A case decided this year in the 9th Circuit highlights how important it is to properly draft a letter of intent (“LOI”). In First National Mortgage Co. v. Federal Realty Investment Trust, the 9th Circuit upheld a district court decision to award the proposed landlord $15.9 million dollars in damages based on an anticipatory breach of the LOI, despite there not being a signed lease in place. 631 F.3d 1058 (9th Cir. 2011). First National involved a LOI that was called a “Final Proposal” which stated its terms were “hereby accepted by the parties, subject only to approval of the terms and conditions of a formal agreement”. The LOI was signed by both First National Mortgage Company (“First National”), as the proposed landlord, and First Realty Investment Trust (“First Realty”), as the proposed tenant. The LOI provided for rent at $100,000 per month and gave a “put” option which would allow the landlord to require the tenant to purchase the property at any point during ten years. After the LOI was signed, the parties tried to negotiate a lease, but ultimately could not come to terms. First National filed suit in federal court against First Realty for anticipatory breach of the LOI. The District Court awarded First National $15.9 million dollars in damages for lost rent and for the loss of its “put” option under the LOI. Federal Realty appealed to the 9th Circuit arguing that the LOI was not binding and was a proposal, further evidenced by its title as a “Final Proposal”. The court held that it was in fact binding and distinguished the language that it was “hereby accepted by the parties, subject only to approval of the terms and conditions of a formal agreement” from Rennick v. O.P.T.I.O.N., in which the LOI in Rennick expressly provided that it was “of no binding effect”. 77 F.3d 309 (9th Cir. 1996). The court further found that calling the LOI a “proposal” did not change the outcome of the case citing that the California Supreme Court has recognized that it is important for the parties to be certain that their interim agreements will be recognized. Gavina v. Smith, 25 Cal. 2d 501, 504 (1944). Federal Realty also argued that the LOI fell within the Statute of Frauds, thus it was not binding because it omitted an essential term in the form of the duration of the Lease. The Statute of Frauds requires that certain contracts, including those that cannot be performed in one year, must be in writing and include certain essential terms, in order to be enforceable. The court explained that just because the term of the lease is an essential term does not mean it has to be express in the contract. In fact, extrinsic evidence can be used to explain essential terms that were understood by the parties. In this case the court found it could imply a 10 year term of duration based on the LOI citing a “put” option within 10 years. First National Mortgage Co. v. Federal Realty Investment Trust underscores that it is critical for parties to properly draft letter of intents to ensure that they are a means of negotiation, rather than a contract subject to a breach and recovery of damages. In addition, parties cannot rely on the fact that a LOI might not specifically list all of the essential terms as a way to avoid enforcement, if the term can be implied based on the nature of the contract and the surrounding circumstances. The LOI should be clear that it is of “no binding effect”, otherwise one party could be left paying the other substantial damages due to an alleged breach even if the operative contract is never executed. 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 2011 Reuben & Junius, LLP. All rights reserved.    

Western SoMa Rezoning Update: Fault Lines Emerge Between Planning Department and Board of Supervisors With the final details of the Western SoMa rezoning being hammered out, differences between the Planning Department and some Board members are coming to the surface. On Monday, the Board’s Land Use Committee held a hearing on a Board resolution that would encourage the Planning Commission to include a Community Stabilization Policy in the Western SoMa community plan that it ultimately adopts. The stabilization policy, approved by the local Western SoMa citizens planning group in 2009, would seek to maintain the existing character of the Western SoMa neighborhood, especially with regard to the ratio of market rate housing to affordable housing. First, the policy would require that at least 30% of all housing units approved by the Planning Commission in any given year be affordable housing. Applications for projects that would create a mix of greater than 70% market rate housing in any given year will be put on hold until the 30/70 ratio is met. Second, if the annual number of new neighborhood jobs compared to new housing units falls below 6.6 to 1 over the course of two years, a conditional use requirement would be applied to all new housing projects for “the maximum legally allowable time frame or until all options to restore the 6.6 to 1 net new jobs/housing mix have been exhausted by the [community advisory committee] working in conjunction with all appropriate San Francisco agencies.” Planning Department representative AnMarie Rodgers asserted the Department’s opposition to the policy, noting that quotas of this sort have never been applied in the city. Further, since the required below market rate percentage for new housing projects is below 30%, the policy would in fact require that 100% affordable projects be constructed in order for typical housing projects to move forward. For example, if a single housing development of 30 units is approved in a given year, and the generally-applicable 15% BMR requirement is applied to the project, the 30/70 mix will already be exceeded and a new market-rate project could not be approved until the following year. The 30/70 mix could even create a de facto 30% BMR requirement, since even the first project approved would