Last month, the Planning Commission certified the Final Environmental Impact Report (“FEIR”) for the Transit Center District Plan (“Plan”) and Transit Tower after nearly five years of study. The two-inch-thick document covered the potential environmental effects of the Plan and Tower in extensive, if not excruciating, detail. Despite years-and millions in public funds-expended on a thorough and objective document, an appeal was filed yesterday. The appeal was filed by perennial anti-development attorney, Sue Hestor, on behalf of the Save Our Parks Sunlight Coalition (“Coalition”), a group whose membership is comprised of Ms. Hestor’s organization, San Franciscans for Reasonable Growth (“SFRG”). Presumably, other groups are members of the so-called Coalition, though none are identified by name. Though Ms. Hestor upbraided the Planning Commission at the certification hearing only weeks ago for not possibly having read the voluminous FEIR or absorbed all of its minute details, the appeal now claims without any visible trace of irony that the document was not detailed enough. As expected, the appeal focuses primarily on the shadows on public parks and other open spaces. Specifically, it alleges that the FEIR: Understates the shadow impacts on parks under the protection of Proposition K, a voter-approved ordinance that precludes new shadows on parks under the jurisdiction of the Recreation & Parks Commission, unless the shadows would not have a significant or adverse effects; Misapplies Proposition K by assuming that the Planning Commission and Recreation & Parks Commission can increase the amount of shadow allowed on downtown parks. Unsurprisingly, the appeal offers nothing in the way of factual or legal support for any of these claims for one simple reason: there isn’t any. For those unfamiliar, an FEIR is not an approval of a project or plan; it is simply an informational document that must be objective, accurate, and adequately apprise the public and decision-makers of the environmental impacts before a project (or a plan) is approved. There is no question that the FEIR’s analysis of shadow meets this standard. It devotes more than 81 pages of text and graphics to describing how the new skyscrapers allowed by the Plan would affect parks and open spaces. What’s more the analysis is deliberately conservative: every potential development site was modeled for a building that, in all likelihood, will be bulkier and taller than what eventually gets built. Potential new shadows on major parks were shown in hour-by-hour graphics at different times of year and the percentage of additional time parks could be shaded was quantified down to one-hundredth of one percent. Again, to be conservative, the FEIR didn’t account for real-world conditions like rain and dense cloud cover. The result of this worst-case analysis? The parks most affected by new shadows could experience one-quarter of one percent (0.25%) more shadow than they do now. At Union Square and Portsmouth Square – the two parks that are the central focus of controversy – new shade would occur before 9:10 a.m. when park use is limited. Though the figures show that effects of new buildings will be minimal, that doesn’t mean they are “understated” or that the FEIR is somehow deficient. It just means that the heated rhetoric of the anti-shadow zealots isn’t grounded in objective reality. The appeal’s primary legal claim – that the amount of shadow on downtown parks can’t be increased – also falls flat. Proposition K does not flatly prohibit new shadows above certain numeric amounts. It prohibits new shadows that are both “significant” and “adverse.” The interpretation of these subjective terms was left to the Planning Commission and Recreation & Park Commission, which later adopted quantitative limits or “shadow budgets” for parks in the downtown area. The appeal asserts that these shadow budgets are somehow locked into place as a voter mandate under Proposition K, even though they were adopted by the two commissions some five years after the ballot initiative passed. This position defies both logic and longstanding practice. The Planning Commission and Recreation & Park Commission have, on rare occasions, adjusted shadow budgets to allow construction of projects with clear social benefits and minimal impacts on parks. These include an addition to the Asian Art Museum and several affordable housing projects. As a key source of revenue for the next generation of downtown transit, minor increases in shadow allowances to carry out the Plan are justified, and the FEIR can’t be considered defective for pointing out the Planning and Recreation & Parks Commissions have the discretion to do just that. Though the appeal is completely without merit, CEQA nonetheless mandates the Board of Supervisors consider it-an exercise that will needlessly consume the time and attention of elected officials and waste public funds. To add insult to injury, none of these costs will be paid by the appellant. San Franciscans for Reasonable Growth, which to most regular observers seems to be an organization consisting of one person, apparently received a fee waiver as a “community organization.” While the City is required to consider CEQA appeals as a matter of law, it should-especially where public projects are concerned-stop encouraging them with what amounts to a hijackers-fly-free policy. The appeal is expected to be heard by the Board of Supervisors in early July. We encourage you to contact them to urge rejection of the appeal and approval of the Plan. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2012 Reuben & Junius, LLP. All rights reserved.    

