• State Agencies Release Land Use and Environmental Considerations for Automated Vehicle Deployment

    The state of California is keeping a watchful eye on the potential land use, environmental, and social consequences of automated vehicle deployment. On November 16, 2018, the Governor’s Office of Planning and Research announced the release of “Automated Vehicle Principles for Healthy and Sustainable Communities.” This document involved staff collaboration among state agencies, including the Office of Planning and Research, the Air Resources Board, and Caltrans.

    The Automated Vehicle Principles set out several broad guiding considerations that seek to align automated vehicle deployment with other environmental and public policy objectives. The Principles address topics such as encouraging shared use and car-pooling, utilizing low-emission vehicles, promoting efficiency in vehicle size, undertaking efficient land use planning, and addressing transportation equity. These considerations are largely reflective of the research of programs like UC Davis’s 3Revolutions.

    While the Automated Vehicle Principles do not impose specific standards and are more likely to serve as a general policy statement for future agency efforts, the statement is nevertheless significant. The Automated Vehicle Principles acknowledge the potential benefits to automated vehicle deployment but warn that the potential consequences could be severe if automated vehicles are deployed without careful consideration of the environmental, land use, and social impacts of the new technologies.

    For example, if automated vehicles are deployed as personally owned vehicles, automated technologies could increase vehicle miles traveled since it may reduce disincentives for long commutes. But if automated vehicles are deployed in a manner that is shared, pooled, and properly-sized, then automated vehicles could help reduce vehicle miles traveled.

    We expect further and more concrete steps by OPR, CARB, Caltrans, and other state agencies to address the issues raised in the Automated Vehicle Principles, including new policies and proposed legislation. This will likely include measures to encourage cities to incorporate these principles into their land use and transportation planning efforts.

  • Senator Wiener Introduces Recrafted Legislation Providing Height and Density Bonuses, Other Incentives for “Transit-Rich” and “Jobs-Rich” Projects

    Last spring, we reported on Senator Scott Wiener’s SB 827, which proposed major increases in height and density for qualifying housing developments.  Battle lines quickly emerged, with supporters claiming that the legislation was a bold, necessary solution to the housing affordability and climate change crises, and opponents asserting that it was a threat to neighborhood stability and an invitation to gentrification.  The bill was ultimately killed in Committee.  On December 3, Senator Wiener introduced SB 50.  Like SB 827, SB 50 would constrain local agencies’ ability to impose height and density limits and minimum parking requirements on residential developments (projects with at least two-thirds of the square footage designated for residential use) that meet the legislation’s “transit rich” and/or “jobs rich” criteria.  SB 50 introduces the term “equitable communities incentives” to describe the bill’s various waivers, concessions and incentives.

    Senator Wiener added new features, and modified others, to address criticisms of the prior bill.  Highlights include:

    • Expanding density incentives beyond “transit-rich” projects to “jobs-rich” projects (based on criteria such as proximity to jobs, area median income and quality of public schools) to capture more affluent areas outside major transit corridors.
    • Delaying implementation for designated “sensitive communities” (generally, those with a high risk of gentrification or displacement based on indicators such as percentage of tenant population living at or below the poverty line) to allow time for planning efforts directed at affordable multifamily housing.
    • Designating properties as ineligible if they have housed tenants in the past 7 years, or if the owner has evicted tenants under the Ellis Act in the past 15 years, prior to submittal of a development application; and
    • Providing that projects are generally subject to the more restrictive of SB 50’s affordable housing requirements, or local city inclusionary housing ordinances.

    The legislation has a number of co-authors and several early supporters, including Mayors Breed and Schaaf and the State Building Trades Council.  It is expected to be opposed by many of the same local communities that resisted SB 827 based on concerns such as loss of local control and gentrification.  The bill is currently awaiting Committee referral.

     

  • At Long Last: Central SoMa Plan Effective

    After over seven years of planning and public outreach, as of January 7, 2019, the Central SoMa Plan and its implementing legislation are finally effective.  The City’s analysis concludes that the Plan area has development capacity for over 8,000 new housing units (approximately 33 percent of which will be affordable) and over 30,000 new jobs, and will generate over two billion dollars of public benefits.

    The key takeaways are as follows:

    Rezoning

    The Plan area is an approximately 230-acre site that runs roughly from 2nd Street to 6th Street, and from Market Street to Townsend Street, excluding certain areas north of Folsom Street that are part of the Downtown Plan. Very broadly, the Plan and its implementing legislation increase permitted height and density and streamline zoning controls for the majority of the Plan area.  With the exception of the Key Development Sites discussed below, height limits in large portions of the Plan area generally increased from 85 feet or less to 130 to 160 feet, subject to bulk controls to encourage building sculpting.  In exchange for this upzoning, the Plan requires increased public benefits, including payment of significant development impact fees.  See our prior blog post for a summary of other required exactions and public benefits, including privately owned public open space (POPOS) requirements.

