1, 2019.” In accordance with the SWRCB’s instruction, on March 1, 2019, the SFPUC, in partnership with other key interested parties, submitted a proposed project description for the Tuolumne River that could form the basis for an agreement (Healthy Rivers and Landscapes Agreement) to the SWRCB that would serve as an amendment to the Bay-Delta Plan. On March 26, 2019, the SFPUC adopted Resolution No. 19-0057 to support its participation in the Healthy Rivers and Landscapes Agreement negotiation process. In November 2022, the SFPUC and partner water agencies on the Tuolumne River signed onto a non- binding Memorandum of Understanding between the State and other parties to structure their p articipation in the Healthy Rivers and Landscapes Agreements negotiation process. This framework document is designed to facilitate the parties’ development of enforceable agreements and amendments to the Bay- Delta Plan, with actions and funding to integra te additional water flows with the physical landscape to help improve habitat for native fish in the Sacramento -
San Joaquin River Delta watershed,
including the Tuolumne River. On March 29, 2024, in furtherance of the Memorandum of Understanding, the SFPUC submitted the key components of its proposed Healthy Rivers and Landscapes Agreement to the SWRCB.
On September 19, 2025, SWRCB issued a report describing the scientific basis in support of the Healthy Rivers and Landscapes Agreement, which SWRCB will use to inform its consideration of the agreement. The SFPUC continues to actively participate in this process and as of the date of the issuance of this WSA, those negotiations remain ongoing.
Implementation of the Bay- Delta Plan Amendment is uncertain given the ongoing negotiations, litigation, and regulatory proceedings. Given the current uncertainty regarding the extent and timing of implementation of the Agenda Title: Approve Water Supply Assessment for the Matson Block Project Commission Meeting Date: February 10, 2026
Bay-Delta Plan Amendment, this WSA analyzes water supply and demand through 2045 under three scenarios:
• Scenario 1: No implementation of the Bay-Delta Plan Amendment or Healthy Rivers and Landscapes Agreement
• Scenario 2: Implementation of the Healthy Rivers and Landscapes Agreement
• Scenario 3: Implementation of the Bay-Delta Plan Amendment
The WSA concludes that:
• During normal years, the SFPUC’s total projected water supplies will meet the projected demands of its retail customers, including those of the Project, existing customers, and foreseeable future development under Scenario 1, Scenario 2, and Scenario 3.
• During single dry years and multiple dry years under Scenario 1, the SFPUC can meet the projected demands of its retail customers, including those of the Project, existing customers, and foreseeable future development without the need for water use reducti on beyond the level of service (LOS) goal of 20% system -wide water use reduction.
• During single dry years and multiple dry years under Scenario 2, the SFPUC would still face a shortfall, thus requiring water use reduction, but to a lesser degree and in closer alignment to the LOS goal of no more than 20% system -wide water use reduction compared to that which would occur under Scenario 3. Because negotiations in furtherance of the November 2022 Memorandum of Understanding continue in earnest, and litigation challenging the adoption of the Bay-Delta Plan Amendment remains pending, SFPUC further finds that the supply projection under Scenario 2 is more likely to occur than that projected in Scenario 3.
• During single dry years and multiple dry years under Scenario 3, the SFPUC cannot reliably meet the projected demands of its retail customers, including the Project, existing customers, and foreseeable future development, without water use reduction at a l
evel greater
than that required to achieve the LOS goal of a maximum of 20% system-wide average water use reduction. The SFPUC estimates it would impose up to 36% water use reductions across the retail service area.
• The SFPUC’s Water Shortage Contingency Plan describes allocation methods and processes that may be used in future
water shortage
emergencies. For both residential and commercial customers, the SFPUC may implement varying levels of water use reductions based on the baseline level of water use, e.g., require less reduction from customers that use less water to begin with. For the Project specifically, these policies may result in lower levels of mandatory water use reduction because of the installation of water -efficient Agenda Title: Approve Water Supply Assessment for the Matson Block Project Commission Meeting Date: February 10, 2026
plumbing fixtures and/or non-potable water systems associated with new construction.
• Under Scenario 3, the relatively small volume of water demand generated by the Project, which demand will be further reduced by compliance with SFPUC’s Non- potable Water Ordinance or obtain an exemption from the City , would not exacerbate the projected shortfalls resulting from implementation of the Bay -Delta Plan Amendment. Regardless of whether the Project is constructed, with implementation of the Bay -
Delta Plan Amendment, the SFPUC’s
existing and planned water supplies will not meet the water demands of
its retail service area in dry years without significant demand reductions.
Environmental
Review:
Approval of the Water Supply Assessment is not considered approval of a project as defined in S ection 15378 of the CEQA Guidelines. The Water Supply Assessment is required by and prepared according to the CEQA Guidelines and is an informational document only. Approval of the Water Supply Assessment does not constitute the Commission’s approval of the
Matson Block Project.
