Board of Supervisors President David Chiu wants to put a commercial rent tax for voter approval on the November ballot. The proposition also would revise the payroll expense tax to establish a progressive rate structure and reduce selected payroll expense tax rates. Proponents of the proposed commercial rent tax claim that this tax will create substantial revenue for San Francisco, approximately $24,500,000 in the first year, and that any additional costs to commercial landlords could be passed through to their tenants. Proponents also look to recover taxes from banks and insurance companies since they are exempt from the payroll tax. Those opposed to the commercial rent tax argue that it imposes an additional economic burden on businesses and hinders job growth. San Francisco Mayor, Gavin Newsom, who is against the proposed tax, maintains that its passage would stunt the nascent economic recovery. The proposed tax will be heard at a Rules Committee hearing at the Board of Supervisors on July 15, 2010.

The legislation would tax all “gross receipts” received by commercial landlords. “Gross receipts” would be defined as (1) cash, credit, property or other consideration from the rental of commercial property and (2) all payments made to a person subject to the tax, and/or paid to third parties on behalf of a person subject to the tax as part of a rental agreement, including insurance proceeds, mortgage payments, taxes, expenses and cash value of services to or on behalf of the landlord in lieu of rental payments. (The ordinance does not explain how a landlord would “receive” mortgage payments.) The schedule of percentage tax imposed on the total “gross receipts” would be as follows:

2011: 0.632%

2012: 1.263%

2013 and subsequent years: 1.895%

For example, if a landlord received $1,000,000 in gross receipts for the 2013 tax year, the tax due for that year would be $18,950. Residential and small commercial landlords whose gross receipts do not exceed $200,000 per tax year would be exempt from the tax.

The timing of the tax payments would depend on the amount owed by the taxpayer. For any amounts between $2,500 and $50,000, the tax would be paid in two installments, one in August and one in February. If the amount of tax is in excess of $50,000 then the tax would be paid in four installments.

Proponents of the tax have argued that it will have a limited impact on commercial owners since the owners can simply pass the additional costs through to its tenants. However, this ignores the fact that many existing leases, especially those negotiated in a more “tenant friendly” environment, do not include landlord favorable provisions that allow the landlord to pass through new taxes or fees. Many leases do not address this issue at all, which could lead to disputes and possible litigation, further depressing productivity. Even if the taxes are passed through, commercial tenants, including many small businesses, would then bear the burden of this new expense. Either way, the cost of doing business will increase – again. In a recent editorial, Supervisor Chiu pointed out that many other California cities have imposed a commercial rent tax. While this may be true, it does not take into consideration all of the other regulatory costs of doing business in San Francisco. Owners are justifiably concerned that yet another expense will hinder the anticipated recovery of the San Francisco real estate market.

The San Francisco Controller – Office of Economic Analysis estimated in its June 28, 2010 report that the commercial rent tax will cause approximately 600 – 700 job losses per year, but that this would be offset by the changes to the payroll tax that are part of the proposed ballot measure. However, the complete offset is not expected to occur for 15 years. The Controller anticipates that higher government spending will save about 200 jobs per year in the public and private sectors.

We will keep you updated once the Board of Supervisors makes their decision. We expect the ordinance to reach the ballot.  Please contact Kevin Rose or Lindsay Petrone if you would like a copy of the proposed ordinance or if you have any questions.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

 

 

The San Francisco Planning and Urban Research Center held a forum this week on smart growth over the next 30 years, which provided us with plenty to consider as we look to the future. We all know San Francisco’s population is growing and will continue to grow. Association of Bay Area Government’s Ken Kirkey actually quantified this trend: ABAG has set a target of 65,000 new housing units to be built in the City by 2035. Providing this amount of housing is supposed to be the goal of the 2009 Housing Element update, so does the latest version move us any closer?

Unfortunately, the latest version veers off in the wrong direction. As explained in an earlier update, the Housing Element is part of a city’s General Plan, which is the document that lays the policy groundwork for future land use planning. Originally, the Housing Element included policies that would allow the City to provide housing for the expected influx of new residents in the next 30 years, including:

• Policy 1.3: Continue using community planning to plan for housing growth.
• Policy 1.4: Through community planning processes, establish land use controls that support efficient use of land.
• Policy 1.5: Support new housing projects on sites that are located along major transit lines.
• Policy 10.2: Reduce the need for discretionary review processes such as conditional use approval.

As you can probably guess, none of these policies made it through to the next version. In addition, the following policies were added:

• Ensure growth is accommodated without significantly impacting existing residential neighborhood character.
• Maintain allowable densities in established residential areas at levels which promote compatibility with prevailing neighborhood character.