    The predominant new base zoning district is Central SoMa Mixed Use Office (CMUO), which largely replaces relatively restrictive zoning districts with more flexible mixed-use zoning controls and eliminates Floor Area Ratio (FAR) limits for larger projects that participate in the Central SoMa Mello Roos Community Facilities District (CFD) Program described below. The CMUO zoning district is characterized as an Eastern Neighborhoods Mixed Use District and as such, Planning Code Section 329 Large Project Authorization from the Planning Commission is required for projects that are greater than 85 feet in height or propose the net addition or new construction of more than 50,000 gross square feet.  Large Project Authorization is required in addition to any other required entitlements, such as Conditional Use (CU) authorization for, e.g., new hotel uses in the Plan area.

    The Plan area is also part of a new Central SoMa Special Use District (SUD), which creates an additional layer of zoning controls.  Some of the major SUD controls are: designating the largest sites (over 40,000 square feet) South of Harrison Street as predominantly non-residential; imposing new PDR/Community Building Space requirements on projects with at least 50,000 gross square feet of office space; imposing active ground floor requirements, including requiring “micro-retail” units between 100 and 1,000 square feet for certain projects; imposing renewable electricity requirements; and generally prohibiting new formula retail bar, formula retail restaurant, and standard group housing uses.  See new Planning Code Section 249.78 for a complete list of requirements and restrictions in the SUD.  Up to 25 feet of additional building height is permitted for certain projects in the SUD that provide certain additional public benefits, including 100 percent affordable housing projects.  See new Planning Code Section 263.32.

    Again, there is generally no maximum FAR in the Plan area.  The purchase of Transfer of Development Rights (TDR) is generally required for larger non-residential projects (50,000 gross square feet or greater) on “Tier C” properties (as defined under Planning Code Section 423.2) for the portion of the project FAR between 3.0:1 and 4.25:1.  TDR must be obtained from a Preservation Lot (as defined under new Planning Code Section 128.1) also within the SUD or a lot containing a building with 100 percent affordable housing units.

    Key Development Sites

    The Plan identifies eight Key Development Sites, which are significantly upzoned, including increased height limits for towers 200 to 400 feet in height (depending on the site), in combination with more permissive Planning Code controls under the SUD and new Planning Code Section 329(e) exceptions, which vary to some extent by site.  Key Development Site projects must provide additional Qualified Amenities (as defined in new Planning Code Section 329(e)) and on-site childcare facilities (for office or hotel projects), in addition to the other required public benefits, including payment of substantial development impact fees.  There are also special height exceptions for qualifying projects on certain Key Development Sites under new Planning Code Sections 263.33 and 263.34.

    Central SoMa Mello Roos CFD

    The Central SoMa Mello Roos CFD Program participation requirement under new Planning Code Section 434 applies to projects in the Plan area that include new construction or the net addition of more than 25,000 gross square feet of non-residential development on “Tier B” or “Tier C” properties, or more than 25,000 gross square feet of new residential condo development on “Tier C” properties.  See the definitions under new Planning Code Section 423.2.  The CFD Program participation requirement is only triggered for projects that also exceed the applicable Prevailing Building Height and Density controls under Planning Code Section 249.78(d)(1)(B), meaning that many smaller projects are exempt.

    Legislation for the formation of the CFD was introduced by the Board of Supervisors on December 4, 2018 (BOS File No. 180622).

    Central SoMa Housing Sustainability District

    The Central SoMa Housing Sustainability District (HSD) encompasses the entire Plan area.  As explained in more detail in our prior blog post, residential projects 160 feet in height or less (unless 100 percent affordable) in the HSD meeting specified criteria, including minimum density and affordability requirements, qualify for a 120-day streamlined ministerial (i.e., no CEQA) review and approval process, including design review by the Planning Department.

    Qualifying projects first require an informational public hearing followed by Planning Department approval, which will be appealable to the Board of Appeals.

  • Major BART Housing Bill Passes

    On September 30, Governor Brown signed AB 2923, which could pave the way for BART to develop up to approximately 20,000 residential units, plus about 4.5 million square feet of office and commercial uses, on about 250 acres of BART-owned land. It requires cities and counties to adopt local zoning standards for BART-owned land that conform to BART Transit Oriented Development (TOD) zoning standards and establishes a streamlined approval process for qualifying projects. The law sunsets on January 1, 2029.

    The new law seeks to ease traffic congestion and increase housing production and affordability by making it easier to develop housing on certain BART-owned land. An eligible TOD project (defined below) qualifies for streamlined ministerial approval (no additional CEQA review) if it meets certain standards related to height, floor area ratio, etc. There are exclusions for projects that have specified adverse, unmitigated environmental impacts.