exceed the 30/70 mix. Ms. Rodgers pointed out that the Planning Department has not had the chance to review the impact of the policy on the area to determine if there are enough sites that are viable for 100% affordable projects (a basic requirement to ensure the policy doesn’t create an immediate halt to housing projects). Supervisor Kim, the sponsor of the resolution, maintained that the neighborhood has been maintaining a 40/60 affordable housing to market rate housing mix since 2001 and that this policy would simply ensure that this appropriate level of affordable housing is minimally maintained. She also cited the fact that the City’s new housing element calls for two-thirds of all new housing units be affordable, and that the stabilization policy is modest in comparison. The Committee ultimately sent the resolution to the full Board without recommendation, after all three members expressed concerns about the Planning Department’s opposition. If passed, the resolution would simply indicate to the Planning Commission that the Board desires to see this policy included – and would likely include it in the final plan if the Commission failed to do so. Environmental review for the Western SoMa Plan is expected to be completed late this year, with adoption hearings in early 2012.   Plenty of Space Available for Office Allocation Within the Prop M “Cap” In 1985, the San Francisco voters approved Proposition M, which required that any creation of at least 25,000 square feet of new office space (whether through new development or a change of use) must obtain an office space allocation from an annual citywide office limit from the Planning Commission. The annual limit of office space allocation is 950,000 square feet, which accumulates over time if the limit for a particular year is not fully allocated in that year. Each year, a pool of 75,000 square feet of the office limit is reserved for smaller projects consisting of 25,000 to 49,999 square feet of office space. In a worst case scenario, where the pool is running low, office projects compete against each other to secure the limited amount of allocable office space each year, in what was referred to as a “beauty contest.” We haven’t had a beauty contest in ten years, and it doesn’t look like one will be likely anytime soon. According to the Planning Department, which presented its annual office limit update yesterday, there is currently 1,004,460 square feet of space under the “small” office allocation cap and 2,633,442 square feet of space under the large office allocation cap. To put that in perspective, the large office allocation cap could cover the 1.4 million square-feet of office space proposed for the proposed 80-story Transbay tower, and would still leave room for a handful of major office towers. While the office market seems to be picking up, the Prop M cap is not likely to be a factor for awhile. 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 2011 Reuben & Junius, LLP. All rights reserved.  

Assemblywoman Ma, Senator Hancock, Introduce Bills to Make Establishing Infrastructure Financing Districts Easier Back in April, we wrote about the potential use of Infrastructure Financing Districts in the city should Redevelopment be eliminated, as proposed by the Governor.  These IFDs provide a similar mechanism to capture and redirect increased tax revenue back to the district and to issue bonds backed by the captured tax revenue.  To see our previous update on IFDs, click here:  http://mytinyurl.com/htpb42mpp6. As a creature of state law, any tweaks to the IFD law must go through Sacramento.  And, possibly also foreseeing a greater reliance on IFDs in the near future, a couple of our local representatives have introduced bills that would make it easier to establish the districts. Assemblywoman Fiona Ma, from San Francisco, has introduced AB 485, which would eliminate the requirement that a vote be held by district property owners or residents to establish an IFD or issue bonds when the IFD implements a “transit village plan.”  Transit village plans can be established by cities and counties in order to encourage high density neighborhoods anchored around a rail or light-rail station, a ferry terminal or a bus hub or transfer station.  Ma’s legislation would also require that at least 20% of tax increment in these IFDs be used to fund affordable housing.  AB 485 was approved by the full Assembly two weeks ago. State Senator Loni Hancock, from Berkeley, has introduced a bill that goes even further.  SB 310 would eliminate the requirement that a vote be held by district property owners or residents to establish an IFD or issue bonds in all situations.  If enacted, IFDs could be created, and bonds could be issued, merely by a majority vote of a County Board of Supervisors or City Council after a public hearing.  SB 310 was approved by the full Senate the same week as AB 485. Removing the requirement of a local vote to establish an IFD makes a lot of sense, considering the fact that IFDs redirect new tax revenue back within the district, as opposed to going to a city or county’s general fund.  It’s difficult to imagine a situation where owners or residents within a district would not want tax revenue redirected back to their local neighborhood.  As for the issuance of bonds, the argument in favor of a district vote is stronger, considering the fact that the district alone is liable on the bonds.  At the very least, eliminating the district vote requirement would take an unnecessary and time-consuming step out of the process to create an IFD.   Senator Leno Attempts to Counter Anti-Inclusionary Housing Palmer Decision Many will remember the momentous Palmer decision of 2009, where the California Court of Appeal struck down the application of a local inclusionary housing law to a rental housing project in Los Angeles.  