Grandfathering Deadline Quickly Approaching For Eastern Neighborhood Projects While it seems like just yesterday the Board of Supervisors approved the Eastern Neighborhoods plan, rezoning a large swath of San Francisco, the deadline for projects that were “grandfathered” by the plan to obtain Planning approval is rapidly approaching. The EN Plan placed new zoning restrictions, a new impact fee, and heightened affordable housing requirements on projects within the plan area. Projects for which a planning application had been submitted prior to April 17, 2008 are exempted from certain requirements of the plan, depending on how early the application was submitted. The Planning Department has compiled an easy-to-read guide to determine the exemptions for a particular project, located at “http://www.sf-planning.org/Modules/ShowDocument.aspx?documentid=1431”. Unfortunately, the grandfathering doesn’t last forever. The Zoning Administrator issued an interpretation last May, requiring grandfathered projects to obtain Planning Commission or Department approval by January 19, 2011. For projects that require Planning Commission or Zoning Administrator approval, such approval must be obtained by this date. For projects only requiring a building permit, the building permit must be signed off by Planning staff by this date (Section 311/312 notice must occur before then as well). If approval is not obtained before this date, the grandfathered status is lost, and all current zoning regulations, increased affordable housing requirements and the EN impact fee will apply. Once Planning Commission or Department approval is obtained, building permits must be obtained for the project within three years of the approval. Due to the length of time to obtain entitlements in San Francisco, we recommend all project sponsors of grandfathered projects that wish to take advantage of that status to pursue entitlements now. For more information, contact John Kevlin at jkevlin@reubenlaw.com. Discretionary Review (DR) Reform Bites the Dust After coming close to reaching a compromise, the Board of Supervisors’ Land Use and Economic Development Committee effectively killed discretionary review reform at its March 8 hearing. The Committee tabled the reform legislation with no expectation of calling another hearing in the near future. The Committee’s action ended the most recent attempt to fix the discretionary review system. The DR process originally was a check on “exceptional and extraordinary” projects in residential neighborhoods, but today there is widespread abuse of the process that allows individuals to demand a Planning Commission hearing for any project, regardless of the merits of the DR claim. The Planning Department has spent the past two years reaching out to neighborhood groups, crafting the legislation, and shepherding it through the legislative process. One of the major challenges with pushing DR reform is that there is no organized constituency to push in favor of it. While anti-reform neighborhood activists and community groups turned out in full force to oppose the changes, only a smattering of architects and other land use professionals turned out to fight for past and future small property owners who have or will be caught up in this byzantine process. Even with the full, well-researched support of the Planning Department and the Planning Commission, the Land Use Committee was unwilling to act. For now, DR Reform is dead. Earthquake Retrofits Incentivized by New Ordinance Yesterday, the Board of Supervisors passed an ordinance intended to spur voluntary retrofits of soft-story, wood-frame buildings by their owners. The ordinance, sponsored by the Mayor and Supervisor Campos, would not require owners to retrofit their buildings. The incentives for voluntary seismic retrofits of soft-story, wood-frame buildings include waived fees for the following services: o Planning Department permit review o Department of Building Inspection permit review o Fire Department permit review o Department of Public Works minor sidewalk encroachment permits …and also makes it a City policy that agencies expedite permits for these retrofits. The City Controller has estimated that, on average, the waived fees will consist of $591 for a single family home and $1,961 for a multi-family home – a reduction of only 2.7% of the total cost of an average retrofit. Unsurprisingly, the Controller has concluded that this legislation will not significantly increase the number of voluntary retrofits in the city. Stay tuned, however, as Mayor Newsom has reiterated as recently as last month his determination to make seismic retrofits mandatory in the city. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2010 Reuben & Junius, LLP. All rights reserved.      

An overview of the hearing process – it’s not as bad as you think! I recently represented a client at a hearing in front of the Assessment Appeals Board to challenge the assessed value of San Francisco real estate. Before the hearing, I noticed that all of the other hearings that day had been cancelled or postponed, a phenomenon that I have seen before. Although the Appeals Board does not keep statistics for why appeals are cancelled, I believe that many taxpayers cancel or delay the hearing for one of the following reasons: The perception that they will not receive a fair hearing before the Appeals Board; Fear that the process is complicated, and will require extensive preparation; or Misunderstanding about how the hearing will work. These concerns are exaggerated, and most owners would benefit by pursuing their appeal. Failure to pursue the tax appeal means that the owner will not receive any consideration of their view that the property’s taxable value is too high. If the appeal relates to the new value after acquisition or construction, then the tax liability could result in thousands of dollars lost. Even if the appeal is a one year “Proposition 8” decline in value appeal, the property owner may be foregoing an opportunity to save money. For every $100,000 in decreased value, the owner could save about $1,400 per year in taxes. These days every dollar counts. As to the fair hearing issue, in my experience, the taxpayer has always received fair consideration of their appeal. The Appeals Board is comprised of people that have other full time jobs – they are not city regular employees. The law requires that the Appeals Board be real estate professionals like brokers, accountants, attorneys or appraisers. I have found Board members to be quite reasonable and receptive to taxpayers, and not automatically deferential to the Assessor’s position. The following is a brief overview of the commercial tax appeal hearing process, from the pre-hearing issues through the actual hearing. Before the Hearing It typically takes about 6-8 months for a hearing to be scheduled. The taxpayer is entitled to one postponement as a matter of right, provided that the request is made at least 14 days prior to the hearing date. Further postponements are subject to the discretion of the Appeals Board. If the appeal is not heard within two years after the filing date, then the applicant’s opinion of value is deemed to be correct, and will be entered on the tax roll. If the taxpayer does not show up to the hearing, then the appeal will be dismissed, and the decision is final, unless the applicant can convince the Appeals Board that there was good cause to miss the hearing, which is a tough thing to prove. Negotiation with the Assessor’s Office It is common for the taxpayer and the Assessor to have no contact prior to the hearing. In some cases, the Assessor will demand that the taxpayer provide extensive information about the property under Revenue & Tax Code Sections 441 & 470 – leases, construction costs, expenses, and other financial information. Although the code obligates the owner to provide certain financial information, there is no penalty for failing to do so, other than the Assessor’s right to postpone the hearing to review any documents submitted by