    An “eligible TOD project” is a project at an infill site on BART-owned land with at least 50 percent of the floor area of the project dedicated to residential uses, unless a local specific plan provides for a different amount of residential uses on the site. The site must form a contiguous area of at least 0.25 acres, with at least 75 percent of its area located within one-half mile of an existing or planned BART station entrance. It must also be within an area represented on the BART Board, which excludes areas south of San Francisco. Eligible TOD projects must also meet requirements regarding housing replacement, tenant displacement and relocation, affordable housing, and labor standards.

    The law requires the BART Board of Directors to adopt new TOD standards for height, density, parking, and floor area ratio for eligible TOD projects on BART-owned land (TOD Standards) by July 1, 2020. Adoption of the TOD Standards is subject to CEQA review, with BART serving as the lead agency. The minimum TOD Standards are generally set as the 2017 BART TOD Guidelines (TOD Guidelines)—these also apply if BART has not adopted TOD Standards by July 1, 2020. The lowest permitted height is set at the higher of 150% of the height permitted in the TOD Guidelines or the approved height in nearby areas, as defined in the bill. There are also parking requirements for auto-dependent stations and limits on local parking requirements.

    Affected local jurisdictions must adopt an ordinance that conforms to the TOD Standards within two years after BART’s adoption of the TOD Standards, or by July 1, 2022 if BART has not adopted TOD Standards for a station. The BART Board is required to review local zoning standards and confirm consistency with the TOD Standards. Certain local provisions are exempt from the TOD Standards if they are already in substantial compliance with the TOD Guidelines. Nothing in the new law affects the application of density bonuses.

    AB 2923 was endorsed by the City and County of San Francisco, housing and other non-profit advocacy groups such as the Bay Area Council, SPUR, the Silicon Valley Leadership Group, SFHAC, YIMBY Action, and various building trades and business advocacy groups. The opposition included Alameda County, various East/North Bay cities, three members of the BART Board, the League of California Cities, and the American Planning Association, California Chapter.

  • Update on Commercial Rent Tax: Tax For Childcare Passes, Faces Legal Challenge

    Proposition C—the Commercial Rent Tax for Childcare and Early Education—is set to take effect on January 1, 2019, and increase the Gross Receipts Tax (“GRT”) on commercial rents in San Francisco.  As discussed in our previous post, Proposition C competed with Proposition D—the Housing For All Commercial Rent Tax—and prevailed with San Francisco voters in June.

    The City’s existing GRT regime already imposes a tax on the gross receipts of many businesses operating within San Francisco, with a current GRT rate of approximately 0.3% imposed on commercial rents.  Gross receipts tax refers to the tax on the total amount of money received or accrued by a person from doing business in San Francisco, less specific statutorily excluded items.  In addition to the existing GRT, the City’s new Commercial Rent Tax imposes a tax of 1% on amounts received for rentals of “warehouse space,” and a tax of 3.5% on amounts received from rentals of other “commercial space” in the City.

    The Commercial Rent Tax will significantly increase the local tax burden on commercial property owners in San Francisco, and taxpayers’ advocacy groups have filed suit against the City and County of San Francisco seeking to invalidate it, claiming that Proposition C was passed in violation of the California Constitution.  At issue is whether the “special tax” imposed by San Francisco voters by initiative requires a two-thirds majority to pass.

    Unless the challenge is successful, the Commercial Rent Tax will take effect on January 1, 2019.  Landlords may be able to pass some of the resulting expense on to their tenants with triple net leases, depending upon the expense pass through language in the leases.  Going forward, landlords will need to consider this tax when drafting such provisions, and tenants will want to pay close attention as well when negotiating their leases.

    Commercial landlords in San Francisco who already pay tax on the lease of their space will find the process familiar, as returns for the new tax will be filed in the same manner and on the same schedule as the current gross receipts tax.  The rules for filing combined returns applicable to the current rent tax will apply: the taxpayer must file returns on a combined basis with all of that taxpayer’s related entities, i.e., those entities with which the taxpayer is permitted or required by the California Franchise Tax Board to reflect income on the same combined report.

    For a more in-depth discussion of the GRT regime in San Francisco, including its history, the current applicability, and information about determining the tax, please refer to the recent Coblentz publication examining this topic.

  • San Francisco Passes Proposition C to Increase Gross Receipts Tax on Commercial Landlords

    Commercial Rent Tax for Childcare

    Proposition C—the Commercial Rent Tax for Childcare and Early Education—is set to take effect January 1, 2019, and increase the Gross Receipts Tax (“GRT”) on Commercial Rents.

    The imposition of the Commercial Rent Tax is expected to be a significant increase to the local tax burden on commercial property owners in San Francisco. To that end, taxpayers’ advocacy groups have filed suit against the City and County of San Francisco seeking to invalidate the tax and claiming that Proposition C was passed in violation of the California Constitution.1 At issue is whether San Francisco voters can circumvent the requirement that Propositions that constitute a “special tax” must attain a two-thirds majority to pass as compared to the voter initiative process, which only requires a simple majority for approval. Last year, the California Supreme Court held in California Cannabis Coalition v. City of Upland that certain procedural standards applicable to measures proposed by legislators do not apply to measures proposed by voter initiative. The business organizations challenging Proposition C argue that the Upland decision did not go so far, as it did not address required voter threshold.