A persistent topic in real estate law is prescriptive easements, whereby one acquires the legal right to use the land of another without the owner’s permission. In the recent case of Connolly v. Trabue (204 Cal.App.4th. 1154)( 2012) the California Court of Appeal decided a dispute between neighbors concerning a prescriptive easement and the effect of significant delay by the party claiming the easement in asserting its rights. The Dispute In 1995 the Connollys bought two parcels of land in Humboldt County, which they used for cattle ranching purposes. By 1998, they had built a fence around these two parcels, which also enclosed a portion of an adjacent parcel, Lot 17. In 2003, the Connollys purchased Lot 17, then immediately sold it to Dobbs, with the agreement that the property line would be adjusted so that title to the fenced-in portion of Lot 17 would remain with the Connollys. However, the 2003 grant deed prepared by Dobbs did not specify that the subject portion of Lot 17 was excepted from the transfer, and the entirety of Lot 17 was transferred to Dobbs. The Trabues bought Lot 17 in 2008, and a dispute soon arose concerning use of the fenced-in portion used by the Connollys. The Connollys claimed that notwithstanding that they had made no formal legal claim of an easement for over 10 years since their use of the subject property had begun, their right to use the area had already ripened into a prescriptive easement, as they had met all legal conditions, and the Trabues could therefore not prevent them from continuing their use of the subject area. The Trabues claimed the Connollys had waited too long to assert their easement rights, and, pursuant to the legal doctrine of laches, a prescriptive easement had not been established. The Legal Framework Under California law, a prescriptive easement is the right to use another’s real property acquired by open, notorious and continuous use of the property under claim of right and without the owner’s permission for a period of five years. Once these criteria are satisfied, an easement is established by operation of law, and no further action by the claimant is necessary. The burden is on the property owner to prevent such use of its land from ripening into an easement. If the property owner takes no action to stop the use of its land before the five year period has run, then a prescriptive easement may be established in the user’s favor. “Laches” is an equitable doctrine that a legal right or claim will not be enforced or allowed if a long delay in asserting the right or claim has prejudiced the adverse party. Laches addresses delay in the pursuit of a right when a party must assert that right in order to benefit from it. The Court’s Decision Reviewing the facts of the case the Court of Appeals determined that since at least 1998 the Connolly’s had used, and continued to use, the subject portion of Lot 17 for cattle ranching purposes. The Connolly’s use was not concealed and was at all times open, apparent, visible, and adverse to all others claiming a right to the subject portion of Lot 17. The Connollys regularly locked the gate leading into the subject portion of Parcel 17. The Connollys were never given permission by anyone to use the subject portion Lot 17 and no one ever interrupted their use. The Court held, contrary to the Trabue’s argument, that the doctrine of laches did not apply to the Connolly’s claim of a prescriptive easement. There can be no undue delay under the doctrine of laches where a claimant is under no obligation to act, but instead acquires a prescriptive easement by operation of law. A claimant’s rights vest by operation of law at the moment the requisite conditions for a prescriptive easement have been established for the five year period; no further steps are required to establish the easement. By maintaining their use of the subject portion of Lot 17 and meeting the required criteria for a five year period, the Connollys were under no obligation to take further action to perfect their rights. Any delay by the Connollys in formally asserting their claim of easement is not pertinent to the establishment of the easement. The Trabues could therefore not legally prevent the Connollys from continuing their long-standing use of the area. The Court’s decision in Connolly confirms that a property owner must be proactive and take steps to prevent a prescriptive easement from being established over its property by operation of law where the required conditions are present. While Connolly involved a rural setting, issues surrounding prescriptive easements are common in urban areas, and property owners should be aware of any use of their land that could ripen into an easement. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2012 Reuben & Junius, LLP. All rights reserved.    

