The city is proposing a $260 million emergency bailout of the struggling Transbay Transit Center construction project in downtown San Francisco, a loan that officials say is needed to prevent work on the $2.25 billion transportation hub from shutting down this summer.

The unusual loan, which would be paid back over the next five to 10 years with taxes collected from developers and property owners in the neighborhood’s burgeoning high-rise district, is proposed as projected costs on the transit center have climbed $360 million in the past two years alone. Since 2008, project costs have soared by $1 billion.

On Tuesday, city Controller Ben Rosenfield will introduce the proposed financing package to the Board of Supervisors, which must approve it along with the regional Metropolitan Transportation Commission. The short-term financing will cover a projected shortfall of $149 million for fiscal year 2017 and $98.5 million in 2018. The city will borrow $160 million from Wells Fargo, and the MTC will provide $100 million.

‘An investment’

The proposed financing comes just a week after sources say the Transbay Joint Powers Authority Board of Directors decided to oust Maria Ayerdi-Kaplan, the longtime executive director of the agency, which is responsible for the construction and oversight of the transit center. The date of Ayerdi-Kaplan’s departure is still unclear, and she didn’t return a call seeking comment.

Mayor Ed Lee said the financing plan will keep the project on schedule while protecting taxpayers.

“It is an investment in our infrastructure, in good-paying construction jobs and in the future of transportation in the San Francisco Bay Area,” Lee said.

For more than a decade, regional transportation advocates have fought for a transit hub at First and Mission streets, slowly building public and political support for a project billed as the West Coast equivalent of New York’s Grand Central Terminal.

But others have questioned the order in which the project’s phases are being undertaken. Early on, the transbay authority decided to invest in building the six-story transit center and 4.5-acre rooftop park before funding the extension of Caltrain and high-speed rail into the station, which many consider the key part of the project.

Critics call it the “billion-dollar bus station” and question whether the unfunded $2.5 billion phase two, which includes construction of the Caltrain extension from Fourth and Townsend streets, will ever happen.

Supervisor Aaron Peskin, who said he is likely to oppose the loan, called the project “the most expensive bus terminal in the history of humankind.”

“I have serious concerns about allocating a quarter of a billion dollars to a non-city agency for cost overruns that were not incurred by the city to an entity that is changing horses in midstream,” Peskin said. “That is money that could be spent to house the homeless, to repair potholes, to buy us some more cops. A quarter of a billion dollars is nothing to sneeze at.”

But Transbay Joint Powers Authority board Chairman Greg Harper, who is also an AC Transit director and has been a regular critic of Ayerdi-Kaplan, said there is no choice but to bail out the first phase and move on. Whatever risks there are in lending the money represent “a fraction of the risk involved in not doing it.”

“You can’t just not complete a construction project of this size, or even delay it,” Harper said.

Better management needed

City officials say they have mitigated risks by stepping up oversight of the project.

In November, as the details of the loan were being hammered out, the San Francisco Department of Public Works was called in to oversee construction. Each expenditure from the $260 million loan will require the approval of a three-member “cost control committee” made up of San Francisco Controller Rosenfield, MTC Director Randy Rentschler and Ayerdi-Kaplan’s replacement. In addition, the Board of Supervisors will have the authority to approve leases signed with terminal tenants.

“We are not just going to hand over the money — we need much better management and cost oversight,” said Supervisor Scott Wiener, who is a member of the MTC board. “This is not a position we wanted to be in. It’s not a position the mayor wanted to be in. We would have much preferred that everything go along smoothly. But we are in this position.”

Supervisor Jane Kim, who sits on the transbay authority board and is co-sponsoring the loan legislation with Wiener and Supervisor David Campos, called the funding gap a “difficult portion” that the project needs to get through while “containing costs as much as possible.”

“Every dollar that goes into phase one is no longer available for phase two,” she said. “That is the biggest concern.”

Meanwhile, city officials are scrambling to finalize the $160 million sale of Parcel F, a city-owned property on Howard Street within the Transbay Transit District zoned for a 750-foot tower. While the transbay authority has raised $660 million by selling land around the new transit center over the past four years, Parcel F has proved difficult, with several deals falling through.

Pinning hopes on Caltrain

In addition, the transbay authority hopes to generate revenue by selling naming rights to the transit center and leasing out more than 100,000 square feet of retail space. In total, the transbay neighborhood will have 6 million square feet of new office space, 4,400 housing units and 1,000 hotel rooms.

Gabriel Metcalf, executive director of the urban think tank SPUR, said if everything goes as envisioned with the transbay project, the political squabbles and financial pitfalls along the way will be quickly forgotten.

“Whether it turns out to be a good investment or not depends on whether we get Caltrain finally extended or not. If we get not just Caltrain, but high-speed rail as well, then all of this will look like a very sound investment.”

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jkdineen@sfchronicle.com Twitter: @sfjkdineen