Let’s start with the elimination of the policies related to community planning. The last decade has seen the City adopt an unprecedented number of new plans, including the Rincon Hill Plan, the Market-Octavia Plan, and the Eastern Neighborhood Plan. These plans are not perfect, but they were visionary in that they very carefully analyzed the need for new housing in the City and carefully (maybe too carefully) planned for that growth. “Community Planning” has its problems. Its’ unfortunate need for across-the-board consensus building means that the development and adoption of a plan can drag out for years. The plans become extraordinarily expensive, stakeholders become frustrated, and it seems like everybody is exhausted at the end of the process. But in each of the cases described above, real, forward-thinking plans were produced, and have already benefited the City’s housing production. What will replace community planning in the future? Neither the draft Housing Element or the Planning Department has said yet. But community planning has worked and should not be discarded by the Housing Element.

The loss of proposed Policy No. 1.5 (support new housing projects on sites that are located along major transit lines) is a significant blow to smart growth and green development. We all know that the right place to put new housing development is along existing major transit lines like Geary Boulevard. This policy recognized this fact. Its removal goes in the wrong direction if the City really is serious about being green.

I guess we shouldn’t be surprised at the elimination of Policy 10.2. San Francisco’s land use decisions have become marathons of process at virtually every level. Whether you are trying to add a third story to your home in the Sunset, or trying to get entitlements for a large new retail development downtown, there’s a very good chance you will be taken on a long, protracted, expensive, difficult, process-driven journey. Virtually any time someone tries to raise their hand and suggest a means of simplifying the process, they are met with howls of protest (see the recently abandoned discretionary review reform). This proposed policy that was specifically intended to allow for a slightly easier permitting process for housing projects over 40 feet in certain limited zoning districts, apparently is meeting a similar fate.

These two new draft policies will certainly be used by many no-growth activists to make developing any level of density in the western part of town (or virtually anyplace else) that much more difficult. At the beginning we saw a Housing Element document with some hopeful signs and the beginnings of a blueprint for a vibrant and growing City. It’s looking more and more like the Housing Element could become just another tool for anti-density, no-growth proponents in San Francisco.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

On June 2, 2010, the Bay Area Air Quality Management District (BAAQMD) adopted stringent and landmark guidelines for mitigating greenhouse gas (GHG) emissions and particulate matter (PM 2.5) from land use projects. The new guidelines may have a major impact on the California Environmental Quality Act (CEQA) process for these projects. There is also speculation that the Guidelines adopted by BAAQMD, which is the air regulator for the nine-county Bay Area region, may be adopted by other air districts in the State or used by environmentalists to challenge land use projects in other air districts that would rise above the Guidelines’ thresholds of significance. The new Guidelines are among the most restrictive of California’s 35 air districts, and of any air regulator across the country.

GHG Thresholds

The Guidelines provide GHG thresholds of significance for a variety of land use project types. For instance, single-family housing projects of 56 dwelling units or greater; hotels with 83 hotel rooms or greater; or general office buildings with 53,000 square feet or greater; would all be considered to have a significant impact on GHG emissions under CEQA. That could prevent such projects from receiving categorical exemptions or other forms of streamlined review, and require mitigation measures that may not otherwise be required by the local jurisdiction in which the project is built.

The Guidelines also encourage local governments to adopt a qualified GHG Reduction Strategy, which would substantially lesson the analytical burden imposed by the Guidelines. Once a local government adopts a GHG Reduction Strategy, GHG impacts from projects or plans that are consistent with the Strategy will be considered less than significant. This would streamline CEQA review by: not requiring mitigation beyond that required in the local government’s GHG Reduction Strategy; not requiring an Environmental Impact Report solely for purposes of GHG analysis; and not requiring Statement of Overriding Considerations with regard to GHG analysis.

In San Francisco, the City is already working to have a GHG Reduction Strategy approved by BAAQMD. The GHG Reduction Strategy is likely to include compliance with already established policies of the City, such as the green building ordinance. Thus, for most projects in San Francisco, the new BAAQMD CEQA Guidelines will not result in too much of a change from business as usual, presuming the City is able to obtain approval of its existing policies as a qualified GHG Reduction Strategy. Some San Francisco projects, most likely large projects or those with unusual mixes of uses, may still need to conduct GHG analysis.

For projects not in jurisdictions with detailed climate change policies, such as those in San Francisco, the new BAAQMD GHG Guidelines could prove especially controversial and difficult to address in the near future.

PM 2.5 Thresholds

BAAQMD’s new CEQA Guidelines do not only address GHG emissions, but fully replace the agency’s previous 1999 Guidelines for evaluating air quality. Another notable change, among many in the new Guidelines, is new thresholds for PM 2.5, or extremely fine particulate matter. These regulations set a numerical screening criteria and threshold for PM 2.5. If a project falls above those thresholds, data must be modeled for the project to determine if the project will result in a significant impact and mitigations that may be required.