    The City’s existing Gross Receipts Tax (“GRT”) regime already imposes a tax on the gross receipts of many businesses operating within San Francisco, with a current GRT rate of approximately 0.3%  imposed on commercial rents. In addition to the existing GRT, the City’s new Commercial Rent Tax imposes a tax of 1% on amounts received for rentals of “warehouse space,” and a tax of 3.5% on amounts received from rentals of other “commercial space” in the City.

    Commercial landlords in San Francisco who already pay tax on the lease of their space will find the process familiar, as returns for the new tax will be filed in the same manner and on the same schedule as the current gross receipts tax. The rules for filing combined returns applicable to the current rent tax will apply: the taxpayer must file returns on a combined basis with all of that taxpayer’s related entities, i.e., those entities with which the taxpayer is permitted or required by the California Franchise Tax Board to reflect income on the same combined report.

    Generally, the Commercial Rent Tax would not apply to businesses exempt from the existing GRT, including businesses with less than $1 million total in gross receipts, leases of retail spaces, leases for “industrial use,” leases for “arts activities,” most residential real estate leases, nonprofit organizations that are leasing spaces as commercial landlords, and leases to nonprofit organizations or local, state, or federal governments.

    The imposition of the Commercial Rent Tax, on top of the existing tax on gross receipts, will likely be a significant increase to the local tax burden on commercial property owners in San Francisco. Landlords may be able to pass some of the resulting expense on to their tenants with triple net leases, depending upon the expense pass through language in the leases. Going forward, landlords will need to consider this tax when drafting such provisions, and tenants will want to pay close attention as well when negotiating their leases.

    To better understand the additional tax burden posed by the Commercial Rent Tax, a discussion of San Francisco’s existing GRT regime follows.

    San Francisco’s Existing Gross Receipts Tax Regime

    Gross receipts tax refers to the tax on the total amount of money received or accrued by a person from doing business in San Francisco, less specific statutorily excluded items. The tax is payable by “persons” engaged in business in San Francisco, which includes any individual, firm, company, partnership, LLC, joint venture, association, proprietorship, domestic or foreign corporation, or any other group acting as a unit.2

    “Gross receipts” are defined broadly to include all amounts that constitute gross income for federal income tax purposes, such as all receipts; cash; credits; and property of any kind or nature, and including any amount for which a credit is allowed by the seller to the purchaser, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, losses or any other expense whatsoever.3

    Phase-In of Gross Receipts Tax

    On January 1, 2014, San Francisco began making the transition to the GRT for all business activities attributable to San Francisco. The GRT was to be phased in over five years, with incremental decreases in payroll expense tax corresponding to incremental increases in GRT. By 2018, the phase-in was to adopt the GRT base rate at 100% and the payroll expense should have been phased out to zero. However, this did not happen, and the current rates are shown below.4

    Year % of Adopted Gross Receipts Base Rate Payroll Expense Tax Rate
    2014 10% 1.350%
    2015 25% 1.162%
    2016 50% 0.829%
    2017 75% 0.711%
    2018 100% 0.380%

     

    Therefore, for 2018, both payroll expense tax and GRT are payable by San Francisco businesses.

    Determining the Gross Receipts Tax

    The rate of the GRT is dependent upon the type of business activities and the amount of gross receipts.5  Businesses conducting business both within and outside San Francisco must apportion their gross receipts to determine gross receipts subject to the GRT.6  Businesses located entirely outside San Francisco are still subject to the GRT to the extent their gross receipts are allocable to San Francisco.7

    There are multiple methods of apportionment, and the method varies depending on type of business activity. The primary methods of allocation and apportionment are set forth in Code section 956.1, summarized as follows:

    (1) Real or Personal Property. Gross receipts related to real property located in San Francisco and personal property delivered to San Francisco are allocable to San Francisco;
    (2) Services. Gross receipts from services are allocable to San Francisco to the extent the purchaser of the services received the benefit in San Francisco;
    (3) Intangible Property. Gross receipts from intangible property are allocable to San Francisco to the extent the property is used in San Francisco;
    (4) Payroll. Gross receipts apportioned based on payroll is calculated by determining the amount of all non-exempt gross receipts multiplied by the fraction of payroll in San Francisco over combined payroll.

    In addition to the GRT, there is a San Francisco Business Registration Fee, which is based on gross receipts for the immediately preceding year and the type of business activity.8  Under the current structure, there are thirteen levels of Registration Fees that may apply, ranging from $90 for businesses with $100,000 or less in gross receipts to $36,225 for businesses with $200,000,001 or more.9

    Exemptions & Exclusions from Gross Receipts Tax

    1. Small Business Exemption
    Exempted from the GRT are small businesses with less than $1,000,000 in San Francisco gross receipts.10 This number is adjusted annually for inflation, putting the 2018 threshold at $1,090,000.  Note that businesses with $500,000 or more in San Francisco gross receipts must still file a GRT return or be subject to a penalty, and businesses operating in San Francisco must still pay the Business Registration Fee regardless of the amount of gross receipts.11  A residential landlord is considered a “small business enterprise” within the meaning of the exclusion if and only if the landlord leases fewer than four units in any individual building.