the owner. As a means to force compliance, the Assessor typically threatens to ask the Appeals Board to dismiss the appeal if the information is not provided by the Assessor’s deadline. There is no such provision in the code for a deadline, or the dismissal of the appeal. If the Assessor does not contact the owner prior to the hearing, some owners request a meeting with the Assessor’s office in the hope of reaching a negotiated agreement, like in the litigation process. In my experience, for commercial properties, these meetings have a limited chance of success, although in some cases the Assessor has agreed to reduce the property’s enrolled value. There is really no motivation for the Assessor to negotiate a deal with the owner. Given the City’s bleak economic condition, the Assessor aggressively challenges most requests for a decrease in taxable value, even if the requests have merit. Owners should be careful during such meetings about what information they provide to the Assessor – it will certainly be used against them at the hearing. However, there is no harm in talking with the Assessor to see if they will discuss a reasonable compromise, but the taxpayer should carefully consider what information to provide during these discussions. In contrast, some counties, like Contra Costa County, have voluntarily initiated a program to reasonably reduce taxpayer’s assessable values, if justified. Whether this decision was due to a desire to be “fair”, or to strategically avoid administrative costs or more aggressive requests, the difference in approach is significant. The owner has the right to request that the Assessor provide information that the Assessor used to determine the property’s taxable value. (R&T Code Section 1606). However, the owner must, along with this request, also provide the Assessor with its supporting facts and documents. There are no other requirements that the owner provide information to the Assessor prior to the hearing. Except in complicated appeals involving possessory interests or construction matters, in most cases it is clear what information the Assessor has in its files – often the purchase price or finished construction cost from years ago. In these cases, it may not be worth the effort to request this information. The Hearing The hearing itself is a low-key affair. Typically, there is no one in the room other than the three members of the Appeals Board, the clerk and one or two representatives from the Assessor’s office. Both the taxpayer and the Assessor’s office will have the opportunity to present their case and refute the other side’s arguments. There are no formal rules of evidence. The taxpayer may provide oral testimony, and present any documentary evidence that it wishes the

After a year and a half of research, analysis, community outreach and drafting, the Board of Supervisors’ Land Use and Economic Development Committee may be on the verge of approving true Discretionary Review (DR) reform. Supervisor Eric Mar introduced a package of amendments at the Land Use Committee’s hearing on February 22 which were developed by a group of stakeholders and generally are intended to allay the concerns of neighborhood groups of losing their right to have a hearing before the Planning Commission for DR cases that they file. Currently, anyone can file a DR application for any building permit that doesn’t otherwise require Planning Commission approval, and get an automatic hearing. One of the most important aspects of DR Reform would empower a DR review team composed of Planning Department planners to review DR filings and their associated building permits to determine whether the case is “exceptional and extraordinary.” If they are, they will be heard by the Planning Commission, if not, they will not be heard. The proposal would give DR filers that were not approved for a hearing the ability to have the Planning Department reconsider its decision, and if that results in the same outcome, to appeal the decision to the Board of Permit Appeals. The reform would also require that all DR cases that justify a hearing before the Planning Commission have that hearing within 90 days of the DR filing. The Mar amendments would add several protections for neighborhood groups, including: • Maintaining the status quo for neighborhood groups, meaning DR cases that they file are entitled to an automatic hearing before the Planning Commission; • Individual DR filers, who would be required to gain approval from the DR review team to get a hearing before the Planning Commission, can still obtain a hearing before the Planning Commission with the support of two Planning Commissioners; • Individual DR filers are assured a hearing before the Planning Commission if their DR case is related to a policy or emerging planning issue that the Planning Code and Residential Design Standards do not address. In our view these are reasonable changes that still leave the bulk of the proposed DR reform in place. First, DR cases filed by neighborhood groups make up a small percentage of the total number of DR cases filed. Limiting automatic DR hearings to neighborhood groups should significantly reduce the number of inappropriate DR filings, where a single neighbor is using DR to block, delay or otherwise oppose reasonable projects that the Planning staff finds consistent with both the Code and the Residential Design Standards. However, the Planning Department needs to develop guidelines to ensure that neighborhood groups are legitimate, in order to protect from groups being formed solely for the purpose of opposing a single project or from individual members of established groups acting on their own. Second, allowing individual DR filers to get a Planning Commission hearing with the support of two Planning Commissioners even after being denied by the DR review team would still protect against frivolous DR cases. Most DR cases are decided by unanimous or close to unanimous decisions of the Planning Commission, so a frivolous DR case would likely not be able to garner the two signatures. There is some discussion of reducing the number of Planning Commissioners who could initiate an individual DR hearing to one. This is simply not good policy. If an individual DR filer does not have the approval of the DR review team and can’t garner the support of two out of seven Planning Commissioners, it likely has no merit. Finally, DR filings related to new or emerging policies and land use issues should go to the Planning Commission, which is the policy-making body of the Planning Department. We also support the Planning Department’s position that no extra time should be given to individuals who file DRs on behalf of neighborhood groups to get the backing of the neighborhood group. One of the core aspects of DR reform is to get a project sponsor a hearing at the Planning Commission within 90 days from the date of the DR filing. The legitimacy of a DR filing on behalf of a neighborhood group can generally be determined through an affidavit requirement and individual planners’ attention to this issue. The Mar amendments to the DR reform package represent a reasonable compromise in a city that is woefully short on compromise these days. They would make the DR process more efficient while simultaneously reducing DR abuse and protecting legitimate DR rights. We commend Supervisor Mar and his office for putting in the difficult work to craft this amendment package, but also encourage him and other results-oriented Supervisors to take this ball and run with it. DR reform is a hot-button issue that will never get 100% support from all interested parties. These Supervisors should enact this compromise and set an example of how good city government works. Another hearing will be held at the Land Use Committee on Monday, March 8, and a final vote is expected at the committee within a few weeks after. As always, we will keep you posted of future developments of DR reform. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2010 Reuben & Junius, LLP. All rights reserved.    