There is concern among many, however, that these new PM 2.5 regulations are set too low for urban areas, and will discourage in-fill projects and transit-oriented development that the GHG thresholds are meant to promote. Further, some developers and cities have argued that the new PM 2.5 regulations could well add unnecessary and exorbitant costs to urban projects, and perhaps even jeopardize the region’s efforts to comply with SB 375, the state’s 2008 law that incentivizes compact development.

Conclusion

The new BAAQMD CEQA regulations are a significant local, and perhaps even national, model for addressing GHG emissions from land use projects. For projects in cities such as San Francisco, which is likely to offer a qualified GHG Reduction Strategy in the near term, project sponsors will not see a substantial change in environmental review, but rather will be required to follow the City’s climate change initiatives, such as the City’s green building ordinance, as a condition of project approval. On the other hand, projects in jurisdictions without qualified GHG Reduction Strategies, will likely see streamlined forms of CEQA review disappear until those jurisdictions approve such strategies.

Will the increased costs of compliance with the new PM 2.5 regulations stymie urban infill projects? That remains an open question. These regulations will, undoubtedly, create one more hurdle for urban projects at a time when the State is otherwise trying to encourage such projects.  Please let us know if you would like a copy of the regulations.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

 

Four Planning Commissioner Terms Expire July 1

The terms of Planning Commissioners Gwyneth Borden, William Lee, Kathrin Moore and Hisashi Sugaya will expire on July 1. Board of Supervisors President David Chiu has already re-nominated Moore and Sugaya for another 4 year term each. The Mayor has yet to submit nomination (or re-nomination) papers for the seats currently held by Borden and Lee.

The City Charter allows Planning Commissioners to continue to serve as holdovers for up to 60 days after their terms expire. The Mayor has the authority to nominate 4 Commissioners and the Board of Supervisors President 3, all subject to the approval by the full Board of Supervisors. Michael Antonini and Ron Miguel were appointed by the Mayor and Christina Olague was appointed by the previous Board of Supervisors President. All three serve terms will expire in two years.

We’ll keep you posted on the potential changes at the Planning Commission.

Planning Commission Approves Prioritization of Office Allocation for Candlestick Point – Hunters Point Shipyard Area

Last week, the Planning Commission and Redevelopment Agency held a joint hearing to consider the certification of the Environmental Impact Report and approval of the redevelopment of the Candlestick Point – Hunters Point Shipyard Area. Demonstrating the controversy surrounding the plan, the hearing lasted over 12 hours and did not adjourn until after 1 a.m. the next day.

Numerous aspects of the plan were discussed. Of note, the Commission prioritization of 800,000 square feet of office space for future office allocation approval. Proposition M, passed by voters in 1986, set a limit on the amount of office space that could be approved by the Planning Commission each year. Any office space within this “cap” that is not allocated to a specific project carries over into subsequent years. When the pool gets low, office projects are forced to compete for this limited office space allocation in a given year must go through a “beauty contest,” where the projects are compared by the Planning Commission and the project with the best design and greatest amount of public benefits is awarded the limited amount of office space allocation.

The Planning Commission’s action on the redevelopment of Candlestick Point – Hunters Point Shipyard allows for up to 5 million square feet of office space in the plan area, 800,000 square feet of which would be prioritized over proposed office projects outside of the area in any future beauty contest. Considering that the office allocation cap currently consists of upwards of 2.9 million square feet, this probably won’t have an affect on office development outside the plan area in the near future. But when the next market cycle begins, and the demand for office space allocations grows again, it could be a factor.

And, Finally, the Whole Story on the Mayor’s Fee Deferment Program in One Place

We’ve received a lot of questions in the past few weeks regarding the specifics of the fee deferment program. For all of you out there wanting to get the basics quick, here you go:

Beginning July 1, the Fee Deferral Program would make all development fees (impact fees and in-lieu fees) due prior to issuance of the first construction document – normally a building permit or site permit addendum. Demolition permits or other site preparation permits would not trigger the fee payment. This at first seems like it is going in the wrong direction, as some of the fees (TIDF, school fee) are currently due at the first certificate of occupancy, not prior to getting your building permit. The relief is that project sponsors will be able to defer 80 or 85 percent of a project’s development fees until the first certificate of occupancy is issued. If a project is located within one of the city’s area plans (such as Eastern Neighborhoods, Market and Octavia or Balboa Park) 80 percent of fees can be deferred. If located outside these areas 85 percent of fees can be deferred. The remaining 15 or 20 percent is required to be paid at the time the first building or site permit is issued. Project sponsors will have to pay a development fee deferral surcharge that accrues during the deferral period. Call or email if you would like to learn more about the surcharge…it’s complicated.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

Between 1979 and 1988, building owners who converted their properties from apartments to condominiums were required to include BMR Units in their project. These Condominium Conversion Program BMR Units are price-restricted under San Francisco Subdivision Code Sections 1341 and 1385 for households of low or moderate income, depending on how the property was originally designated.