    2. Tax Reimbursement Exclusion
    Excluded from the computation of gross receipts are federal, state and local taxes for which a taxpayer is reimbursed by means of a separately stated charge.12

    3. Investment Exclusion
    Gross receipts do not include any “investment receipts,” which are defined as interest, dividends, capital gains, other amounts received on account of financial instruments, and distributions from business entities, provided such amounts are derived exclusively from the investment of capital and not from the sale of property other than financial instruments or from the provision of services.13 

    Gross receipts do not include allocations of income or gain, or distributions from an entity treated as a pass-through entity for federal income tax purposes, provided such allocations or distributions are derived solely from an investment in such entity and not from the provision of services.14

    4. Exclusion for Amounts Received from Related Persons
    Amounts received from a related person or entity, including gross receipts of a pass-through entity which is itself subject to the GRT, are excluded from gross receipts.15

    5. Rent Controlled Buildings Exclusion
    Lessors of residential real estate may exclude from gross receipts 50% of the total amount received from the rental of real property to tenants in occupancy at any location in San Francisco that is subject to limits on rent increases.16

    6. Other Exemptions
    The following are also specifically exempt from the GRT:

    Formally recognized tax-exempt organizations under either the California Revenue and Taxation Code or the Internal Revenue Code;

    • Banks, financial corporations, and insurance companies;
    • Businesses engaged as for-hire motor carriers;
    • Businesses engaged in intercity transportation as a household goods carrier;
    • Charter-party carriers operating limousines that are not domiciled or maintained in the City; and
    • Any other person the City is prohibited from taxing under State law.17


    Quarterly Estimated Tax Payments

    In February 2017, the San Francisco Board of Supervisors passed Ordinance 026-17, which requires quarterly estimated payments for payroll expense taxes and GRT, and permits taxpayers to apply refunds of overpayments of the business registration fee, the payroll expense tax, and the GRT to subsequent tax periods.  Every business with San Francisco gross receipts of more than $1,090,000 or payroll expense of more than $300,000 is required to make three quarterly estimated tax payments and file an annual tax return. Residential landlords that rent four or more units, with annual gross receipts less than $1,090,000 and payroll expense less than $300,000 are only required to file an annual tax return.18 For businesses not fitting these criteria, no annual return is required for GRT and payroll expense tax.

    The required quarterly estimated payments are the lesser of (1) 25% of the prior year or (2) 25% of the current year tax liabilities. If a taxpayer fails to make the estimated payment, there is a penalty equal to 5% of the underpayment.19 The quarterly estimated payments due are billed and posted in March. The first, second, and third estimated tax payments for a tax year are due on or before April 30, July 31, and October 31, respectively. The fourth quarter payment is due by February 28 of the following year. These payments are credited against a person or combined group’s total annual payroll expense tax or GRT for the year in which the payments are made.20

    For more information, contact Tax Partner Jeffry Bernstein at jbernstein@coblentzlaw.com or Real Estate Partner Barbara Milanovich at bam@coblentzlaw.com. Research analysis provided by Jessica N. Wilson and Heather Webb.

     

    1See Complaint to Invalidate Special Tax, Howard Jarvis Taxpayers Assn. v. City and County of San Francisco, Superior Court of California (filed August 3, 2018).
    2Code § 6.2.
    3Code § 952.3(a).
    4 OFF. OF THE CONTROLLER AND OFF. OF THE TREAS. & TAX COLLECTOR, SAN FRANCISCO BUS. TAX REFORM:  ANNUAL REPORT FOR 2017  8 (Oct. 2017).
    5See Chart 1.
    6See Code §§ 956.1; 956.2.
    7Code § 956.1(f).
    8Code § 855(e).
    9See City and County of San Francisco Treasurer & Tax Collector, Business Registration Fees for the Registration Year Ending June 30, 2018, http://sftreasurer.org/RG18Rates (last visited August 17, 2018).
    10Code § 954.1(b).
    11Code § 954.1(c).
    12Code § 952.3(c).
    13Code § 952.3(d).
    14Code § 952.3(e).
    15Code § 952.3(d).
    16Code § 954(d). The limits on rent increases must be imposed by San Francisco’s Residential Rent Stabilization and Arbitration Ordinance.
    17Code § 952.3(f)(1) – (6); see also Code § 954(a).
    18City and County of San Francisco Treasurer & Tax Collector, Gross Receipts and Payroll Expense, http://sftreasurer.org/2017GRPY.
    19See San Francisco Ord. No. 26-17 (Feb. 10, 2017).
    20See City and County of San Francisco Treasurer & Tax Collector, Gross Receipts Tax and Payroll Expense Tax Quarterly Estimated Payments, http://sftreasurer.org/gross-receipts-tax-and-payroll-expense-tax-quarterly-estimated-tax-payments (last visited August 17, 2018).