There’s no doubt that historic preservation is politically popular in San Francisco: residents recently approved Prop J to create the Historic Preservation Commission (HPC), and grant it sweeping powers. But there were already solid protections in place. When people voted on Prop J, they probably didn’t know much about the California Environmental Quality Act (CEQA), which was the existing complex mechanism for dealing with historic resources, and how CEQA and the new Prop J represent alternate universes of regulation. CEQA and Prop J both try and protect historic resources, but they do it in very different ways, ways that were left un-reconciled by Prop J. CEQA incentivizes preservation of historic resources by offering a “safe harbor” for property owners that limit changes to historic properties. Owners that chose this safe harbor, by satisfying what are known as the Secretary of Interior Standards, are exempt from CEQA, and are theoretically not subject to further costly review. So the City and the preservation community get what they want (more preservation) and the owners get what they want (expedited review). That at least is the policy; in practice it usually is not that straightforward for the property owner. CEQA is in reality a complex, expensive and time consuming process. And it was in place long before Prop J. Unfortunately, owners of many small properties more than 50 years old cannot make changes to their structures without going through what can be an arduous CEQA process. Now we have Prop J. That measure created a powerful new commission to oversee the implementation of existing Planning Code provisions designed to protect historic resources. Those parts of the Planning Code have been in place for decades, and the Planning Department staff and the Planning Commission had been doing a good job implementing them. Now the HPC has that job, and it is not yet clear how much more difficult it will be to make CEQA and the new HPC work efficiently together. This uncertainty is heightened by the fact that the HPC was granted many new powers, including the power to review CEQA documents for any projects that might have an “impact on historic or cultural resources.” Why did Prop J happen? This week we look way back and provide a very brief history of the historic preservation movement in an effort to place Prop J in a larger context, and comment on the future of the process in San Francisco. How Did We Get Here? A Brief History of Historic Preservation There are generally considered to be three phases to the historic preservation movement. The first phase began in the 19th century when nation-states began preserving landmarks as a means of preserving national identity. The iconic American nineteenth century preservation effort was that of George Washington’s Mount Vernon estate by the Mount Vernon Ladies Association. The Association purchased the home and two hundred-acre estate with contributions solicited from women in every state, thereby preventing a planned development on the site. The second phase is typically defined as the call-to-arms following the demolition of New York’s Pennsylvania Station in 1963 and the destruction of large swaths of inner cities in accordance with post-World War II urban renewal programs. This phase saw the rise of the most visible and institutionalized aspects of the historic preservation efforts-federal, state and local historic preservation laws. The most important of these new laws was the National Historic Preservation Act of 1966 (NHPA). The use of these laws was accelerated after Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), in which the U.S. Supreme Court upheld New York City’s landmarks law that sought to prevent Penn Central’s owners from building a skyscraper on top of the existing Beaux Arts Grand Central train station. Penn Central established, for the first time, that historic preservation regulations were not only a legitimate use of the police power, but they were also not subject to compensation as a taking, so long as certain parameters were met. Since Penn Central, historic preservation has exploded. The National Park Service estimates more than one million individual buildings or sites have been listed in the National Register since its creation in 1966. One million. Clearly, we aren’t just preserving Mount Vernon anymore. And it is this third wave of historic preservation-the one in which we now live-where the real conundrum of historic preservation starts to arise. As Carol M. Rose wrote in the Stanford Law Review, “The phrase ‘historic preservation’ is so elastic that any sort of project can be justified-or any change vilified-in its name. In a sense, every event is ‘history,’ and it is a cliché among professional historians that views of ‘historical significance’ alter considerably with shifting social interests. . . .” At this extreme, a prominent proponent of historic preservation, Dolores Hayden, has encouraged that historic preservation should, “celebrate the history of their citizens’ most typical activities-earning a living, raising a family, carrying on local holidays, and campaigning for economic development or better municipal services.” But by the time we get to Hayden’s level of analysis-and in San Francisco we are surely there-almost anything that means anything to anybody has standing as a historic resource. Since the definition of what it means to be “historic” has expanded to mean anything that might have a history-including mere evocations of nostalgia or even kitsch-the very notion of “historic” has lost any outer boundary. This is the preservation world in San Francisco today. Which brings us back to Prop J. Under Prop J, the HPC was granted the ability to review any project that might have an “impact on historic or cultural resources” as that phrase is used in the California Environmental Quality Act. Without getting too deep into CEQA, that broad phrase could mean almost anything is within the HPC’s grasp. Coupled with a the larger cultural rise of history indistinguishable from nostalgia, and the HPC’s broadening itself into the realm of “cultural resources,” the HPC seems to have the power to consider