Ordinance No. 320-08 (the Ordinance) passed last year, amended the San Francisco Subdivision Code related to the Condominium Conversion BMR Program (the Program). The Ordinance was intended to clarify the rules applicable to existing BMR Units in the Program, and to provide updated standards for BMR units purchased on or after the effective date of the Ordinance. The Ordinance also provides a way for BMR Units in certain older conversion projects to be released from the Program, so that the unit becomes a market rate unit. This article will focus on the rules applicable to existing BMR Units in the Program, and the options for release from the Program. The Ordinance is administered by MOH, and much of the information in this Update is taken from their website (“http://www.sfgov.org/site/moh_page.asp?id=117961”).

The Ordinance provides that current owners of individual BMR Units may elect to stay in the current Program under the rules for pre-legislation owners, or may select one of the options listed in the Ordinance, including release from the Program. Original Subdividers have two exclusive options under the Ordinance. The various options are summarized below.

Owner Categories

The Ordinance divides owners into four categories: pre-affidavit owners, pre-legislation owners, post-legislation owners and original subdividers. The definitions of each owner category are summarized below.

Pre-Affidavit Owners. Owners who purchased or acquired their BMR unit before December 1, 1992 are called “Pre-Affidavit Owners.”

Pre-Legislation Owners. Owners who purchased or acquired their BMR unit before January 18, 2009 (the effective date of the Ordinance) are called “Pre-Legislation Owners.”

Post-Legislation Owners. Owners who purchased or acquired their BMR unit on or after January 18, 2009 (the effective date of the Ordinance) are called “Post-Legislation Owners.” Owners in this category will be automatically enrolled in the updated Condo Conversion BMR Program and are subject to the requirements for Post-Legislation Owners. The options below do not apply to Post-Legislation Owners.

Original Subdividers. Owners, or their successors in interest, who owned an apartment building at the time of conversion to condominiums and have continued to rent their units under Subdivision Code Section 1341 are called “Original Subdividers.”

Available Options under the Ordinance

A. Pre-Affidavit and Pre-Legislation Owners

Option 1: Continue to be Governed as a Pre-Legislation Owner (Stay on the Current Program)

Only Pre-Affidavit Owners and Pre-Legislation Owners are eligible for this option. If an owner chooses to stay on the current Condo Conversion BMR Program, the BMR Unit will continue to be regulated by the provisions in the Ordinance that relate to units acquired prior to the effective date of the Ordinance.

An owner does not need to do anything to remain in the current Condo Conversion BMR Program. Any BMR Unit for which the City and owner have not finalized an agreement under one of the other options by January 18, 2011 will automatically remain part of the current Condo Conversion BMR Program and subject to the provisions in the Ordinance for pre-legislation owners.

Option 2: Agree to be Governed as a Post-Legislation Owner (Opt Into the Updated Program)

Only Pre-Affidavit Owners and Pre-Legislation Owners are eligible for this option. If an owner chooses to opt into the updated Condo Conversion BMR Program, the unit will be subject to all of the requirements applicable to post-legislation owners

If an owner opts into the updated Condo Conversion BMR Program, the base price of the BMR Unit will be increased one time to the value printed in the Ordinance. This may enable the owner to sell the unit at a higher price. However, the BMR Unit will become subject to restrictions of the Program, including rental, resale and other restrictions.

Option 3: Pay a Fee and be Released from the Program

Only Pre-Affidavit Owners are eligible for this option. If an owner chooses to pay the fee, the unit will be permanently released from the Program. The fee is determined as the lesser of: 1) the fee printed in the Ordinance, or 2) 50% of the difference between the fair market value and the BMR price at the time of repayment. If an owner is unable to pay the fee immediately, a loan may be available from the City in the form of a City Lien. Call or email us if you need more information on this Option.

B. Original Subdividers

Option 1: Demonstrate a 20-year Affordable Rental History and be Released from the Program

Only Original Subdividers are eligible for this option. If an owner chooses to demonstrate that any or all of that owner’s BMR units have been rented within the Program’s guidelines for 20 years, those units will be permanently released from the Program. An owner must follow required procedures to demonstrate that the owner has complied with the affordable rental requirements. A rental history must be compiled for each BMR Unit the owner wishes to have released from the Program.