For more years than we care to count, Reuben & Junius has been appearing at the Planning Commission in support of multi-unit residential projects. At most, if not all, of those hearings, one Planning commissioner or another, or speakers opposing the project would consistently and predictably raise questions of the project sponsor and/or make critical comments about the Planning Department’s project processing such as; (1) will these residential units be for sale or for rent – the complaint being that very little product was being produced that would be affordable to the middle-class; (2) if the units are going to be for-sale condominiums, how much will they cost; and (3) the Planning Department has no means of tracking the cumulative production of residential projects and their respective affordability level. Generally, we were able to deflect the questions with a combination of lack of knowledge of market conditions in the coming years and the fact that there are no Planning Code provisions that required a project sponsor to declare rental vs. for sale, rental or for sale price points, or any other proprietary information. Housing Production Reports Things may change. Supervisors Christina Olague, Jane Kim, David Campos, and Eric Mar have proposed adding a new Article 5, “Housing Preservation and Production” to the Planning Code. The portion of the legislation that we wish to highlight is entitled Housing Production Reports. This section would require Planning Department staff reports to the Planning Commission for individual developments to include: (a) the expected unit type and household income levels of buyers or renters of the proposed projects, and (b) how the units in the project would address the City’s quantified production goals for housing at different income levels. Under state law, housing developments cannot be denied just because production targets have been exceeded. Nonetheless, project opponents in San Francisco routinely urge that projects be denied because “we’ve already built enough market-rate housing already.” According to the legislation, San Francisco exceeded its market-rate housing production targets for the 1999-2006 period by more than 50 percent. Had the reporting requirement been in place in 2006, for example, market-rate developments would have gone to the Planning Commission with a staff report indicating that production targets for such housing had been met. Again, this alone is not an adequate basis for denying a project, but it is nonetheless problematic for staff reports to include information that can be easily weaponized by the City’s seasoned development foes. Indeed, with the City’s affordable housing requirements set uniformly on a city- or district-wide basis, it is hard to see what purpose – other than empowering opponents – the project-level reporting requirement will accomplish. In addition to project-based reporting, running data would need to be updated on a quarterly basis. And although couched as an effort to maintain an accurate continuous total of housing approvals and how those new approvals address the City’s production goals as expressed in the Housing Element of San Francisco’s General Plan, it is hard to see how this data will be assembled absent a requirement that project sponsors provide detailed economic forecast information (sales or rentals, price points, buyer/ renter anticipated gross income levels, unit costs, etc.). In that the legislation requires that the Planning staff provide the data prospectively as residential projects are processed for entitlement, it seems logical and likely that project sponsors will be required to participate in assembling the information with regard to their respective projects. Predicting The Future Is Not Easy It has been our experience in the San Francisco market that economic cycles are inevitable and that they are both short and steep. The role of a speculative residential developer requires a great deal of guesswork in trying to anticipate delivery of product into the right market. It is virtually impossible to assemble a site, even one that includes a single parcel, conceptually design a project, submit applications to the Planning Department and pursue those applications through entitlement, prepare construction drawings and submit for plan check through the Department of Building Inspection, obtain financing, and then spend at least a year constructing a building, all within one cycle. In fact, perhaps the most unpredictable segment in that sequence is the time spent at the Planning Department, which can often exceed a year, notwithstanding the number of units contained in the proposed project, which ultimately means that residential developers are at the mercy of a process that they cannot control and also at the mercy of market forces that are virtually impossible to time. To the extent that the proposed “Housing Preservation and Production” legislation seeks to maintain accurate up to date factual data on the construction of housing and who that housing will serve, it may make more sense to collect the data as projects are completed and sold or rented. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2012 Reuben & Junius, LLP. All rights reserved.    

As people increasingly shop online, the uncollected sales taxes leave billions of dollars out of the reach of state and local governments. We have recently seen the very public tiff between Amazon and the State of California over this issue. Traditional retailers continue to argue that it is simply unfair for online retailers not to pay the same sales taxes that they do. Many groups are now calling for a federal response to require the collection of sales tax by remote retailers. This week we review some history on this issue and the status of the latest federal legislation. Quill v. North Dakota – The Nexus Rule We start in 1992, when the U.S. Supreme Court in Quill v. North Dakota ruled on the matter of sales tax on remote sales. In Quill, the Tax Commissioner of North Dakota sought to require Quill, an out-of-state mail order house with neither outlets nor sales representatives in the state, to collect and pay a use tax on goods purchased for use in that state. The Supreme Court ruled that sales tax must be charged only if a retailer has a physical presence, or “nexus”, in the state where the purchase is used. 504 U.S. 298. The court held that it would be too complicated for retailers to parse through 45 state and more than 7,500 local tax systems in order to ascertain the appropriate sales tax charge. Some states, like California, are now claiming that affiliate programs run by those like Amazon establish such a nexus, in order for states to recover the uncollected sales taxes. Further, brick and mortar retailers argue that they operate at a competitive disadvantage to remote sellers who do not charge or collect sales tax and thus lose business to online retailers not tied to a particular state. The Marketplace Fairness Act Congress has responded to this increased pressure by introducing the Marketplace Fairness Act. S.1832. A similar bill was introduced in the House of Representatives called the Marketplace Equity Act of 2011 (H.R. 3179). The Marketplace Fairness Act (“Act”) was brought before the Senate on November 9, 2011. The Act requires that states