Budget Woes Trickle Down to Planning Department Plugging the city’s $575 million budget deficit in 2009 was painful enough. Late last year, the Mayor’s budget director announced that the 2010 budget deficit would be $522 million. And the city can’t expect another $60 million in federal stimulus dollars this year. The city’s budget woes have now made their way to the Planning Department, which has been presenting proposed budgets to the Planning Commission over the past few weeks to figure out how to fill a current $4.7 million department budget deficit. The Department is facing an expected 30 percent reduction in General Fund revenues from the city. Today the Department presents it final recommendations to the Planning Commission. While the Department’s proposals project confidence in dealing with the deficit, many assumptions are made to help fill the hole, including an increase in the volume of applications filed (2.5%), in the amount of costs recovered through general advertising sign enforcement ($423,608), and in fees collected due to the economic recovery (2.5%). The Department cites as a mixed-blessing the recent increase in code compliance through the Administrative Penalty Program: increased compliance also means decreased abatement fees. After all of the above number-crunching, though, a deficit of $1.47 million remains, and the Department sees a reduction in labor costs as the only place left to squeeze out a few remaining dollars. In addition to greater fee increases, the Department suggests wage decreases, Department closure days, shortening the work week and reduced work schedules. Layoffs of planners will hopefully be avoided. However the Department ultimately chooses to reduce labor costs, it has already proposed a reduction in staff hours for each division. The Neighborhood Planning Division, which provides services such as application review, public information and code enforcement, will be reduced by 7.72 full-time employees (“FTE”). The Citywide Planning Division, which maintains the General Plan and administers Area Plans, will be reduced by 6.39 FTE. Major Environmental Analysis, which prepares and reviews all environmental documents, will be reduced by 4.95 FTE. Overall, these three divisions will be reduced from 124.7 to 105.64 full-time employees, a 15% reduction. This will unfortunately mean less staff hours to service the many projects that the Department continues to process even during this downturn. Hopefully, the Planning Department will be able to balance its budget with the least amount of pain – to its employees and the public – as possible. Street Frontage Controls May be Expanded to New Zoning Districts Today, the Planning Commission will hold a hearing on a proposed ordinance that would expand the street frontage controls, which were significantly strengthened by the Eastern Neighborhoods rezoning, to apply to a number of new zoning districts. The purpose of these controls was to provide a more pedestrian-friendly experience at the street level of buildings in commercial districts – in other words, to make the streets more engaging and interesting for people to walk through. Currently, these controls only apply to Neighborhood Commercial, Downtown-Residential and Eastern Neighborhoods Mixed Use districts. The ordinance would apply these controls to Commercial, Residential-Commercial and the Van Ness Special Use districts. Generally, the controls require that: • “Active uses” (allowing transparent walls) occupy ground floors • 60% of ground floor facades be transparent • Parking ingress/egress be limited to 1/3 of the façade • 25-foot setbacks for parking uses on the ground floor • Ground floors with non-residential uses be a certain height, depending on the zoning district The ordinance would also eliminate the requirement in Residential-Commercial districts that proposed projects taller than 40 feet obtain a conditional use authorization, expand the requirement for upper-story setbacks to RC and NC districts, and expand the requirement for mid-block alleys in large lot developments to Commercial districts. The Planning Department is also recommending several public comments be adopted, including further expanding the street frontage controls to South of Market Mixed Use districts, Chinatown districts and C-M districts and allowing lobbies to be considered an “active use.” We’ll keep you posted as this ordinance makes its way through the legislative process. City Preparing for Crackdown on Vacant Building Owners Who Haven’t Registered SF Public Press is reporting that the Department of Building Inspection, in response to a low rate of compliance with the recent vacant building registration ordinance requiring owners to register and pay a $765 annual fee, is considering increasing the annual fee to $6,885. While the ordinance does not authorize a fee increase of this type, this likely means that DBI is considering assessing fines of $6,885 to owners of vacant buildings who have failed to register them. If all presumed vacant building owners paid the $765 fee, it would total $3 million for the city. DBI’s website has all the information vacant building owners need to comply with the ordinance, which the city appears serious about enforcing: “http://sfdbi.org/index.aspx?page=449” Shadow Initiative Aftermath Many San Franciscans breathed a sigh of relief a little over a week ago when Supervisor David Chiu pulled from the ballot his initiative to ban all new developments that would create any new shade on public parks, which would have effectively shut down the Transbay Transit Center, along with a number of other developments. Few have likely thought about it since, or where we go from here. As part of the deal the Mayor struck with Chiu to pull the initiative, a task force will be created to study the issue further. John King had a great column in the Chronicle earlier this week pondering what might come of it. “http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/15/BA171BVJQ8.DTL” Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2010 Reuben & Junius, LLP. All rights reserved.        