Option 2: Pay a Fee and be Released from the Program

Only Original Subdividers are eligible for this option. If an owner chooses to pay the fee for any or all of the BMR units, those units will be permanently released from the Program. The details are similar to the fee payment discussed above. Note that there will be one Fee and Release Option Agreement to cover all of an owner’s BMR units. If an owner selects the lien option for some or all of that owner’s units, the owner will be required to record a separate Promissory Note and Deed of Trust for each unit.

Conclusion

The Mayor’s Office of Housing (MOH) implements the Program, and reviews and processes all applications under the Program. To select any of the options described in this article, written requests must be made to MOH. Please see the MOH website for more information and required forms, or call or email Jay Drake with questions. MOH is currently accepting and processing owner applications under the Program.

Please note the following important deadlines:

• Complete applications must be received by MOH no later than December 1, 2010.
• The transaction for an owner’s chosen option must be completed by January 18, 2011. All agreements must be fully executed and all relevant documents must be recorded against the property by January 18, 2011.
• Original subdividers choosing one of the two applicable options available to Original Subdividers are not bound by the December 1, 2010 or January 18, 2011 deadlines applicable to pre-legislation and pre-affidavit owners in the Ordinance.

BMR unit owners interested in the options described above should obtain legal advice before agreeing to opt into the updated Condo Conversion BMR Program or entering into an agreement with the City.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

In 1965, Oakland adopted its zoning regulations, which control land use and development throughout the city. 45 years later, many of those same regulations are still in effect. Needless to say, the city has changed dramatically since then, leaving the existing regulations out of date. The regulations do not reflect best zoning practices, such as encouraging high density housing near public transit and pedestrian-friendly design in retail corridors, they are unclear and subject to interpretation, and, most importantly, they are inconsistent with the city’s general plan.

In 1998, Oakland adopted a new Land Use and Transportation element to its General Plan, providing a vision for development for the 21st century. However, the city’s zoning regulations were not updated along with the general plan. Numerous inconsistencies exist between the two documents, which has led to a lack of clarity of land use regulation for residents, property owners, businesses and developers. As a result, the Planning and Zoning Department began a process of analyzing and rewriting the zoning regulations. New zoning regulations for open space were adopted in 1999, for housing/business mix districts in 2005, for industrial districts in 2008 and the central business district in 2009.
The next round of rezoning, covering the city’s residential and commercial zoning districts, covers the largest area of the city yet. The department has been holding public meetings since 2008. Wednesday night, the Zoning Update Committee, a sub-committee of the Planning Commission, held the first of a series of public hearings that will ultimately result with the rezoning of these districts.

The department’s rezoning proposal currently consists of the following significant changes:

New zoning districts. The general plan currently identifies 4 residential zoning districts and 3 commercial zoning districts while the existing zoning regulations identify 12 residential and 12 commercial districts. Each of the districts in the zoning regulations are currently matched with a “best fit” general plan zoning district, which controls uses and development. The proposed zoning regulations would create new zoning districts that will parallel the zoning districts in the general plan, thereby eliminating the need to crosscheck the two documents to determine the land use controls for a property. Each new zoning district is broken down further into different density categories. This simple revision will go a long way in making the zoning regulations more comprehensible.

Increased density in “growth and change” areas. The general plan identifies certain neighborhoods and corridors as “growth and change” areas, where increased density and intensity of uses will encourage future growth. The rezoning proposal attempts to lay the groundwork by increasing the permitted density and the uses in some of these areas.

Height limits along major corridors. Areas along commercial and transportation corridors will now be regulated by a new height and intensity map rather than the zoning district they are located in. The purpose of this was to control the size and scale of development in a way that more closely takes into account the surrounding building context.

Design standards. In various new residential and commercial districts, the rezoning proposal includes new design standards. Examples of standards include minimum ground floors of 15 feet, restrictions on parking egress and ingress along the front of a building, and required amounts of transparency on the ground floor façade.

The hearing on Wednesday was mostly informational, with department staff presenting an overview of the rezoning and a short public comment session. One issue that will likely be contentious during this process is the rezoning of the area around Broadway and 51st Street, where the Safeway and Rockridge Shopping Center are located. The rezoning proposes to cap height limits a 75 feet at the corners of the intersection, tapering down to 60 feet and below heading north and south on Broadway. Several neighborhood groups commented at the hearing and at a public meeting the department conducted that this rezoning would be out of line with the character of the neighborhood. This will likely be just one of a number of specific areas that will get a closer look at the Zoning Update Committee’s upcoming meetings.

Department staff announced future hearings on the rezoning at the committee on June 23 and July 14. There will likely be 3 to 5 hearings at the committee before it goes to the full Planning Commission and on to the full City Council. The entire process is expected to take from 3 to 5 months to complete.