simplify their sales tax laws in order to ease the concerns raised in the Quill case. The Act grants states the authority to compel online and catalog retailers to collect sales tax at the time of a transaction, subject to an exception for those businesses which do less than $500,000 in total U.S. remote sales. The sales tax would be attributed to the locality where the item is delivered to the purchaser. The caveat is that states are given this authority to compel the collection of sales tax from remote sellers only after they have simplified their sales tax laws. States may elect between two options in order to simplify their sales tax laws. One, a state can join the other 24 states that have already voluntarily adopted the measures of the Streamlined Sales and Use Tax Agreement. The Streamlined Sales and Use Tax Agreement requires member states to comply through the use of consistent sourcing rules, definitions, methods, and protocols for the calculation, collection and reporting of sales/use tax. California is currently not yet a member state of the SSUTA. Alternatively, states can adopt certain simplification mandates, such as designating a single state organization to handle sales tax registrations and establishing a uniform sales tax base for use throughout the state. The Debate There are lobbyists both in favor of and against the bill’s passage. Those against the bill say that the additional sales tax on online purchases is a bad idea in a weak economy because it decreases consumer spending for groups with limited budgets. Also, online retailers like Ebay argue that it could stifle online commerce and destroy jobs, which in turn could decrease income taxes flowing to the state. Tod Cohen, eBay’s Vice President for Government Relations and Deputy General Counsel, stated “this is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors. It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.” Supporters argue that the additional revenue from collecting sales taxes from remote sales would help those states facing budget shortfalls. Further, they believe it would make it more fair for those retailers who operate out of a brick and mortar shop. Haley Barbour, the governor of Mississippi has said “good public policy says it is past time that our brick and mortar merchants on Main Street and in our shopping centers get a level playing field with Amazon and the internet-that they get fair treatment for paying our taxes.” Mr. Barbour further commented that the passage of the bill would allow Mississippi to collect an estimated $300 million in currently uncollected sales taxes. As of the date of this article, the Act has been referred to the Finance Committee, so the debate will continue for the time being. The outcome of this legislation is important for Californians. On the one hand, according to the University of Tennessee Center for Business and Economic Research, 18% of California’s $23 billion deficit could be closed if online retailers collected sales tax for sales attributable to California. On the other hand, there is a fear that the state could be hampered by the requirement to streamline their sales taxes and it could negatively affect small businesses in California and reduce job growth. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and

To those who are not from here, San Francisco can sometimes seem a little backwards. It’s cloudy in the summer. We bike to work. Instead of confining our spices to one rack at the grocery store, we have entire shops devoted to spices. And we discourage new parking. As avid readers of the R&J update know, San Francisco policymakers have been steering a significantly new course for transportation policy over the past few years. In the spirit of the City’s “Transit First” policy, zoning is generally not requiring parking anymore, denser development is being planned for near transit stops, and large investments are being made in upgrading our transit, pedestrian and bicycling systems. One thing that hasn’t caught up to this new wave of transportation policy is environmental review. Currently, when new development projects undergo environmental review, transportation impacts are studied based on, for example, how new automobile traffic will affect nearby intersections. The problem with this narrow approach is that many intersections in the City are already overburdened, and new development easily triggers higher (costlier, more time-consuming) environmental review and preparation of many redundant transportation studies (TS). The City is now devising a way for virtually all projects to avoid heightened environmental review due to transportation: by using a new citywide fee that expands the existing Transit Impact Development Fee (“TIDF”). TS Out – TSF In This new Transportation Sustainability Fee (“TSF”) would expand the existing TIDF to apply to residential development. Single family homes and development of less than 800 square feet would be exempt from the fee. By paying the fee, a development project would be mitigating any potential adverse impacts it could have on transportation. Critically important for streamlining projects and avoiding redundant work: no transportation study would be required. Preparation of a negative declaration or EIR could be avoided for projects with potential adverse impacts limited to transportation. The Nitty-Gritty. In essence, the TSF would replace the TIDF. The City is currently estimating the following fee rates for the TSF:   Residential: $5.53/sf   Office: $12.64/sf   Retail/Entertainment: $13.30/sf   PDR: $6.80/sf   Cultural/Institution/Education/Medical: $13.30/sf   Visitors Services: $12.64 The residential fee is completely new. The fee rate for office, retail and institutional uses would increase slightly. PDR fees would drop significantly. The City is also contemplating a TSF reduction for preferred-policy projects. Reduced fee rates would apply to space housing small businesses, projects proposing reduced parking, affordable housing projects, and residential projects of 20 units or less. Fee reductions may also be available in the Market/Octavia and Eastern Neighborhoods plan areas, where area-specific impact fees already apply. The TSF must itself undergo environmental review, and will not be considered for passage for at least 18 months. In the meantime, the existing TIDF is being updated (yes, this generally just means increased). As currently written, the updated TIDF would apply to all new non-residential development of 800 square feet or more (instead of the current 3,000 square foot threshold) and the proposed non-residential fee rates listed above would go into effect. This updated TIDF is expected to go into effect this October. We expect a lot of debate over transportation fee reform over the next few years. On one hand, the residential development community could take issue with a brand new fee that applies to development. On the other hand, all development (including residential) could see a huge benefit in simply avoiding environmental issues related to traffic. We will keep you posted as the TIDF update moves through the legislative process this year, and as the TSF ordinance is considered in a few years. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2012 Reuben & Junius, LLP. All rights reserved.    