Attachment: 1. Water Supply Assessment for the Matson Block Project
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO.
WHEREAS, Under the California Environmental Quality Act (CEQA) and California Water Code Section 10910(g)(1), the San Francisco Public Utilities Commission (SFPUC) is required to prepare and approve a Water Supply Assessment of whether available water supplies are sufficient to serve the demand generated by projects of a specified size as well as the reasonably foreseeable cumulative demand in the region over the next 20 years under a range of hydrologic conditions; and
WHEREAS, The Matson Block Project (Project) occupies the entirety of the 151,390 - square-foot (3.5-acre) rectangular block that encompasses Market Street to the north, Main Street to the east, Mission Street to the south, and Beale Street to the west; and
WHEREAS, There are seven existing buildings on the project site, including 215 Market Street, 215 Market Street Annex, 245 Market Street, 50 Main Street, 77 Beale Street, 45 Beale Street, and 25 Beale Street; and
WHEREAS, The project sponsor, Hines, proposes to undertake a mixed- use project with the following components: (1) demolish the office building at 77 Beale Street and construct a new tower of up to 1,225 feet with up to 1,919,847 ground square feet of office uses of which up to 250,000 ground square feet could be institutional use; (2) demolish the existing 50 Main Street garage building; (3) convert 90,000 ground square feet at 25 Beale Street from office to residential use which would result in a range of 44 to 120 units; (4) demolish the existing 215 Market Street Annex building; (5) renovate the historic buildings at 215 and 245 Market Street; (6) construct publicly accessible open space and/or midblock pedestrian access paths and include up to 7,500 square feet of potential outdoor entertainment use; (7) add up to 250,000 square feet of new retail space in the 215 and 245 Market Street buildings; and (8) include two project variants that would construct a second stand-alone building along with up to 317 r esidential units or up to 350 hotel rooms.; and
WHEREAS, The Project requires the preparation of a Water Supply A ssessment because it is a mixed -use development that includes more than 250,000 square feet of commercial floor space; and
WHEREAS, A Water Supply Assessment must be completed by the public water supplier that would serve the proposed project and be approved by its governing body at a public meeting; and
WHEREAS, A Water Supply Assessment is an informational document that assesses the adequacy of water supplies to serve a proposed project and is required to be prepared as part of the CEQA environmental review process; and
WHEREAS, The water demand associated with the Project is encompassed within the 2020 Urban Water Management Plan water demand projections; and
WHEREAS, The water demand associated with the Project is also encompassed within the 2023 Interim Water Demand Projections, which the SFPUC prepared after the 2020 Urban Water Management Plan to account for slightly higher housing unit projections associat ed with the Housing Element 2022 Update adopted by the City; and
WHEREAS, Approval of a Water Supply Assessment is not considered an approval action as defined in Section 15378 of the CEQA Guidelines and approval of the Water Supply Assessment does not constitute the Commission’s approval of the Project; and
WHEREAS, SFPUC staff prepared the attached Water Supply Assessment for the Project, analyzing water supply and demand under three scenarios: (1) No implementation of the Bay- Delta Plan Amendment or Healthy Rivers and Landscapes Agreement (Scenario 1), (2) Implementation of the Healthy Rivers and Landscapes Agreement (Scenario 2), and (3) Implementation of the Bay-Delta Plan Amendment (Scenario 3); and
WHEREAS, The Water Supply Assessment concludes that the SFPUC’s total projected water supplies through 2045 will (1) meet the demands of the Project in normal years under all three scenarios, (2) meet the demands of the Project in dry years without rationi ng beyond the SFPUC’s level of service (LOS) goal of no more than 20% system-wide rationing under Scenario 1, (3) require water use reduction but to a lesser degree and in closer alignment to the LOS goal of no more than 20% system -wide water use reduction under Scenario 2 and in comparison to Scenario 3; and (4) not reliably meet the projected demands of the Project without rationing at a level greater than that required to achieve the LOS goal under Scenario 3; and
WHEREAS, In dry years, the P roject may have lower levels of mandatory water use reduction compared to existing buildings because of the installation of water -efficient plumbing fixtures and/or non-potable water systems associated with new construction; and
WHEREAS, The Project is required to comply with the City’s Non- potable Water Ordinance, Article 12C of the San Francisco Health Code, and as a result, the Project will offset a portion of its potable water use with alternate water sources or obtain an exemption from the City; and
WHEREAS, The relatively small volume of water demand generated by the P roject itself would not exacerbate the projected shortfalls resulting from implementation of the Bay-Delta Plan Amendment; now, therefore, be it,
RESOLVED, This Commission hereby approves the attached Water Supply Assessment for the Matson Block Project pursuant to the California Water Code Section 10910(g).
I hereby certify that the foregoing resolution was adopted by the San Francisco Public Utilities Commission at its meeting of February 10, 2026.
Director of Commission Affairs
San Francisco Public Utilities Commission