San Francisco Supervisors Seek to Reorganize Rent Board

Meanwhile, back across the Bay, eight members of the Board of Supervisors introduced a charter amendment that would reorganize the structure of the Rent Board. The Rent Board has the authority to interpret the Rent and Eviction Control Ordinance, conduct rental arbitration hearings and mediations and investigate reports of wrongful eviction. The Rent Board’s legally-required membership includes two landlords, two tenants, and one member who is neither a landlord or tenant. All are appointed by the Mayor.

The charter amendment would change the makeup of the Board to include three tenants, two landlords, and two neutral members. The Board of Supervisors would appoint three members, the Mayor would appoint three members, and the Mayor and Board President would have to agree on the final member.

Over the past year, several members of the Board of Supervisors, most visibly Supervisor Avalos, pushed for a reform of the rent control ordinance that would have significantly altered the ordinance in a pro-tenant direction, at the expense of landlords. The Board passed the ordinance, only to be sent to the Mayor’s desk to be vetoed. This new charter amendment appears to be another attempt to wrest some control over the Rent Board, and therefore the application of the rent control law, from the Mayor. If approved the Board of Supervisors, the amendment would be on the November 2, 2010 ballot.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

 

 

Discretionary Review Reform: Take Two

The Planning Department is developing a scaled-back proposal to reform the discretionary review (DR) process, one that does not require approval of the Board of Supervisors. The proposal, outlined in several public meetings held at the Planning Department over the past few weeks, would continue the review of all DR requests by the residential design team. The review would be driven by the DR review checklist approved by the Planning Commission last year. If the residential design team concludes that the project requested for DR is an exceptional or extraordinary circumstances or poses an emerging policy issue, the case will be brought to the Planning Commission, for a full DR hearing. If the project does not rise to this level, a preliminary hearing will be held by the Planning Commission where both the project sponsor and DR requestor will have the opportunity to present their case. A minimum of three commissioners can vote to hold a full DR hearing if they believe the case merits it.

The major distinction between these two tracks is that Planning Department staff will not prepare a full report for what they believe to be unjustifiable DR requests. This would have an immense impact on staff resources, as even simple DR cases can take up as much as 40 hours of staff time to analyze and prepare a report. The proposal was met with intense opposition during the first outreach meeting, which should be expected at the upcoming Planning Commission hearing on the proposal. The proposal, which was scheduled to be heard by the Planning Commission today, is proposed for continuance to June 17. Since it requires no approval from the Board of Supervisors, it would only need to be approved by the Planning Commission to go into effect. The last effort at DR reform was tabled at the Board of Supervisors Land Use and Economic Development Committee.

Mayor’s Development Stimulus Package Finally Passes

After a seven-month legislative process, the Board of Supervisors voted 10-1 to pass the development stimulus after its final reading yesterday. Beginning July 1, project sponsors will be able to defer 80 or 85 percent of a project’s development fees until the first certificate of occupancy is issued. If a project is located within one of the city’s area plans (such as Eastern Neighborhoods, Market and Octavia or Balboa Park) 80 percent of fees can be deferred and if located outside these areas 85 percent of fees can be deferred. The remaining 15 or 20 percent is required to be paid at the time the first building or site permit is issued.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

 

 

Reuben & Junius LLP attorney Stephen R. Miller has just published an article on commercial green leasing in the prominent Environment Law Reporter, one of the country’s most-cited environmental law journals, which is published by the Environmental Law Institute in Washington D.C. The article, “Commercial Green Leasing in the Era of Climate Change: Balancing Risks, Burdens, and Incentives,” is available free of charge at “http://ssrn.com/abstract=1600422.”

The article’s review of model leases available in the United States and throughout the world, including Australia, Canada and the United Kingdom, provides a global view of how real estate markets-both public and private-are navigating the dilemma of meeting climate change mandates through leases.

Green leasing is especially important since commercial office space is one of the largest sources of greenhouse (GHG) emissions, energy use, and resource consumption. The overwhelming majority of commercial office space is leased, which means that how commercial leases address issues of GHG emissions, energy use, and resource consumption will be an increasingly important issue in the next decade. Long-term leases negotiated today must anticipate coming regulatory and market shifts to meet the demands of the private parties involved in properly allocating green buildings’ risks, burdens, and incentives. Done right, such a lease also has the potential to play a substantial role in reducing climate change: one study estimated that the energy cost reduction in the typical office building could be as high as 50%. Not only does that provide a substantial social equity component in addressing a global problem, it could also provide a substantial marketing benefit, as well as carbon credits that could be redeemed in anticipated cap-and-trade programs. Such a lease may also put the parties in a better position to address the increasing number of green regulations being passed on a regular basis by municipalities.