The Court determined that the local law, which required new housing projects to construct a certain amount of below-market rate housing units, conflicted with the state Costa Hawkins Rental Housing Act, which gives rental property owners the right to set rental rates for vacant units.  The decision was seen as a blow to inclusionary housing laws throughout the state, and many expected the state legislature to move in to pave a legal path for these laws. San Francisco’s own Senator Mark Leno has made such a move this legislative session, by introducing a bill that would expressly supersede the Palmer decision and give cities and counties the right to establish inclusionary housing laws.  SB 184 cleared a Senate committee in early May. While Leno’s bill may provide relief to cities and counties throughout the state by reaffirming their inclusionary housing laws, San Francisco has already taken steps to comply with the Palmer decision.  Last year, the city adopted amendments to its inclusionary ordinance, allowing most projects to comply by paying an in-lieu fee or providing below market rate ownership units, but significantly limiting the option of providing below market rate rental units.  Expect to see local legislation freeing up the below market rate rental unit option if Leno’s bill passes. Oakland Skyline Set to Grow The growth on the ground in Uptown Oakland may soon be matched by growth in the sky.  Early in May, the Oakland Planning Commission gave the thumbs up to redevelopment of the Kaiser Center – located on Harrison Street between 20th and 21st Streets.  The project would add 1.4 million square feet of mostly office development to the site, by demolishing existing street level mall buildings along 20th Street and Webster Street, and constructing a pair of towers – at heights of 573 feet and 469 feet.  For those keeping track, these would immediately become the tallest and second-tallest buildings in Oakland.  The Ordway Building, just across 21st Street from the Kaiser Center, is currently the tallest building in the city at 404 feet, with the Kaiser Center the second tallest at 390 feet. The project is proposed to be constructed in two phases and will take approximately 8 years to complete.  Future approvals are still necessary for the project to proceed. The Kaiser Center redevelopment would continue to cement the renaissance of Uptown Oakland, which has been substantially driven by the Fox Theater redevelopment, the construction of numerous residential projects as part of Jerry Brown’s 10K plan, and the explosion of hip, new restaurants formally only found in San Francisco and Berkeley. 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 2011 Reuben & Junius, LLP. All rights reserved.

A lot has changed in the twenty or so years that have passed since the Planning Code’s controls on restaurants in Neighborhood Commercial districts were enacted.  Back then, going out to eat was a less common event, reserved for weekends and special occasions.  Fast forward to today, and many people will tell you they eat at restaurants or eat takeout more days each week than they cook. Whether this phenomenon is caused by busier work schedules, the fine cooking revolution, or an increase in healthy eating awareness, the restaurant industry has moved to fill this new demand.  “Fast casual” restaurants – a term few would have recognized just five years ago – have recently seen tremendous growth.  This new dining category is associated with healthier, more diverse menus than fast food, payment at a register with no servers, and higher check averages than fast food ($8 to $15 according to some).  Think La Boulange, Boudin Bakery, or your local upscale burrito joint.  According to RestaurantNews.com, total visits to fast casuals in the U.S. grew by 17% in the past three years, compared to a 1% drop in visits for the total restaurant industry. Contrast the change in the industry with current zoning controls in the City’s Planning Code.  There are 13 different restaurant categories in the Planning Code.  Distinctions are largely based on traditional distinctions between fast food and full service dining, such as whether food is served in disposable wrappers or whether the bill is paid before food consumption.  A major distinction is made based on whether the floor area of a restaurant is above or below 1,000 square feet, creating another layer of size regulation on top of generally-applicable use size limits. Spurred by Supervisor Mirkarimi’s recent legislation to make changes to the restaurant definitions and controls in the Planning Code, the Planning Department is taking the opportunity for a re-think of the entirety of restaurant regulations.  Department staff presented its proposals at the Planning Commission this afternoon, which include: Reducing the number of restaurant categories to three:  “Restaurant” (food and on-site alcohol), “Restaurant-limited” (food and off-site alcohol), and “Bar” (on-site alcohol only); Principally permitting “Restaurant-limited” uses in all Neighborhood Commercial Districts; Pegging the controls on “Restaurant” uses to the existing controls on full-service restaurants (e.g., if a full-service restaurant currently requires a CU or is not permitted, a CU would be required for the new “Restaurant” use). A more conservative proposal is also being considered, which would actually increase the number of restaurants that would be subject to a CU. At the hearing this afternoon, the executive director of the Small Business Commission, the director of the Golden Gate Restaurant Association, and the executive director of Livable City all heartily supported the effort.  Discussions on the overhaul of restaurant controls will continue for the next few months, and the proposal will be heard again by the Planning Commission on August 4.  Those wanting to get involved in the effort should contact planner Aaron Starr at aaron.starr@sfgov.org.   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 2011 Reuben & Junius, LLP. All rights reserved.