The Future of the Fee Deferral Program On April 23, the Board of Supervisors’ Land Use and Economic Development Committee held a hearing to consider the impacts and future of the Fee Deferral Program. The Fee Deferral Program commenced on July 1, 2010 and is scheduled to expire on July 1, 2013. The hearing was primarily an information-gathering session, and the Committee plans to take these issues up again in approximately six months. As such, the next six months will be very important in determining the political future of the Fee Deferral Program. Critics of the Fee Deferral Program point to the deferred fees and express concern that affordable housing and infrastructure needs are not being met. The Fee Deferral Program was originally designed as a financial incentive to make development more affordable and encourage new projects in bad economy, the Program arguably a better way for the City to do business in any economy. Under the Program, a developer that chooses to defer payment of fees still pays a 15 or 20 percent down payment on the fees, and then pays the remainder of the fees prior to the issuance of the first certificate of occupancy with interest generally ranging from 2-3 percent. This can be a significant amount of money for big projects that pay up to $20 million in impact fees – with a 20 percent down payment, 2.5 percent of $16 million is $400,000. Moreover, the only perceived problem presented by the Fee Deferral Program for the provision of affordable housing and infrastructure was that a “lag time” resulted between the time when the City previously received fees and when the City now receives fees. But the April 23 Committee hearing revealed that the City is now catching up and will soon completely close this lag time, and the City will be budgeting for and receiving impact fees just as it was before. The benefits of the Fee Deferral Program are that the City receives a bit more in revenues; developers no longer have to pay significant carrying costs on up-front money; if investment still is necessary to pay the deferred fees, that investment is more secure because the project is closer to completion; and the City significantly reduces its risk of having to reimburse fees for stalled or failed projects. We will continue to monitor the progress of the Fee Deferral Program as it could have a significant effect on the future of development in San Francisco. On the Horizon: Van Ness Bus Rapid Transit The planning and construction of the Van Ness Bus Rapid Transit (BRT) Project is taking a significant step forward over the next few weeks as staff from the San Francisco County Transportation Authority (Authority) and San Francisco Municipal Transportation Agency (SFMTA) is recommending a Locally Preferred Alternative (LPA) for the Project. Construction of the BRT Project is significant not only because of the changes it will produce for public transit along Van Ness Avenue, but also because of its potential impacts on other construction projects along the Van Ness corridor. According to the Project’s Draft EIS/EIR, the LPA recommended by staff has the longest construction schedule at an estimated 21 months. The Project will extend for two miles along Van Ness between Lombard and Mission Streets. Construction of the BRT stations, transit way, and medians would take place in an approximate 43-foot-wide area in the center of the roadway. Two traffic lanes would generally remain open on either side of the construction area. If necessary, the parking lane on both sides of the street would be closed during the construction work. When parking lanes or a second travel lane is closed, construction will be staged in three-block segments. Construction could begin in 2015. The Draft EIS/EIR reviewed three build alternatives for consideration: one that had the transit line running along the outside lane (Alternative 2), and two center lane options (Alternatives 3 and 4). Staff’s LPA is a hybrid of Alternatives 3 and 4: a center-running line with right side boarding, a single median, and limited left turns. The BRT is intended as an affordable approach to creating rapid transit along Van Ness, and would incorporate the following features: A dedicated bus lane separated from regular traffic; All-door, level boarding, and proof of payment to promote faster boarding and de-boarding; Shelters with seating; Pedestrian safety enhancements; Transit signal priority with traffic signals recognizing an approaching BRT vehicle; and “Traffic signal optimization,” a timing technology for all traffic lights in the corridor. The LPA recommendation is scheduled to be considered by the Authority Plans and Programs Committee on May 15, and by the Authority Board on May 22. It is also scheduled to be considered at the SFMTA Board on May 15. Once the LPA is selected, it will be analyzed in the Final EIS/EIR, which is scheduled to be completed this Summer. The Authority and Federal Transit Administration will certify the Final EIS/EIR in Fall 2012, and SFMTA ultimately has approval authority for the Project. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2012 Reuben & Junius, LLP. All rights reserved.    