In this installment of our Housing Element series, we focus on a new objective of the proposed 2009 San Francisco Housing Element. You’ll remember from our last update on this subject that the Planning Department is in the process of updating its Housing Element, as is mandated by state law. The purpose of developing and adopting a Housing Element is so each city and county will “consider economic, environmental, and fiscal factors and community goals set forth in [its] general plan and [will] cooperate with other local governments and the state in addressing regional housing needs.” The 2009 Housing Element contains a new objective (Objective 10), which states that the city should “ensure a streamlined, yet thorough, and transparent decision-making process.” We see this as a positive step – as a city, we would be recognizing that our entitlement process needs to be improved, which would provide justification for future changes to the system. Changes to make the process more efficient and faster could lead to lower housing costs, which is a major goal of the housing element. While we are hopeful, there have been many unsuccessful attempts to improve the process in recent years. While a high-level statement in the Housing Element is helpful, everyone that is part of the entitlement process and wants to see change must re-double their efforts. We consider below two attempts at recent reform, as well as the elephant in the room: the unwieldy, unmanageable and increasingly obstructionist CEQA process. Discretionary Review Reform Later this month, the Board of Supervisors’ Land Use and Economic Development Committee will hold its fourth hearing on the proposed amendments to the discretionary review (DR) process. Reforming the DR process would go a long way towards stream-lining the permitting process for small projects. DR, which is normally initiated by a member of the public or a community organization, requires the Planning Commission to hold a hearing on any building permit before it is issued. This hearing is required if requested, even if the project complies 100% with the Planning Code and guidelines. At the hearing, the Commission holds a vote to effectively approve, modify or disapprove a project. This means that the Planning Commission has on its calendar every week disputes between neighbors about things like how far back into the rear yard someone’s addition extends, or if a third story is allowed for a new home. These may in fact be important issues to those involved, but they don’t belong at the Planning Commission. They need to be resolved by the Planning Department in some other way. Even though the City Attorney’s office opined in 1954 that DR is “a sensitive discretion and one which must be exercised with the utmost restraint,” there were 230 publicly-initiated DR cases in 2004 alone, and 126 in 2008. In addition to all the other problems this causes, the ease and frequency of filing of DR cases significantly slows the entitlement process and increases its uncertainty, which, in turn, increases the cost of housing. The most promising aspect of the DR reform package, with the best chance of streamlining the process, is the elimination of the automatic hearing of DR cases before the Planning Commission. Currently, every DR case is entitled to a hearing, no matter how frivolous the complaint is. This adds time and cost to the development process and, most importantly, adds the uncertainty of a public hearing and vote. The DR reform package would empower staff to review each DR case for its compliance with the Residential Design Standards. If the project substantially complies with the Code and the Standards, the DR case will not be heard by the Planning Commission. In a test run of staff’s recommendations over the past year, the Planning Commission has agreed with staff on whether a hearing should be held 95% of the time. While not perfect, this staff review will significantly streamline the entitlement process, which would still allow appeals of staff decisions to the Board of Appeals. We’ll keep you posted on upcoming hearings at the Board of Supervisors regarding DR reform. Certainty in Zoning Proposed Policy 10.2 of the Housing Element would set as city policy the need to reduce other discretionary processes such as the conditional use approval requirement. Just like DR cases, conditional uses add uncertainty to the entitlement process and can unnecessarily increase the cost of constructing new housing. The city sought to achieve a relaxation of conditional use requirements in its recent Eastern Neighborhoods rezoning. Many of the new zoning districts created by the rezoning made standard housing projects permitted as of right, a major improvement on the industrial districts they replaced, which permitted housing only as a conditional use. However, the Eastern Neighborhoods rezoning fell short of the goal of truly streamlining the entitlement process for housing. A new Planning Commission review process was created for certain “large” projects, including those creating 25,000 square feet or more of new space. Such a low threshold ensures that most new housing projects will require review by the Planning Commission, defeating the purpose of making residential uses permitted as of right, just as the City was trying to do the right thing by making housing easier to build. Housing developers should be given a clear set of zoning rules to follow, and not be subject to unpredictable public hearings for housing projects that fulfill many of the goals of our Housing Element. Along that vein, proposed Housing Element implementation measures 69 calls for the Planning Code to “clearly specify development that is principally permitted, and limit conditional use requirements.” CEQA Streamlining The CEQA process was born out of the environmental movement in the early 1970s with a simple and direct mandate: before doing anything that could have a major effect on the environment, we should gather the relevant information so that the public and the decision-makers are able to consider all the facts when making decisions about physical changes in our environment (i.e. development projects). What was

SHADOW UPDATE: Rules Committee to Hold Hearing on Park Sunlight Protection Initiative this Thursday The Park Sunlight Protection Initiative that we reported to you on last week is moving quickly through the legislative process. The Board of Supervisor’s Rules Committee will be holding a public hearing on the initiative this Thursday, February 4, at 10:00 a.m. in Room 263 of City Hall. This will be the only chance for the public to comment on this draconian initiative, which would effectively put a number of major development projects in the city at risk. While the hearing starts at 10 am, this item is last on the agenda, and we expect the earlier matters to take some time. The shadow measure may not be called until early afternoon or later. The only way that this comes off the June ballot is for at least two of the Supervisors who have signed onto it to rescind their support. Supervisors Chiu, Maxwell, Mirkarimi, Mar and Campos are currently supporting the measure. If you can’t make the hearing, be sure to voice your opposition to the Supervisors’ offices during the week. This initiative amounts to a major downzone of the City’s downtown, and would significantly reduce the value of our investments in public transit, including the Transbay Terminal and Central Subway. Contact Daniel Frattin for more information. Interim Affordable Housing Controls Seek to Limit Reach of Palmer Decision Today the San Francisco Board of Supervisors will consider new interim controls for affordable housing requirements. The City is re-writing its affordable housing provisions in light of a landmark case, Palmer/Sixth Street Properties, L.P. v. City of Los Angeles. We reported on Palmer in our Oct. 29, 2009 Update. Palmer held that inclusionary housing ordinances that require on-site affordable rental housing or payment of an in-lieu fee