MTA Drops Proposed Residential Transit Impact Fee Residential builders and developers, you can breathe a sigh of relief.  As reported by the California Planning and Development Report, the MTA has decided not to pursue a proposal to expand the Transit Impact Development Fee to apply to new residential construction.  Currently, the fee only applies to new non-residential development. The expanded fee would have applied a fee on new market rate residential development of between $4 to $5 a square foot and was expected to generate $2 to $5 million annually.  According to CP&DR, in addition to strong opposition from residential builders, the Pacific Law Foundation had also threatened a lawsuit over the fee. No word yet on the proposed increase in the existing TIDF or the proposed new fee to fund bicycle and pedestrian improvements.  We’ll keep you posted. Proposed Statute Would Require New Contractors to Retain Previous Employees We came across an interesting statute that BOMA (Building Owners and Managers Association of San Francisco) reviewed in its recent “Action Alert.”  Upon the sale of commercial property, AB 350 (Solorio) would require certain contractors hired by the new building owner (janitorial, security, landscaping, building maintenance, and window cleaning) to retain any employees of the previous contractor for at least 90 days.  This is an expansion of existing law that requires such retention of only janitorial workers for 60 days.  The statute would also prohibit the new contractor from conducting any background checks or interviews to determine the qualifications of the employees.  BOMA opposes this proposed law because it (quoting from BOMA): Unfairly forces employers to hire a predecessor’s employees; Undermines the at-will employment presumption in California; and Is designated to ensure union representation, despite any changes in employers. It seems to us that if this statute were enacted, building owners would face uncertainty in selecting new contractors for services, and whether the employees would be of the quality that they expect.  There could be cost increases for complying with the new law, especially for contracts that have a set term. The stated purpose of the bill is to assist workers who have lost their jobs.  BOMA asked the question – if that is the case, why does the statue single out the commercial real estate industry, rather than all jobs in the State of California?  BOMA also noted that the commercial real estate industry is struggling, so imposing this additional burden is not appropriate. If you would like more information about AB 350, check out the fact sheet by clicking on http://mytinyurl.com/ccg7zvrvpm, or contact Kevin Rose by email at krose@reubenlaw.com. HPC to Consider Yet Another Historic Survey in Showplace Square/Northeast Mission:  25% of All Buildings Identified as Historic Resources On June 1, the City’s Historic Preservation Commission is set to adopt yet another historic resource survey in the Eastern Neighborhoods – this time in the Showplace Square/Northeast Mission area.  With many underutilized industrial buildings, this is a prime area in the City for future growth.  For that reason, this historic survey could have a greater negative impact than those that have come before it.  New development on sites identified as historic in the survey must either meet the highly restrictive Secretary of the Interior standards or must go through a lengthy and expensive environmental review process before being approved. At a glance, 525 buildings are located within the survey area – 24% of which are identified as historic.  The HPC will consider these findings en masse at its hearing on June 1.  This hearing will be important for property owners who feel their building has been incorrectly identified by the survey.  You can find the proposed survey at http://www.sf-planning.org/index.aspx?page=2666.   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 2011 Reuben & Junius, LLP. All rights reserved.