After five years of study and outreach, the Transit Center District Plan (“TCDP” or “Plan”) is in the home stretch. This week, the Planning Commission and Historic Preservation Commission (“HPC”) will consider whether to formally “initiate” the various ordinances that will implement the TCDP. On May 24th, the Planning Commission will vote on the certification of the Final TCDP Environmental Impact Report (“EIR”), and make a recommendation on the TCDP ordinances to the Board of Supervisors. If all goes according to schedule, the TCDP will be before the Board of Supervisors in June or July. The TCDP aims to transform the area surrounding the proposed Transbay Transit Center into the new heart of downtown. The Plan includes a package of zoning changes, including height increases, expanded protections for historic buildings, and the elimination of maximum floor area ratio (“FAR”) limits. The Plan also includes an ambitious program of public improvements to be financed by an equally ambitious package of impact fees and exactions on new development. Regional Smart Growth Goals According to the Association of Bay Area Governments, San Francisco needs to build 23.5 million square feet of downtown office space over the next 25 years to meet regional smart growth goals. This is the minimum amount of office space that San Francisco needs just to maintain its current share of regional employment, which declined from 27 percent in 1970 to 16 percent today. Under existing zoning, only about 5.8 million square feet of new office space can be built downtown. The implications of the shortfall are significant. It means that San Francisco risks losing its position at the center of the Bay Area’s economy. Regional sustainability goals will be jeopardized as jobs move to suburban locations where commute patterns generate result in much higher greenhouse gas emissions and other pollution. The Plan’s liberalized development rules will move the City closer to meeting its smart growth obligations. However, significant shortfalls will remain. The Plan proposes a modest increase of about 2.5 million square feet of new office development, or enough for roughly 10,000 workers. This would still leave the City 13 million square feet short of the projected citywide need for office space. As we recently reported, some of this shortfall will be met by planned Central Corridor upzoning focused on the Fourth Street Corridor and new Central Subway. New Development Controls The Plan includes detailed design guidelines and zoning controls to shape new development and achieve the City’s job creation goals: Height Increases. Height increases are among the most publicized aspects of the TCDP. On the site of the proposed Hines-Pelli Transit Tower, the height limit will increase to nearly 1000 feet to make way for the City’s tallest building. Smaller increases, ranging from 50 feet to 300 feet, would allow a handful of buildings on other sites to exceed the area’s current 550-foot height limit. The TCDP would also create new height exemptions to allow decorative architectural elements to extend well above the height limit. FAR Limit Eliminated. Right now, most properties in the Plan Area are subject to an FAR limit of 18-to-1. The TCDP would eliminate this cap, i.e., there would be no express restriction on floor area. To ensure that key opportunity sites are not under built, sites larger than 15,000 sq. ft. would have to achieve a minimum FAR of 9-to-1. Simplified Bulk Controls for Towers. Most TCDP properties fall within an “S” Bulk District. The “S” controls mandate “wedding-cake” buildings with three discrete sections: a base, a lower tower and an upper tower. These bulk restrictions are difficult to comply with in practice and exceptions are the norm. Under the TCDP, a new S-2 District will simplify and relax controls for buildings over 600 feet. Partial setbacks from street frontages would be required to help define the streetwall, but lower tower bulk would not be otherwise restricted. At the upper tower (the top third), average floor plates would have to be 75 percent of the average floor-plate size in the lower tower. Limits on Non-Commercial Uses. Projects on development sites larger than 15,000 sq. ft. within a defined “core area” would be required to provide at least two square feet of commercial space for every one square foot of residential space. This is a somewhat more liberal standard than the 3-to-1 ratio proposed in the first version of the Plan. Pedestrian-Oriented Design. Improving the “bleak” pedestrian environment is among the Plan’s major goals. Below 20 or 25 feet in height, buildings should include façade treatments that create a “pedestrian zone.” The street frontage devoted to lobbies would be restricted. Active retail or open space uses would be required at the rest of the ground-floor frontage. Certain non-active uses (notably banks and gyms) would not be allowed at the ground-floor. New Historic Designations and Additional TDR Supply. The New Montgomery-Second Street Conservation District would be extended to the west to include several properties along Mission and Howard Streets. New individual ratings would be applied to buildings throughout the district. The Plan will also expand the supply of TDR in two ways. First, newly designated historic buildings will be eligible to participate in the TDR program. Second, the amount of TDR that may be transferred from buildings will be increased. Thus, even buildings that have sold off TDR already will be eligible to sell an additional increment. Parking. The Plan includes many new regulations intended to discourage the number of cars entering and traveling through the area. These include new rules on the quantity and pricing of parking in commercial developments, as well as restrictions on the points of access to parking garages. Ultimately, the Plan calls for an absolute maximum on parking in the area. Until the cap is established, the Plan would limit accessory parking to 3.5 percent of a commercial building’s gross floor area, i.e., half of what is currently allowed. In addition, new curb cuts on Mission Street, Second Street, and several pedestrian alleys would be prohibited. A conditional use