The article points out that effective green leasing is not simply a matter of adding one or two provisions here or there in a lease, but rather, is an overlay on the entirety of the leasing enterprise. In addition to providing substantial background information on regulatory and market-driving factors to green leasing, the article provides insight into such issues as:

• whether a third-party rating system, such as LEED, should be integrated into a lease
• how to build a green negotiating team
• understanding today’s green leasing market, and anticipating tomorrow’s green leasing market; and
• drafting a green lease

In reviewing various approaches to drafting green leases, the article touches on issues such as:

• cooperative or top-down approaches to implementing green leases
• drafting an operations plan for green buildings
• housekeeping in green buildings
• allocating operating costs in green buildings
• tenant improvements and alterations in green buildings
• work letters and contractor obligations for green buildings
• drafting tenant handbooks for green buildings
• cooperation among tenants in multi-party buildings in achieving environmental objectives
• green insurance and endorsements
• remedying a green breach and green arbitration or mediation
• allocation of carbon credits in any future cap-and-trade system
• future changes to third party green building rating systems, such as LEED

The article’s global approach to the issue of green leasing makes clear that there is no one right approach to drafting a green lease; rather, green leases need to be tailored to the particular green building, particular parties involved, and the particular regulatory environment where the building is located.

If you would like to discuss green leasing issues further, feel free to contact Stephen R. Miller, who is also available to discuss these issues with your team.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

New Development Stimulus Proposal Aired at Housing Action Coalition Summit

The HAC held its annual summit Wednesday morning which focused on the difficulty of providing housing for middle-income families in the city. During the discussion period, panelist Brad Paul, a longtime housing and community development consultant involved in the early years of the Tenderloin Neighborhood Development Corporation, raised a concept that has been talked about quietly among housing advocates in recent months: set a transfer tax on sales of all real property throughout the city while reducing the affordable housing fees on new projects. This could stimulate the housing industry and increase overall funding for the city’s affordable housing stock at the same time.

Most people would agree that providing affordable housing is an obligation that all of society shares. Today, the burden of that obligation is borne almost exclusively by new development through affordable housing fees, fees that contribute to the high sales prices of new homes in the City. A fairer approach would be to spread the City’s obligation to provide affordable housing so that both new and existing property owners must make an equal contribution. This citywide transfer tax would do just that. A citywide transfer tax could be set at less than 1% and likely still provide more funding than current affordable housing fees on new development. It would also stabilize the city’s affordable housing fund, which is highly sensitive to rises and falls in the market (as it is tied directly to the number of new development starts). Supervisor David Chiu – a panelist at the HAC summit – stated he was “very interested” in discussing this idea further. This is a commonsense proposal that will increase the amount of affordable housing in the city while spreading the burden amongst all residents, and should be pursued by city officials and those involved in the development community.

Development Fee Deferment Clears Committee Hurdle; BMR Fee Reduction Removed

Last Monday, the Board of Supervisors Land Use and Economic Development Committee approved an amended version of the development fee deferment ordinance, sending it on for consideration by the full Board. The final version would make all development fees (including affordable housing fees) due before the first site or building permit is issued, but would allow deferment of most of the fees to be due at the issuance of the first certificate of occupancy (including temporary ones). Under the committee-amended version, for projects located in recently adopted plan areas with impact fees (such as Eastern Neighborhoods, Market & Octavia, Rincon Hill, Balboa Park, etc.), 20% of the all of the development fees would be required to be paid up front, before the building permit is issued. For projects outside of plan areas, 15% of all of the development fees would be required to be paid up front. The original concern with the fee deferment proposal was that there would be no early funds for public improvements, and the committee felt a lower down payment was needed outside of these plan areas where the funds would not go to immediate public improvements.

The 33% BMR fee reduction proposal, however, was not moved forward. The proposal would have reduced the affordable housing fee by 33% in exchange for a project sponsor subjecting a project to a 1% transfer tax on all future sales which would go into the citywide affordable housing fund. The committee expressed concern about how long it would take to recoup the reduction in affordable housing fees.

Mayor Newsom to Introduce Ordinance to Help Finance Development Fees

In related news, last week Mayor Newsom announced his intention to introduce legislation next month that would help developers finance city development fees. The legislation would likely be similar to the recently-enacted GreenFinanceSF program, which helps finance energy efficiency upgrades. A city-wide Mello-Roos district would be created, allowing the developer of a project located anywhere in the city to opt-in to the district. The developer would receive a loan from the city, or Mello-Roos bonds would be issued, to pay the development and impact fees (but not affordable housing fees). The loan/bonds would be paid off through a special tax to be paid with property taxes, and amortized over a period of time. This would provide a mechanism for a developer to pay off development fees over a longer period of time, freeing up funds to be spent on actual development and construction costs.