  • Summer Summary: Recent Changes in Local Law

    This summer, the San Francisco Board of Supervisors approved legislation that increased the Transportation Sustainability Fee (TSF) for large non-residential projects, amended the HOME-SF (Housing Opportunities Mean Equity-San Francisco) Program to temporarily (through 2019) reduce Program requirements, and created a new administrative approval process for 100% Affordable Housing Bonus Program projects.

    TSF Increase for Large Non-Residential Projects

    In June 2018, the San Francisco Board of Supervisors approved a Transportation Sustainability Fee (TSF) increase for large non-residential projects (over 99,999 gross square feet (gsf)) citywide, with certain exceptions.  This increase follows a major overhaul of transportation fee requirements in 2015, which imposed higher transportation fees citywide for most projects.  The legislation characterizes the increase as $5.00 per gsf (based on the 2015 original TSF rate); however, according to the current Development Impact Fee Register, due to interim increases based on indexing, as of January 1, 2018, the TSF was $21.14, and the actual fee increase is $2.90 per gsf.

    There are certain exemptions and exceptions to the fee increase.  For example, for most large non-residential projects in the Central SoMa Plan Area, the fee will be $21.04 upon the effective date of the Central SoMa Plan Area rezoning and associated Planning Code amendments under Board of Supervisors File No. 180184.  The fee increase also does not apply to projects with a Development Agreement approved prior to June 5, 2018.

    The TSF for residential, hospital, health services, PDR, and other smaller non-residential projects (under 99,999 gsf) is not affected by the legislation and there are no changes to existing grandfathering clauses and exemptions.

    Amendments to HOME-SF Density Bonus Program

    In July 2018, the San Francisco Board of Supervisors approved legislation to temporarily reduce HOME-SF Program requirements.

    As explained in more detail in our prior blog post, the HOME-SF Program seeks to increase affordable housing production, particularly housing affordable to middle income households, by encouraging project sponsors to provide additional on-site units as affordable.  Certain Planning Code modifications and density bonuses may be granted by the Planning Commission for qualifying projects, including up to 20 feet of additional building height without the need for a Height Map amendment. Previously, in order to qualify for the Program, at least 30% of on-site units were required to be designated as affordable, as compared to the lower percentages (18 to 20% for rental and ownership projects, respectively) otherwise required under the San Francisco Inclusionary Housing Ordinance.

    The recent legislation reduces HOME-SF Program requirements for projects with a complete Environmental Evaluation (EE) application on file before January 1, 2020.  For qualifying projects with 25 or more total units, the 30% requirement is reduced to 23% or 25% for a height bonus of up to five and ten feet, respectively.  For projects seeking a height bonus between eleven and 20 feet, the 30% requirement still applies.  For smaller projects only seeking a height bonus of up to five feet, the 30% requirement is reduced to 20%, which, again, is the same as the current on-site Inclusionary Housing Ordinance requirement for ownership (i.e., condo) projects.

    Although the required AMI spread for affordable ownership units (80%, 105% and 130% of AMI) and affordable rental units (55%, 80% and 110% of AMI) remains the same, changes were made to the percentage of affordable units required at those AMI levels.  For example, although a qualified HOME-SF Program project seeking 20 feet of additional building height would still be required to designate at least 30% of on-site units as affordable, more of those units could be rented at 80% and 110% of AMI. See Planning Code Section 206.3(f) for more information.

    The recent amendments also require the Planning Commission to approve or deny a HOME-SF Program project within 180 days of submittal of a complete application, unless an EIR is required for the project. See Planning Code Section 328 for more information about the Planning Commission review process.

    New Administrative Approval Process for 100% Affordable Housing Bonus Program Projects

    The July 2018 legislation referenced above also created a new administrative review and approval process under Planning Code Section 315.1 for 100% Affordable Housing Bonus projects, as defined under Planning Code Section 206.4.

    These projects will now be reviewed and approved administratively by the Planning Department, notwithstanding any otherwise applicable Conditional Use (CU) authorization requirement related to a specific land use or use size limit.  The Planning Director may also grant “minor exceptions” to Planning Code requirements (in addition to  Planning Code Section 206.4 modifications), including exceptions from residential usable open space, loading, rear yard, dwelling unit exposure and parking requirements, and modifications of other Planning Code requirements that could otherwise be modified through the Planned Unit Development (PUD) process, regardless of the zoning district. These exceptions are similar to what is currently available by Planning Commission authorization for downtown projects and projects in the Eastern Neighborhoods under Planning Code Sections 309 and 329, respectively.  Even though these modifications are substantially broader than those otherwise permitted under Section 206.4, they are available  in limited circumstances (i.e., to “appropriately shift” building mass to respond to the surrounding context and only if such modifications “do not substantially reduce or increase the overall building envelope permitted under Section 206.4.”).