Legislation to amend the Planning Code to encourage the production of new student housing and to prohibit the conversion of existing housing to student housing was introduced at the Board of Supervisors in January. Over the past four months, amendments were proposed by the Supervisors to create some limited exceptions to the total ban on conversion of existing housing to student housing. The amendments will be considered at the Planning Commission on May 17, and the Commission will make a recommendation on the proposed amendments to the Board. The first amendment would allow the conversion of existing housing and SRO (“Single Room Occupancy”) buildings to student housing if (1) the existing housing was built by the post-secondary educational institution that will own, operate or otherwise control the student housing; (2) is in a convent, monastery or similar religious order facility; or (3) is on a lot adjacent to the post-secondary educational institution that will own, operate or otherwise control the student housing, provided that the lot has been owned by the educational institution for at least 10 years. The second proposed amendment would allow residential and SRO buildings that have been vacant for at least one year, or have been underutilized for at least two years and have caused blight, could be converted to student housing with a conditional use authorization from the Planning Commission. The definition of “student housing” in the current draft of the ordinance would not be changed. The ordinance defines student housing as a “living space for students of accredited post-secondary educational institutions that may take the form of dwelling units, group housing, or an SRO”. Student housing is permitted where dwelling units, group housing, or SROs are permitted in the underlying zoning district. Student housing must be owned, operated, or controlled by an accredited post-secondary educational institution. Student housing may consist of all or a part of a building. The required dwelling unit mixed in RTO, NCT, DTR, and Eastern Neighborhoods Mixed-Use districts are waived for student housing. Conversion of an existing unit or units to student housing will not be considered by the Planning Department as a loss of a dwelling unit through merger or conversion pursuant to Planning code Section 317, only if the building was built by a post-secondary educational institution that will own or operate the student housing; is in a convent, monastery or similar religious order facility; or is on a lot adjacent to a post-secondary education institution that will own or operate the student housing, so long as the lot has been owned by the post-secondary education institution for at least 10 years. Existing buildings in the C-3-G and C-3-S districts that are not designated as significant or contributory buildings under the historic preservation guidelines may be expanded above the base floor area ratio limits by construction of new student housing, subject to conditional use authorization from the Planning Commission. Through this proposed ordinance, the City will be encouraging construction of new student housing, allowing some limited conversions where they make sense and don’t harm the existing housing stock, but still prohibit the conversion of most existing dwelling units, apartments, or condominiums. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2012 Reuben & Junius, LLP. All rights reserved.      

Legitimization Program Extended to November Mayor Lee has signed an ordinance that will extend the Eastern Neighborhoods Legitimization Program through November 12, 2012. The program, which grants “amnesty” to uses established prior to the Eastern Neighborhoods rezoning but had not received proper permits, had expired this past January. Beyond extending the program’s deadline, the ordinance also requires that legitimization applicants, after receiving their letter of eligibility from the Zoning Administrator, must submit all materials to complete legitimization (e.g. Prop M office allocation application, building permit application) within 90 days of the letter’s issuance. Owners of buildings in the Eastern Neighborhoods with office tenants should make sure they have the proper permits for office use. Once the program expires, buildings without proper permits could be subject to enforcement action. Legitimizing now may be the only way to maintain a legal office use into the future. You can contact our office with any questions you may have about the program. Hallelujah, Hallelujah! Restaurant categories in the Planning Code drop from Thirteen to Three! While everyone talks about the need to cut “red tape” to get rid of inefficient and ineffective government regulations, seldom do you see clear, successful examples of this happening. But that’s exactly what Supervisors Weiner and Olague have done with their recent amendment to the Planning Code, which, among other things, reduces the number of restaurant definitions from 13 to 3. It’s become a public joke in the past few years how convoluted the restaurant controls are in the Planning Code (“will you be toasting bagels on-site?”). This was brilliantly captured in a video created by Aaron Starr at the Planning Department last year (for anyone who has been through the entitlement process in San Francisco, this is a must watch: http://www.youtube.com/watch?v=QOreHYVTHGA). The restaurant ordinance removes all of the confusing and out-dated distinctions between food uses and creates three categories: Limited-Restaurant, Restaurant, and Bar. A Limited-Restaurant is any restaurant that serves food but does not serve beer or wine for on-site consumption. A Restaurant is any restaurant that serves food, including those that serve beer, wine or liquor for on-site consumption. A Bar is, well, a bar. The ordinance doesn’t just improve the restaurant classifications of the Planning Code though. It also amends the use controls for each Neighborhood Commercial and mixed-use district, and in many cases makes restaurants principally permitted where they were formerly permitted with a conditional use, or makes restaurants permitted with a conditional use where they were formerly not permitted. The ordinance is truly transformative in terms of simplifying the process for this critical sector of the City’s economy. We commend Supervisors Weiner and Olague for co-sponsoring this legislation. San Francisco’s restaurant industry could really use a shot in the arm right now – especially considering neighboring Oakland’s restaurant scene has been gaining on San Francisco in the hipness category, and many chock that up to Oakland’s more permissive zoning and other governmental regulations. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2012 Reuben & Junius, LLP. All rights reserved.  