are preempted by the Costa-Hawkins Act and thus unenforceable. The City is drafting a new ordinance in the hopes of preventing a Palmer challenge to its ordinance; the interim controls will be in place until then. The interim controls act as a placeholder, as they put in place the City’s new draft affordable housing ordinance for the next 18 months, or until a final replacement ordinance is adopted. The interim controls and draft new ordinance would remove the on-site requirement and reference to an in-lieu fee. Instead, project sponsors would be required to pay an “affordable housing fee,” now essentially an impact fee supported by a previously conducted nexus study, As presently written, the affordable housing fee would be equivalent to the previous in-lieu fee, and those project sponsors that wished to build on-site rental housing instead of paying the affordable housing fee could elect to do so. Before the Board of Supervisors Land Use Committee hearing on Monday, representatives of the City noted that it expects the impact of Palmer to be minimal to the City’s overall affordable housing program. Of the City’s 1,100 affordable housing units in the City, approximately 800 are owner-occupied and 300 are renter-occupied, and the City said there are few rental units in the pipeline. However, project sponsors subject to these requirements will want to keep a close eye on the interim controls and new ordinance. The interim controls, if passed, will go into effect immediately. Contact Stephen Miller for more information, or if you would like copies of the current interim controls or proposed new ordinance. Mayor Vetoes Avalos Eviction Protection Ordinance; Introduces Narrower Protections On January 22, Mayor Newsom vetoed Supervisor Avalos’s eviction protection ordinance, all but killing the controversial legislation. The ordinance would have expanded the “just cause” eviction protections that currently only apply to rental properties constructed before 1979 to post-79 properties. The Board of Supervisors has until February 21 to overturn the veto with the vote of at least 8 supervisors. A veto override is unlikely at this point, since Supervisor Dufty has co-sponsored a narrower version of the legislation with the Mayor. The new ordinance would prohibit lenders who obtained title to a post-79 property through foreclosure from evicting a tenant, except when the reason falls within the “just cause” evictions that are listed in the current rent control ordinance. This restriction lasts in perpetuity for as long as the foreclosing lender has title to the property. However, the restriction expressly does not apply to any subsequent purchaser, who would be free of any eviction controls. Contact John Kevlin for more information. Planning Commission Recommends Passage of Mayor’s Stimulus Plan to Board of Supervisors The Planning Commission held a hearing on the Mayor’s stimulus plan on January 21, and after a long and well-attended hearing, recommended passage of all parts of the plan to the Board of Supervisors. The Planning Commission voted 4-3 to recommend allowing developers to defer development fees until the first certificate of occupancy if a fee equaling the city’s cost of funds is paid. Commissioners Bill Lee, Michael Antonini, Ron Miguel and Gwyneth Borden voted to recommend and Commissioners Kathrin Moore, Bill Sugaya and Christina Olague voted not to recommend. The recommendation included several amendments, including adding language to ensure automatic inflation adjustments for all fees, setting an end date for the option of fee deferrals based on some measure that the economy has improved, and excluding the fee deferral option from all projects that have paid their fees by the time the ordinance is enacted. The Planning Commission voted 6-1 to recommend allowing a one-third reduction in affordable housing in-lieu fees in exchange for levying a 1% transfer tax on all future sales of a property. Several Commissioners emphasized their support for finding a way to collect affordable housing fees that would not be as sensitive to the ups and downs of the local economy. Commissioners Moore, Sugaya, Lee, Antonini, Miguel, and Borden voted in favor of recommendation and Commissioner Olague voted against. The next step for the Mayor’s stimulus package will be a hearing before the Board of Supervisors’ Land Use and Economic Development Committee and then to the full Board.

Last week, five San Francisco Supervisors submitted an initiative, the “Park Sunlight Protection Ordinance” (the “PSPO”), to the Department of Elections for the June ballot. Coming in at just under two pages, the deceptively short measure would significantly expand the City’s longstanding shadow regulations by: – Eliminating the City’s discretion to approve projects that cast any new shade on certain parks – Expanding shadow-protected open spaces to include Yerba Buena Center, Hallidie Plaza and UN Plaza – Giving the Board of Supervisors power to unilaterally extend shadow protections without first consulting the Recreation and Parks Commission (“Rec/Park Commission”) or Planning Commission – Lowering the height limit for exempt Projects The PSPO has no phase-in provision, i.e., projects without an approved site-permit would be subject to the new regulations, even if it had already been reviewed by the Recreation & Park Commission and approved by the Planning Commission. The net benefits of these changes would be minimal: shadows on parks are already strictly regulated by a longstanding voter-approved ordinance. However, the PSPO’s negative consequences will be far-reaching. These include new burdens on small builders, major impediments to transit-oriented development downtown, and threats to the City’s plans for new downtown parks and transit infrastructure. Proposition K and Existing Shadow Budgets At present, property under the jurisdiction of, or intended to be acquired by, the Recreation and Park Commission (“Rec/Park Land”) is protected by Section 295 of the Planning Code, which was enacted by voter initiative (Proposition K) in 1984. Proposition K prohibits new structures over forty-feet tall that would have adverse and significant shadow impacts on the use of Rec/Park Land. It charged the Planning Commission and Rec/Park Commission with jointly adopting standards for implementing shadow protections, including the criteria for determining whether potential shadows cast by a project should be considered significant and adverse. Proposition K itself exempts the extremely long shadows cast one hour after sunrise and one hour before sunset. The Planning Commission and Rec/Park Commission responded by developing “shadow budgets” for all Rec/Park Land, which took into account the amount of existing shadow and park size, among other factors. The shadow budgets established an absolute cumulative limit for new shadows, with allowable increases ranging from zero net new shadow to a maximum of one percent. Rec/Park Land in Chinatown, the Financial District and Tenderloin tended to be among the most strictly regulated. Within these areas, Portsmouth Square, Maritime Plaza, St. Mary’s Square, and Boeddeker Park, among others, are allowed no new shadow. Union Square and Justin Herman Plaza are restricted to a maximum cumulative increase in shade of 0.1 percent. In addition to the quantitative limits, the two commissions adopted qualitative criteria to determine whether shadows adversely impact the use of a park. These include evaluating the location, extent and duration of new shadows in relation to (a) the extent of existing shadows, (b) the times of day and year when a park is most active, and (c) the public good served by the building casting new shadow. Proposition K’s Relief Valves While the existing shadow controls have been strictly enforced, two important aspects have allowed them to coexist with the continued development of downtown. First, not all downtown public open spaces are administered by the Rec/Park Commission. The Redevelopment