    The Planning Department’s determination will be appealable to the Board of Appeals through the  building permit process, but any requests for Discretionary Review (DR) by the Planning Commission will be denied if and when the Commission delegates its DR authority to the Department for 100% Affordable Housing Bonus projects, as contemplated by the legislation.  The CEQA determination for a project will be separately appealable to the Board of Supervisors, unless the project qualifies for ministerial approval under Senate Bill (SB) 35, as locally implemented pursuant to Planning Director Bulletin No. 5 (which should be amended to account for new Section 315.1). See our prior blog posts for more information about SB 35 and the local implementation of SB 35.

  • California Voters Poised to Weigh in on Major Changes to Rent Control Law

    California voters will consider a November ballot initiative (Proposition 10) that would repeal the 1995 California Costa-Hawkins Rental Housing Act (“Costa-Hawkins”). Costa-Hawkins generally limits rent controls that may be imposed by local jurisdictions on housing units in buildings with a certificate of occupancy issued after February 1995, prohibits local jurisdictions from expanding rent control to include “vacancy control,” and exempts single-family homes and condominiums from rent controls, with limited exceptions.

    In San Francisco and Los Angeles, Costa-Hawkins prohibits rent control for housing units in buildings with a certificate of occupancy issued after June 1979 and October 1978, respectively, because of the local rent control ordinances that were in effect in those cities when Costa-Hawkins was adopted. In other words, in San Francisco, rent control only applies to tenants in buildings built before June 1979, meaning that generally, owners of buildings built after that date can increase rental rates at any time (subject to required notice) to reflect market conditions.

    Proposition 10 is not the only attempt to repeal Costa-Hawkins in the recent past. In 2017, Assembly Members Chiu, Bloom and Bonta introduced AB 1506 to repeal Costa-Hawkins, which was rejected by the Assembly Housing and Community Development Committee, in part because two Democrats abstained from voting.

    If passed by California voters, the ballot initiative would allow—but not require—local jurisdictions to adopt rent control laws without any state-imposed limitations related to the type of housing or the date that a certificate of occupancy was issued for a building (see above). If Proposition 10 were to pass, the San Francisco Board of Supervisors could vote to impose rent control on units in buildings built after June 1979, including new construction. Earlier this month, the San Francisco Board of Supervisors voted on a resolution to support Proposition 10. That resolution failed, with “no” votes from Supervisors Cohen, Safaí, Stefani and Tang.

    The Coalition for Affordable Housing is leading the campaign in support of the initiative and the California Apartment and Rental Housing Associations are leading the opposition, with major donations from the real estate investment and development communities. A myriad of elected officials, businesses, organizations, labor unions representing the construction trades, and some affordable housing developers and advocates are also in opposition. Opponents generally argue that Proposition 10 would worsen the existing housing crisis because it would discourage investment in housing. Supporters, including the California Democratic Party and the California ACLU, generally argue that Proposition 10 is necessary to protect residents from being displaced due to skyrocketing rent increases.

  • Cracking the Code: Three Simple Steps To Break Through the Legalese of the California Rules of Court and Local Rules When Filing with the Court

    How do we, the legal paraprofessionals, build a consistent, reliable bridge between the attorney and the clerk, while delivering our pleadings through the Court’s gatekeepers?

    Whether we are Legal Secretaries, Paralegals or Legal Assistants, we need to ensure that our pleadings are successfully filed without being rejected by the clerk. When filing, we need to comply with both the California Rules of the Court (“CRC”) as well as the local rules of each court. Many of us did not go to law school, so how do we understand the legalese when reading these rules? Even attorneys with decades of legal practice experience may encounter obstacles when their best attempts at compliance with the California and local rules do not satisfy the clerk.

    Here are three simple steps that can help overcome those obstacles:

    1. Locate the applicable rules
    2. Understand those rules
    3. Clarify any remaining ambiguity with the clerk

    1. Locating the Rules

    Since the diminutive, spiral-bound desk books we once received annually have now become obsolete, the best modern day reference is to go straight to the source – the California Rules of Court website, where you can find the CRC’s. Each county’s local rules can be found at http://www.courts.ca.gov/find-my-court.htm, where you can find not only the links, locations, and contacts, but also the proper District for the Court of Appeal for each county.

    2. Comprehending the Rules

    Foundationally, we must understand the relationship between the Local Rules of the Court and the California Rules of the Court (hereinafter “CRC”). The California Rules of Court (“California Rules” or “CRC”) are rules that govern all the state Courts in California – that is, they apply statewide. They are administered, managed and updated by the Judicial Council of California (“The Judicial Council”), which is a body of highly qualified people employed by the State of California and under the leadership of the Chief Justice of the California Supreme Court, the highest court in our state judicial system. Local Rules cannot supersede the California Rules of the Court. CRC. 3.20.