Not too long ago, we were writing about the possible demise of redevelopment law in California as a land use planning and policy tool. However, since the Governor made his proposal to eliminate Redevelopment in January, the legislature has responded with tepid support and a discussion of less radical reforms to the system. While the Governor’s proposal is still alive, there is a growing belief that it may never see a vote. The California Planning & Development Report recently published a good summary of where we stand as of today. A synopsis of that is below…for more detail go directly to CP&DR’s website at http://www.cp-dr.com/node/2940. The focus of recent legislation proposals is reform, not elimination, of redevelopment. SB 286 – A Broad Reform Proposal SB 286 incorporates a package of redevelopment reform measures developed by the California Redevelopment Agency (CRA). The CRA reports that SB 286 would add specificity to the types of information needed for making findings of blight. The blight finding is one of the primary determinations that must be made before any redevelopment agency can begin the process of establishing a redevelopment area. The new blight finding rule reads as follows: “This finding shall be supported by empirical and, to the greatest extent feasible, quantifiable evidence demonstrating the prevalence of specific conditions…on specific properties that are so substantial that they cause a reduction of, or lack of, proper utilization of the entire project area. Evidence shall be reasonable in nature, credible, and of solid value. Conclusions not based on documented evidence of specific conditions shall be deemed insufficient.” The change to the blight finding requirements is very significant. Raising the bar by requiring much more detailed evidentiary showing the project area is so blighted that there is a demonstrable “reduction of, or lack of, proper utilization of the entire project area” will certainly give agencies pause when considering establishing a new project area. This is a much higher standard than the existing provision that says the legislature must simply find that the area is blighted and that it would serve the general health and general welfare of the public. One wonders if, for example, the existing Transbay Redevelopment Plan would have been able to meet this more stringent standard. In addition, SB 286 would: limit the percentage of total land area of a jurisdiction which may be included in project areas (the max would be 25% of total land area of a City); exclude the schools’ share of property taxes in new project areas formed after January 1, 2012;prohibit uses of tax increment for specific purposes such as golf courses and never before developed parcels of land if they consist of 20 acres or more; prohibit uses of tax increment for the purpose of financing a professional sport stadium, unless the financial assistance is approved by a majority of voters; add new requirements to five-year implementation plans and require agencies to focus activities on state priorities such as job creation, cleaning up contaminated property, basic infrastructure needs, and affordable housing; require development of performance indicators to measure agency success; require performance audits of agencies and provide funds for those reviews; and specifically prohibit the use of tax increment for non-redevelopment, non-agency operating costs. These other reforms further respond to the major criticisms of the current Redevelopment Law by ensuring that redevelopment funds are not put towards inappropriate uses or used for greenfield development, that tax revenue is not diverted from educational entities and that there is adequate oversight of the redevelopment process. These additional reforms will likely have a greater impact on suburban or rural cities and counties, and should have a limited impact in San Francisco. SB 450 – Focus On Affordable Housing Money A much less sweeping bill than SB 286, SB 450 focuses on the use of affordable housing funds generated by Redevelopment Agencies. The bill would restrict the use of the Low- and Moderate-Income Housing Funds for planning and general administrative expenses. Specifically, only 15% of monies deposited in the housing funds could be used for planning and general administrative purposes. This change would respond to the criticism that only a limited amount of affordable housing money actually gets spent on the acquisition, construction, rehabilitation or preservation of affordable housing. The bill would also provide funding for audits of redevelopment agency housing programs by the Department of Housing and Community Development, to allow the State Controller to conduct reviews of redevelopment agency audits and recommend suspension of auditors that are not conducting audits in accordance with the applicable standards and guidelines. The bill would also recalibrate the required distribution of affordable housing funds to housing for certain levels of affordability and would also give California courts the power to temporarily prohibit a Redevelopment Agency from issuing debt if they find that an agency has failed to comply with requirements for replacement affordable housing. An Alternative Proposal Back in March the CRA announced an alternative to killing redevelopment. CRA still believes its alternative proposal could make it into the final agreement. CRA believes this change alone