Agency, Port, and Transbay Joint Powers Authority each have jurisdiction over existing or planned open spaces. These spaces are currently exempt from Section 295. This has allowed the Redevelopment Agency in particular to create new parks at the center of high-density districts. Yerba Buena Gardens is a prime example of the synergies between new parks and surrounding development. In Yerba Buena, the Redevelopment Agency strategically planned the location of private development to ensure ample sunlight would reach the park. The new private development in the surrounding area, in turn, both activated the park and generated tax increment revenue to defray the cost of building it. If shadow regulations had been applied to Yerba Buena Gardens, the SF MOMA, St. Regis, W Hotel, and Paramount would each be significantly shorter than they are today. Second, where both the Planning Commission and Rec/Park Commission find that there is no adverse effect on the use of a park, minor new shading may be allowed. In rare instances, shadow budgets may be increased by a majority vote of both commissions. In practice, such actions are rare, involve minor increases in allowable shadow, and are granted where a project will have obvious and compelling public benefits. One example is Boeddeker Park. The area surrounding Boeddeker Park is the site of several affordable housing developments. Two recent projects, one built and the other approved, would increase shadows by approximately one-third of one percent and create nearly 250 units of affordable housing. The City chose to allow a minor increase in the shadow budget given the overwhelming need for low-income housing and the limited extent of new shadows. Another example is the Asian Art Museum in Civic Center. The Civic Center Plaza’s cumulative shadow limit was raised from one percent to 1.12% in order to allow the adaptive reuse of the Old Main Library. Construction of the new Asian Art Museum entailed major seismic upgrades to, and rehabilitation of, the landmark building and brought an important cultural facility to the Civic Center. The PSPO: A Defacto Downtown Downzone The PSPO deprives the City of its discretion to make such reasonable tradeoffs between minor new shadow on public parks and major public benefits that can be created by new development. If passed, it would set in stone the existing shadow budgets for parks citywide, i.e., any future increase could only be approved by ballot initiative. This is especially problematic downtown where parks are closely spaced, buildings are tall, and many shadow budgets are set at zero. The PSPO would also expand shadow restrictions to several new downtown open spaces. Unlike Section 295, which is limited to Rec/Park Land, the PSPO applies to anything classified as “Park Property” under Section 2.01 of the Park Code. “Park

Last week, the California Building Standards Commission (CBSC) adopted new, statewide green building standards-the first statewide green building standards in the nation. Dubbed CALGREEN, the regulations will go into effect on January 1, 2011, though they shouldn’t have much immediate effect on projects in San Francisco for reasons described below. The 2010 Green Building Standards Code, as CALGREEN is officially known, will have mandatory code components and two “tiers” of voluntary components. The “tiers” of voluntary green building requirements provide ready-made means by which local governments can choose to enact higher levels of green building requirements by simply adopting the tiers into a local building code. This significantly assists smaller communities that do not have resources to devote to detailed analysis of greening their codes. Builders could also choose to build to the higher “tier” of green building, regardless of the local government’s adoption of the more stringent requirements. Local governments will still be able to maintain green building standards stricter than the mandatory codes, such as San Francisco’s green building ordinance that uses Leadership in Energy and Environmental Design (LEED) and Build It Green third-party certifications. The 2010 Green Building Standards Code will require: –20 percent mandatory reduction in indoor water use, with voluntary goal standards for 30, 35 and 40 percent reductions; –Separate water meters for nonresidential buildings’ indoor and outdoor water use, with a requirement for moisture-sensing irrigation systems for larger landscape projects; –Diversion of 50 percent of construction waste from landfills, increasing voluntarily to 65 and 75 percent for new homes and 80 percent for commercial projects; –Mandatory inspections of energy systems (i.e. heat furnace, air conditioner, mechanical equipment) for nonresidential buildings over 10,000 square feet; –Low-pollutant emitting interior finish materials such as paints, carpet, vinyl flooring and particle board. The CALGREEN Code will apply to all residential, commercial, hospital and school buildings, as opposed to some existing green building ordinances, such as that of San Francisco, which applies only to limited building occupancies. Local government building departments will be responsible for implementation of CALGREEN, just as with all other State health and building codes. CALGREEN requires field inspections to determine compliance. CALGREEN may challenge the long-term viability of third-party rating systems, such as the U.S. Green Building Council’s LEED rating system. For instance, the CBSC has stated in a press release that a key benefit of CALGREEN is that it “will allow California’s builders to build to a certifiable green standard without having to pay costly fees for third-party programs.” In turn, the U.S. Green Building Council, sponsor of the LEED rating system, as well as other environmental groups, opposed the CALGREEN standards, claiming that they would confuse the market. So what will CALGREEN mean for San Francisco projects? Here are a few possibilities. First, it is likely that most standards of San Francisco’s green building ordinance already exceed those of the new mandatory CALGREEN standards. As a result, CALGREEN will not “preempt” San Francisco’s existing green building ordinance, and thus San Francisco can continue to implement its ordinance as written, which requires compliance with LEED and Build It Green private rating systems. Second, while San Francisco can continue to implement its ordinance requiring compliance with third-party rating systems, it will be important for projects to also check the CALGREEN regulations to determine whether some aspect of mandatory CALGREEN requirements applies where San Francisco’s green building ordinance does not. For instance, San Francisco’s current ordinance only applies to B, M, and R occupancies, while CALGREEN will apply to a wider range of building product types. Third, practitioners in San Francisco will want to be familiar with both CALGREEN and the third-party rating systems (such as LEED and Build It Green) regardless of the immediately applicable standard. Knowing both systems will be helpful not only in achieving compliance today, but also in marketing green buildings to buyers and tenants, and addressing any future market trends as to which rating systems ultimately prove to have more cache. CBSC plans to place final text of the adopted 2010 Green Building Standards Code on its website, “www.bsc.ca.gov”, for download no later than the end of the month. In the meantime, you can read more about CALGREEN at: “http://gov.ca.gov/press-release/14186/.” Reminder: Mayor’s Stimulus Package Hearing to be Heard at 11 a.m. Tomorrow The Planning Commission will hold a public hearing on the Mayor’s stimulus package tomorrow, January 21, at 11:00 a.m. in room 401 of City Hall (unlike the typical Planning Commission meetings that begin at 1:30 p.m.) Again, we urge everyone who is able to attend to do so and voice their support at this hearing. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2010 Reuben & Junius, LLP. All rights reserved.    