    However, at times, the California Rules often give the “green light” to the Local Rules, providing there is no conflict with higher authority. For example, to open a case, CRC Rule 2.220(a) requires, “The first paper filed in an action or proceeding must be accompanied by a case cover sheet” and that cover sheet “must be on a form prescribed by the Judicial Council and must be filed in addition to any cover sheet required by local court rule.” For example, the Los Angeles Superior Court includes within its Local Rules, LR 2.3(a)(1)(E), which instructs us that a Civil Case Cover Sheet Addendum is required for all new civil case filings in “addition to the Civil Case Cover Sheet required by the California Rules of the Court.” This Civil Case Cover Sheet Addendum is a locally approved form (LACIV109), which can be found on that court’s website. Therefore, to successfully file a first paper and open a new case in the Los Angeles Superior Court, this Civil Case Cover Sheet Addendum must also be filed in addition to documents required by the California Rules, the Complaint and Case Cover Sheet. If this local rule is not followed, your filing may be rejected or sent back asking for that form in order to open your case.

    The second most basic rule is to learn to have patience in understanding the grueling legalese in so many of our rules. One way of breaking through the Court’s language as swiftly as possible is to take time in advance.

    Here are two ways to get started. Let’s consider how the following two rules work: CRC Rule 1.5 and CRC Rule 1.6.

    CRC Rule 1.5, “Construction of Rules and Standards” sets forth a series of requirements that require special attention. In this section, you should notice the mandatory words such as “must,” which are required, as compared to words such as “should,” which are simply strong suggestions. This will help you look out for and locate the words that flag a rule that unquestionably needs to be followed, versus words that may make your life easier if you follow them, but are not mandated.

    Second, take a careful look at the definitions set forth in CRC Rule 1.6, “Definitions and Use of Terms.” The context of these rules is not the same in the everyday English we speak. For example, in Rule 1.6 (14), the word “Person” is not just a “natural person” but this word also includes a “corporation.” Who would have ever thought that a corporation would be considered a person when speaking everyday English? It is important to recognize when a term is specifically defined for the Court, and demands certain rules are followed, and when a term is free to be used on Friday night (such as ‘party’).

    3. Contacting the Court Clerk

    For many of us, the all-important interaction with the Clerk may be the most challenging task of all. As a general rule, it is always best to learn how the Clerk prefers to be contacted, by telephone or email, and then proceed from there. Some courts have designated phone hours. Other courts prefer contact by email. All of this vital information can usually be found on each individual court’s website.

    Our communication with the Court will likely be much smoother if we have all the information available: case number, type of hearing, date and question. Just remember to keep your eye on the ball, and that ball is getting the document successfully filed without any delay. Don’t be intimidated by the comportment of the Clerk; these folks are constantly dealing with the public, and often are happy to help a legal professional. Think of yourself and the Clerk working together for a successful filing and representation of your client and strive to do your job in a kind and professional manner. As your career develops, a friendly Clerk who recalls your professionalism and good cheer will almost certainly prove to be one of your most trusted professional contacts.

    So, to wrap this up, remember three simple steps: first, locate the applicable rules; second, understand those rules, and third, clarify any remaining ambiguity with the clerk. You got this!

    Francie Skaggs is a legal assistant at Coblentz Patch Duffy & Bass LLP. She is the Educational Chair for the San Francisco Legal Professionals Association.

    Posted on: September 20, 2018 Tags: Categories: Publications

  • RM-3 Passed – What Happens Next?

    Earlier this summer, Bay Area voters passed Regional Measure 3 with 54% of the vote, authorizing $4.5 billion of transportation improvements throughout the region. Commuters will pay a $1 toll hike on seven Bay Area bridges, excluding only the Golden Gate Bridge, beginning on January 1, 2019. Our original article summarizing RM-3 lays out the planned improvements. 

    San Francisco commuters may have already noticed new Muni railcars on the N-Judah line, added in late June 2018 with money from other sources. With RM-3 funding on its way, Muni officials estimate that 68 new cars – featuring automated stop announcements and new seating configurations – will go into service by the end of next year.

    RM-3 requires the Bay Area Toll Authority (BATA), a joint-powers agency with the Metropolitan Transportation Commission (MTC), to establish an independent oversight committee to manage the allocation of funds throughout the nine Bay Area counties. The committee would submit an annual report to the State Legislature, detailing the status of the projects in the Measure’s operating and capital expenditure plans.

    The construction schedule for RM-3 projects is not expected to be determined until next year, pending the resolution of a taxpayers’ lawsuit seeking to invalidate the Measure.  The lawsuit claims that the toll hikes are a tax requiring a two-thirds vote of the Legislature to qualify for the ballot.

    We expect more information about the RM-3 improvements beginning in January of 2019, when the Measure is scheduled to take effect, and we will continue to provide updates.