could raise more money over 10 years than Governor Brown’s plan of elimination of redevelopment altogether. The basic concept CRA is proposing, not surprisingly, keeps the general framework of the existing redevelopment law, but with some seemingly minor changes focused on getting money to schools: Redevelopment agencies can voluntarily suspend their housing set-aside for FY 2011-12. An equivalent amount of funds must then be contributed to local school districts in project areas. In exchange for this contribution of funds for FY 2011-12 to local schools, the agency will be allowed to extend the project area’s life by two years. In addition, or alternatively, agencies could voluntarily contribute up to 10 percent of their tax increment revenue stream to local school districts for 10 years. We’re curious how schools outside of project areas will react to this proposal…   The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established

Time will tell whether there will be significant reform to the City’s historic preservation policies, but a public hearing on the subject this week ignited the debate. At the same time, the City’s existing preservation policies kept rolling along. On Monday, the Board of Supervisors Land Use Committee held a more than three hour hearing in the Board’s main chamber on the City’s historic preservation policies and the potential need to rebalance those preservation policies with other City policies on affordable housing, transit-oriented development, etc. Supervisor Wiener commenced the hearing with a presentation by the Planning Department. Early on, it became clear that it would be difficult to discern the many smaller issues within the broad penumbra of “historic preservation.” The Planning Department noted that out of 4,900 permit applications last year, only 149 triggered a full evaluation by preservation staff and only 8 focused EIRs were prepared. While that figure seemingly indicated that few projects were being caught up in historic preservation issues each year, it didn’t tell the full story and certainly isn’t this firm’s experience. Supervisor Wiener emphasized that this figure doesn’t include projects that either get withdrawn or never proposed due to historic preservation policies. In addition, the figure fails to speak to the time and cost of completing environmental review for projects that are exempt from environmental review (yes, even a project that would be considered by most people clearly not an important historic resource and therefore exempt from review – i.e. CEQA doesn’t apply at all – often has to go through many months of costly analysis and delay to be absolutely, positively, 100% sure that, yes, in fact, it is exempt). A number of homeowners who have experienced this process commented on the difficulty and cost of renovating their homes. A documentary filmmaker, who has produced documentaries on historic preservation, told his story about buying a dilapidated home in San Francisco with his wife (a schoolteacher) and in-laws, only to have spent $65,000 – a quarter of their construction budget – dealing with historic preservation review and neighborhood appeals of his building permits for historic preservation reasons. One thing became clear from the hearing: “historic preservation” is so broad a category that each person has their own view of what the hearing was about. While no one is arguing against the importance of historic preservation and the need for landmarking important buildings, many spoke as if the ferry building was proposed for demolition. Others spoke about ethnic representation in historic surveys. One speaker said we needed more historic preservation protection immediately after a speaker told the story of being unable to seismic on his building because he had to spend $11,000 on historic preservation review. As this discussion progresses, it is clear that a more targeted debate needs to occur. No one is attacking the need for historic preservation. However, many do find problems with the way the City is currently conducting historic review on projects large and small. In the end, there was significant discussion of CEQA-related issues with historic preservation as well as the need to re-think the historic survey process – both important areas to focus on in future discussions. Just two days after the hearing, the Historic Preservation Commission heard a presentation from the Planning Department about the recently-completed Inner Mission North Historic Survey. The survey assessed over 2,000 properties, and resulted in at least 811 properties being designated as a historic resource and 13 potential historic districts being identified. While many were quick to point out at Monday’s hearing that a survey doesn’t automatically designate a property or district as historic, these findings will have a significant result on the CEQA review process for these properties. To see the survey results, go to http://mytinyurl.com/fxjjsy4ntp. Supervisor Wiener’s hearing could be a turning point in the City’s development of historic preservation policies. After a decade of expansion of preservation regulation, the debate now shifts to reviewing the current state of historic preservation and identifying ways that we can maintain the City’s historic character, while improving the historic review process. 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 2011 Reuben & Junius, LLP. All rights reserved.    