There’s been a lot of news about San Francisco’s new Central Subway line. Less has been reported about the new, transformative planning efforts for the area surrounding the subway.  After obtaining a key approval from the Federal Government in January, major components of the subway’s construction have begun (as anyone who has done some shopping in Union Square recently will have clearly noticed). When completed (estimated in 2019), the subway will extend the T-Third Street line from the King Street Caltrain station to Chinatown. Staying true to its name, the Planning Department is already spending considerable time and effort to modernize the zoning in the area around the subway to take advantage of this new transit corridor. Dubbed the “Central Corridor Plan,” the rezoning process has been going on for close to a year. So far, the efforts have been focused on studying the area, conducting outreach with neighborhood residents, owners and businesses, and developing zoning and infrastructure proposals to upgrade the neighborhood. Several proposed scenarios for new zoning and height controls have been made public. The Central Corridor Plan is smart growth at its best. Anyone who has gotten a degree in Urban Planning in the past decade will tell you that the number one priority in planning new development is taking advantage of transit-rich areas by allowing for higher density housing and workspace. By providing homes and jobs close to transit, residents and workers will be able to live with no- or low-dependence on an automobile. According to the EPA’s most recent annual greenhouse gas inventory, transportation is the second-largest contributor to the U.S.’s greenhouse gas emissions – contributing significantly more of these gasses than even the industrial sector. Reducing Americans’ reliance on automobiles has got to be part of a realistic plan to reduce greenhouse gasses, and the Central Subway is a unique opportunity, as underscored by the Feds’ close-to-$1 Billion investment in the project. The Central Corridor Plan, bounded by Mission, Townsend, 2nd and 6th Streets, could potentially up-zone the entire area to mixed-use zoning districts (allowing both residential and office uses) and could increase height limits to 85 feet in much of the plan area. This would be a big improvement on the Western SoMa Plan rezoning, currently expected for enactment this year, which would maintain most of the current zoning between Harrison Street and Townsend Street, prohibiting new housing or office – likely preserving surface parking lots in the area for the foreseeable future. Under the Western SoMa rezoning, the Planning Department expects that both housing units and jobs in the area would decrease from current levels. Depending on its final form, the Central Corridor Plan is expected to more than double the number of housing units in the area and to increase the jobs in the area by more than a third of those existing.You can find the proposed rezoning maps at http://www.sf-planning.org/index.aspx?page=2557. The Plan does more than just rezoning. It will significantly increase the “livability” of the neighborhood for its new residents and workers. New bike lanes will be installed, pedestrian safety measures will be implemented (this is one of the most dangerous areas in the entire city for pedestrians), and new open space will be created. In short, the plan will leverage the $1.6 Billion investment in the new Central Subway to transform this worn-down part of town into a full-functioning city neighborhood. Based on the Association of Bay Area Governments Housing Allocation goals, San Francisco is on the hook to provide 31,193 new housing units between 2007 and 2014. The Central Corridor plan will put a significant dent in that number, by paving the way for high-density housing in an area of the city that can handle the new residents while also taking advantage of the new Central Subway, which will connect area residents to a transit network that can take them as far as Gilroy and Pittsburg without ever stepping in a car.  The Central Corridor Plan is expected to be released within the next few months, and must then undergo environmental review, expected to begin this spring or summer. This likely means the Plan will go into effect sometime in 2014. We will keep you posted as the process continues. Take That NYC! SF-ers now have a new piece of data to use in their never-ending debate over “best US city” rights with New York. According to the 2010 census, the San Francisco/Oakland region is the second most densely populated city in the United States, after West Coast-neighbor L.A. New York City ranked just fifth in the nation. In 2010, San Francisco/Oakland averaged 6,266 people per square mile. San Jose was just behind in third with 5,820 people per square mile. Beyond bragging rights, these figures highlight the opportunity we have in Bay Area to provide an example of what the future of smart-growth development should look like. Between a world-class transit system and plenty of growth opportunity, the Bay Area has the ability to provide for more residents without expanding the physical borders of our urbanized area. Just hop off BART at Balboa Park (where the new 5-story, 173-unit, lot line Avalon Bay development is just wrapping up), at MacArthur Station in Oakland (where Phase I of the new 624-unit Transit Village is just underway), or at Civic Center (where Twitter’s new lobby is already open) and its clear there is enormous opportunity to grow from within. In fact, the 2010 census also concluded that urbanized areas in the U.S. grew at a faster rate than the country as a whole in the past 10 years, 12.1 percent to 9.7 percent, respectively. This is the future of U.S. development. According to the 2010 census, the top five most densely populated cities in the U.S. are Los Angeles-Long Beach-Anaheim: 7,000 people per square mile (ppsm) San Francisco-Oakland: 6,266 ppsm San Jose: 5,820 ppsm Delano, Calif.: 5,483 ppsm New York-Newark: 5,319 ppsm The issues discussed in this update are not intended to be legal advice and no attorney-client