New Hearing Date: Stimulus Package Hearing at Planning Commission Moved to January 21 The Planning Commission has rescheduled its hearing on the Mayor’s stimulus package from this Thursday to next Thursday, January 21. Again, we urge everyone who is able to attend to do so and voice their support at this hearing. The hearing begins at 1:30 p.m. in Room 401 of City Hall. Avalos Eviction Protection Ordinance is Passed by Board of Supervisors The eviction protection ordinance that Supervisor John Avalos introduced last year passed the Board of Supervisors on Tuesday. The ordinance now goes to the Mayor’s desk, who has publicly stated his opposition to the measure. The Board of Supervisors would need 8 votes to override a Mayoral veto. The Avalos ordinance, as we reported to you last month, would expand foreclosure protections, currently only applicable to rental properties constructed before 1979, to all rental properties. Avalos first justified the measure by saying it would protect tenants who lived in post-79 buildings that were foreclosed on by banks and lenders, which now have the ability to evict tenants for any reason. However, as interested parties researched the ordinance in greater depth, it was clear that the measure was not narrowly applicable, and that it would put enormous new burdens on all owners of post-79 rental properties. The Mayor has stated his intent to introduce a new, narrowly-focused ordinance that would protect tenants in post-79 rental properties that have been foreclosed on by a bank or lender. We’ll continue to keep you posted on future developments. Concern Grows That Proposed Air Quality Guidelines Could Slow Infill Development First came AB 32, which requires California’s greenhouse gas emissions to be reduced to 1990 levels by 2020. Then came SB 375, which seeks to reach AB 32’s goal by curbing sprawl and incentivizing urban, transit-oriented, infill development. Now the Bay Area Air Quality Management District’s new CEQA guidelines for analyzing very small particulate matter (PM) from new projects located near highways could thwart these efforts. BAAQMD, tasked with developing CEQA air quality review guidelines for Bay Area jurisdictions, has proposed that PM emissions from a new source (i.e. development) be considered significant for the purposes of CEQA if PM 2.5 levels (particulate levels for the smallest particles) increase even slightly. Unlike PM 10 particles (large particulates like most diesel exhaust) that have been heavily regulated for years, PM 2.5 particles (smaller particulates like sulfates and nitrates formed from power plants, motor vehicles, and other sources) are now subject to stepped up regulatory standards. But PM 2.5 particles are much more prevalent and therefore will be harder to control. These new PM 2.5 levels, if adopted, will impose very costly additional studies and mitigation measures on even the most environmentally-friendly, transit-oriented projects. Due to growing concern from developers, and now local jurisdictions, BAAQMD has continued a public hearing where it intended to adopt the proposals to April 7. During this time, BAAQMD will continue its public outreach on the proposal. We believe these standards are bad for cities, bad for development, and bad for the environment. Ironically, the proposed guidelines would actually work against SB 375’s efforts to incentivize urban infill development. The draft CEQA guidelines can be found at “http://www.baaqmd.gov/Divisions/Planning-and-Research/Planning-Programs-and-Initiatives/CEQA-GUIDELINES.aspx”. We’ll keep you posted on further developments. New Secretary of State Alert for Bogus Business Solicitations The California Secretary of State issued another warning regarding misleading solicitations sent to California corporations and LLCs. The bogus letters encourage business owners to submit $495 to a private company named Business Filings Division in order to dissolve their business entity. Although these solicitations may appear legitimate and contain an official-looking seal, they are not being made by or on behalf of any government entity. Be advised that there are no filing fees for submitting dissolution documents to the Secretary of State. The bogus forms do not meet state law requirements for dissolution of a business entity, and will not effectively dissolve a corporation or LLC. Suspicious solicitations may be reported to the California Attorney General’s office, Public Inquiry Unit, P.O. Box 944255, Sacramento, California 94244-2550. A complaint form, which can be completed online and printed to mail, is available on the California Attorney General’s website at “www.ag.ca.gov/consumers/general.php.” If you have any concern that a form regarding your corporation or LLC may be a bogus solicitation, you should contact your corporate attorney or Jay Drake at Reuben & Junius, LLP. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work. Copyright 2010 Reuben & Junius, LLP. All rights reserved.