This week, we highlight a handful of important meetings and events for the San Francisco land use community that are scheduled for this upcoming week: Land Use Committee Hearing on Historic Preservation – Monday at 1 p.m. The Board of Supervisors Land Use Committee will hold a public hearing on the current state of historic preservation policies in the City and the need to balance these with other City policies, including affordable housing production and transit-oriented development. Please attend this hearing and inform the committee that historic preservation processes in the City need reform. The hearing is on Monday at 1 p.m., in Room 263 at City Hall. Friends of City Planning Annual Event: Wednesday at 5:30 p.m. You’re not in the know in San Francisco land use if you’re not at the annual Friends of City Planning Annual Event. FOCP is a non-profit organization made up of developers, neighborhood groups, policymakers, and others in the land use community with the purpose of funding planning activities in San Francisco outside of the Planning Department’s budget. FOCP’s annual fundraiser always attracts a large and diverse crowd, and this year’s event, “20/20 Vision for 2020 – Seeing the Future Clearly,” will highlight important projects in the coming decade that will enhance the economic vitality of San Francisco. The event is on Wednesday, May 4, at the Julia Morgan Room and the Daniel Burnham Bar and Lounge at 465 California Street from 5:30 p.m. to 8:30 p.m. Please contact Lisa Wong at (415) 665-1150 x1 to purchase tickets or for more information. Housing Action Coalition Annual Housing Forum – Wednesday at 7:30 a.m. This is the must see event of the year for anyone working in the housing industry. HAC’s annual forum always provides a great state-of-the-housing-economy update, as told by San Francisco elected officials, policymakers, and industry leaders. This year’s forum “After the Fall: Stimulating New Housing Production in San Francisco” is moderated by Dan Murphy, principal of UrbanGreen Devco LLC, and will feature the following panel: Doug Shoemaker, Director, Mayor’s Office of Housing John Rahaim, Director, Planning Department Cynthia Parker, President & CEO, Bridge Housing Oz Erickson, Chairman, Emerald Fund Dr. Ted Egan, Chief Economist, Office of the Controller The forum is on Wednesday, May 4, at the PG&E Ballroom at 77 Beale Street. Breakfast reception goes from 7:30 a.m. to 8:30 a.m. and the panel discussion goes from 8:30 a.m. to 10 a.m. Please contact Julia Sullivan at (415) 541-9001 to purchase tickets or for more information. Development Fee Alert: Fee Increases Go Into Effect May 1 The Planning Department is increasing development fees across the board by 3%, which will go into effect May 1. The Jobs Housing Linkage Fee and the Affordable Housing Fee, however, will not be increased. Go to http://mytinyurl.com/s4zf66tfkb for the updated fee schedule. 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 2011 Reuben & Junius, LLP. All rights reserved.    

Back in January, as one of his first acts in office, Supervisor Scott Wiener called for a hearing on the state of historic preservation process in San Francisco. Citing the potential that overly-burdensome historic preservation regulation could pose problems for affordable housing and transit-oriented developments, Wiener’s goal is to “establish an understanding of what constitutes an appropriate balance between historic preservation and other policies, including housing, parks, libraries and pedestrian safety.” The hearing has been scheduled for Monday, May 2, at 1:00 p.m. before the Land Use Committee. The hearing will be at City Hall, in room 263 on the second floor. In addition to public comment, the committee will take testimony from the Planning Department, the Municipal Transportation Agency, the Recreation and Parks Department, the Public Library and the Mayor’s Office of Housing. The hearing comes after a decade of increased preservation awareness that has coincided with a dramatic increase in historic preservation regulation. A zenith of sorts may have been reached with the passage of Proposition J in 2008, which created a powerful new charter-level Historic Preservation Commission. The HPC has already weighed in on controversial subjects such as the North Beach Library replacement and the proposed historic designation of the entirety of Golden Gate Park. Some view historic preservation as simply another tool to stop new development. Historic surveys have been completed on broad swaths of the City. Any designation or recognition of a building as “historic” has significant consequences: any proposed alteration or demolition of a historic building requires heightened environmental review under the California Environmental Quality Act (CEQA), increasing the time and cost of a project, irrespective of size, and seemingly irrespective of the importance of the historic resource. Everyone can agree that historic preservation should play a role in land use decisions in the City. The question many are asking now is should historic preservation dominate over other priorities? Take, for example, the recent “Automobile Support Structures” historic survey conducted by the Planning Department. The survey will likely result in a number of low-rise automobile garages and related buildings along Van Ness Avenue being designated as historic structures. Van Ness has long been identified in the City’s General Plan as a high-density residential district, with easy access to transit options. Designating automobile support structures as historic could make it that much more difficult for the City’s stated goals for more housing along Van Ness. Is the preservation of these increasingly-obsolete structures more important than developing the City in a way that reduces automobile traffic and provides a residential base for neighborhood-serving businesses? Supervisor Wiener’s hearing is a sign that many would like to engage in a broader discussion about the effects of preservation policies on other important policy goals of the City. Coincidentally, at its meeting yesterday, the Planning Commission certified the EIR and approved rezoning measures that will allow the demolition of the existing North Beach Library to make way for a new, state-of-the art facility (the Board of Supervisors shot down the proposed landmarking of the building late last year). We will of course keep you posted as this important policy debate moves forward. 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 2011 Reuben & Junius, LLP. All rights reserved.    