We’ll keep you posted on each of these proposals.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

 

Last week, Supervisor Michaela Alioto-Pier introduced a new ordinance that would limit the time period in which negative declarations and categorical exemptions could be appealed to the Board of Supervisors. This is an important opportunity to reform the city’s inefficient CEQA appeal process, which currently places unjustifiable costs on project sponsors and places unnecessary burdens on the Board of Supervisors.

The Way It Is Now

The California Environmental Quality Act provides that any environmental impact report or negative declaration approved by the Planning Commission or categorical exemption issued by the Planning Department must be appealable to an elected body. In San Francisco, that is the Board of Supervisors. However, San Francisco’s Municipal Code currently only limits the appeal period for EIRs – which must be appealed to the Board of Supervisors within 20 days after the Planning Commission has certified the document. Negative declarations and categorical exemptions, however, can be appealed at any time up until a proposed project has been approved and all appeals of the project have been extinguished. This has resulted in the following situations:

– A project entitlement is approved by the Planning Commission at the same time a negative declaration is adopted. A project opponent can appeal the entitlement approval to the Board of Supervisors or the Board of Appeals, a process which can take more than two months to complete. Before a final action on the entitlement appeal, the opponent can then appeal the negative declaration, which can take several more months to resolve.

– A categorically exempt project that otherwise requires no Planning Commission approval is taken to the Planning Commission on Discretionary Review. After being approved by the Planning Commission, the project sponsor spends several months to over a year preparing detailed architectural and building plans. Finally, the Department of Building Inspection issues a building permit. A project opponent can then file a second appeal of the building permit to the Board of Appeals within 15 days. Even if the Board of Appeals upholds the building permit, the project sponsor is still at risk of having the categorical exemption for the project being appealed and overturned – possibly over a year after obtaining Planning Commission approval at a discretionary review hearing.

One problem with the current situation is that it undermines one of the primary purposes of CEQA – to provide public officials with an adequate environmental review document for a project as early as possible in the entitlement process in order to inform their decision. In the second scenario above, the categorical exemption appeal is heard by the Board of Supervisors after all project approvals and appeals have occurred. At that point, it has very little usefulness in informing city officials’ decision on a project.

Another problem is that the current situation is fundamentally unfair. It provides project opponents with more than one bite at the apple to stop a project. Any problems with an environmental document should be raised within a reasonable period of time after it is approved or issued. Allowing an entirely new appeal process to begin after one appeal process on the same project has completed is an inefficient use of the Board of Supervisors’ time and exacts an unfair costs on all project sponsors – from developers to single-family homeowners.

The Reform Proposal

The proposed ordinance would set a 20-day appeal period for negative declarations and categorical exemptions. This would ensure that any potential appeals of these environmental documents would occur within a reasonable, and limited, period. For negative declarations, the appeal period would start when the Planning Commission approved the document. For categorical exemptions on projects that require Planning Commission or Zoning Administrator approval, the appeal period would start when the Planning Commission or Zoning Administrator approved the project or requested variance. For categorical exemptions that do not require Planning Commission or Zoning Administrator approval, the appeal period would start when a permit for the project is issued (or when the Planning Commission takes action on a project through the discretionary review process).

Just these changes would solve the issues in the above scenarios by forcing project opponents to file a timely appeal of an environmental document before an appeal of a project approval has run its course.

The ordinance would also prohibit appellants from maintaining an appeal on behalf of other individuals or entities without express written consent. This would avoid individual appellants taking advantage of an appeal fee waiver meant only for neighborhood organizations. The ordinance would also make the statute of limitations of a judicial appeal start at the date of project approval, not the Board of Supervisors’ later disapproval of the appeal.

Further Recommendations

While we believe the proposed CEQA Appeal Reform is a tremendous step in the right direction, it could be even better. The ordinance should make clear that the 20 day appeal limitation also applies to community plan exemptions. Second, the legislation should clarify when the CEQA Notice of Determination (NOD) and Notice of Exemption (NOE) should be filed by the City. The filing of the NOE and NOD start the running of statutes of limitations for CEQA challenges in court. There is considerable confusion surrounding this issue on many projects, as a result of the often overlapping appeal periods and timelines. This seems like the right time to fix this problem as well.

CEQA Appeal Reform is another opportunity, similar to Discretionary Review Reform, to significantly improve the entitlement process in San Francisco. Interested parties should make their voices heard at future public hearings in support of the ordinance.

The ordinance will likely be heard first by the Planning Commission, then by the Board of Supervisors Land Use and Economic Development Committee before going to the full Board. Please contact us if you would like a copy of the ordinance.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.