This week the Planning Commission may have been peering into the future when it held an informational hearing on Infrastructure Financing Districts (IFDs), a public financing tool provided by state law. With Redevelopment Agencies still on life support (although seemingly upgraded from critical condition), cities are scurrying to find new ways to fund economic development activities, infrastructure improvements and affordable housing. IFDs could be one solution to these problems. IFDs have been around for several decades but to date have been little used in San Francisco. Once established, IFDs provide funding for new infrastructure within their boundaries, including streets, sewage and water facilities, child care facilities, libraries and parks. These improvements are funded through tax increment financing, which allows a city to divert increased property taxes collected within an IFD from the city’s general fund directly towards improvements within the IFD. Bonds can be sold backed by future expected tax increment revenue, allowing a city to get a chunk of money up front to pay for improvements, instead of waiting for new taxes to come in each year. To create an IFD, both the Board of Supervisors must approve the IFD and accompanying financing plan and two-thirds of the residents of the proposed district (or of property owners if there less than 12 residents in the district) must vote to approve it. Tax increment financing is a tool that redevelopment agencies are able to take advantage of, and the idea currently building a head of steam in the city is that IFDs could fill the void left if and when redevelopment agencies are eliminated. Recently, an IFD was created for the Rincon Hill neighborhood. The city sees this Rincon district as a test case for future IFDs to fund infrastructure improvements. The Rincon IFD is a noncontiguous area that only includes a number of undeveloped sites that are entitled or proposed for major residential towers. The Rincon IFD is expected to fund roughly $15.5 million in infrastructure improvements, while project-specific impact fees would provide another $16.5 million. Over the 30 year life of the Rincon IFD, property values are expected to increase by $2 billion. During the first few years, 100% of the incremental property tax will be diverted from the general fund, whereas only 14% will be diverted for the final 17 or so years. In many ways IFDs can fill many of the roles of redevelopment. Within the IFD’s borders, increased property taxes can be diverted back into the district. This is especially helpful in areas where future growth is projected and area plans have recently been adopted. IFDs can make public infrastructure improvements happen faster – through the sale of bonds – and possibly more efficiently – where a developer’s contractor can construct not only in-kind improvements, but other improvements that can be funded through tax increment and impact fees. IFDs, however, cannot be created where there was once a redevelopment project area, so they will not be able to pick up where old redevelopment areas left off. IFDs have the potential to fill part of the void left if redevelopment agencies are eliminated, but they also benefit from the fact that no finding of “blight” is required to establish an IFD – unlike redevelopment areas. IFDs have the potential to put the “future neighborhoods” of Rincon Hill, the Eastern Neighborhoods and others on a fast track to adequately serve their residents by constructing public infrastructure much faster than would be constructed without them. As the future of state assistance for economic development becomes less and less clear, San Francisco will have to continue to think creatively to pick up the slack. Expect to hear more on IFDs in the coming months and years. SFHAC Hosts Fifth Annual Housing Summit May 4 Just another friendly reminder that the San Francisco Housing Action Coalition is holding its annual housing summit on Wednesday, May 4 from 7:30 a.m. to 10 a.m. at the PG&E Auditorium at 77 Beale Street in San Francisco. This year’s topic: “After the Fall: Stimulating New Housing Production.” Speakers include – Oz Erickson, Chairman, Emerald Fund – John Rahaim, Director, San Francisco Planning Department – Dr. Ted Egan, Chief Economist, San Francisco Controller’s Office – Doug Shoemaker, Director, Mayor’s Office of Housing – Cynthia Parker, President and CEO, Bridge Housing – Moderated by Dan Murphy, principal of UrbanGreen Devco LLC Think of this as the “State of the Bay Area Housing Market” event – it’s a great event that informs on you what’s happened in the last year and what to expect this coming year. For more information on the event, go to http://sfhac.org/events or contact Julia Sullivan at Julia@sfhac.org or (415) 541-9001. 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 2011 Reuben & Junius, LLP. All rights reserved.