Advocate - July 19, 2018
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BOMA San Francisco's Member Interests Were Well-Represented

 
Please take a moment to review the results of the most recent election. 
 

 

BOMA San Francisco's Political Action Committee's Voter Guide

June 5, 2018 Election Results

BOMA San Francisco has an active Political Action Committee (BOMA SF-PAC) that campaigns for candidates and issues that promote the economic vitality of the industry and the City and County of San Francisco. Here is a brief report of results of the June 5th election.

The recent June election in San Francisco was contentious. Arguably, there hasn’t been such an acerbic election season quite like this in decades – maybe even in the City’s history. There was an unexpected Mayor’s race, two massive tax measures on the ballot targeting our industry, and a decisive supervisorial race in District 8. Thanks to the leadership of the BOMA San Francisco’s Political Action Committee (BOMA SF-PAC), your interests were well represented during what can only be described as a chaotic period in San Francisco. 

If you have any questions, John Bozeman, BOMA San Francisco's Director of Government and Industry Affairs, at johnb@boma.com.

Candidates

San Francisco

WON Mayor – London Breed

LOST Board of Supervisors, District 8 – Jeff Sheehy

California

WON Governor - Gavin Newsom

WON State Assembly District 17 – David Chiu

WON State Assembly District 19 – Phil Ting

WON State Board of Equalization District 2 – Malia Cohen

Federal

WON US Senate - Dianne Feinstein 

WON US Congressional District 12 – Nancy Pelosi

WON US Congressional District 14 – Jackie Speier 

Local Propositions

  • PASSED Proposition A - Charter Amendment: Revenue Bonds for Public Utilities Commission Clean Power, Water, and Clean Water Facilities
    • Authorizes the SFPUC to issue revenue bonds for power facilities when approved by ordinance receiving a two-thirds vote of the Board of Supervisors. Amends the Charter to allow the SFPUC to finance new power facilities that increase delivery of energy.
    • This amendment to the City Charter gives almost unlimited power to the PUC and Board of Supervisors for revenue bonds to be issued, without voter approval, to replace or expand the city’s electrical power systems. This authority could be used later to bypass existing bond measure ballot requirements in order to construct competing power systems, an action San Francisco voters have rejected before.
  • PASSED Proposition B - Charter Amendment: Appointed Board Members and Commissioners Seeking Elective Office
    • A Charter amendment requiring appointees on San Francisco boards and commissions to give up their seats when running in state or local elections, a common practice in the past that helped prevent appointed office-holders from enjoying unfair advantages.
  • PASSED Proposition C - Ordinance: Tax on Commercial Rents to Fund Child Care and Education.
    • .5% additional GRT on leases of commercial space; 1% on warehouse space
      • Estimated to raise $146 million annually;
      • Funds early child care and education;
      • Tax would not apply to gross receipts from leases that have the following uses: industrial, arts, or non-formula retail, non-profit and small businesses;
      • Requires 50% + 1 voter approval to pass;
  • FAILED Proposition D - Ordinance: Additional Gross Receipts Tax on Commercial Rents for Housing/Homeless
    • 1.7% additional GRT on leases of commercial space
      • Estimated to raise $70 million annually;
      • Funds low/middle income housing and homeless services;
      • Tax would not apply to gross receipts from leases that have the following uses: PDR, retail and services, entertainment, arts and recreation, non-profit and small businesses;
      • Requires 67% voter approval to pass;
  • PASSED Proposition E - Referenda: Repeal of Ordinance Banning the Sale of Flavored Tobacco Products
    • This referendum suspended an ordinance passed by the Board of Supervisors banning sales of flavored tobacco products. The ordinance was supported by healthcare organizations and opposed by small business advocates. A coalition opposed to the ordinance collected signatures to put this referendum on the ballot. A ‘yes’ vote is a vote to keep the ban on sales of flavored tobacco products in place; a ‘no’ vote is a vote to repeal the ban and allow sales of flavored tobacco products.
  • PASSED Proposition F - Ordinance: City-Funded Legal Representation For All Residential Tenants in Eviction Lawsuits
    • “No Eviction Without Representation Act”
    • This voter initiative requires the Mayor’s Office of Housing and Community Development to create a program that provides legal services for residential tenants facing eviction. These matters are best addressed legislatively rather than by the ballot. Legislation to implement such a policy is pending at the Board of Supervisors.
  • PASSED Proposition G - Ordinance: Parcel Tax for San Francisco Unified School District (Teacher Salaries)
    • “Living Wage for Educators Act of 2018”
    • San Francisco Unified School District parents and the teachers union collected signatures to place this parcel tax on the ballot to fund a 2% salary increase for teachers following a three year, 11% increase approved last November. If passed, the $298 per parcel tax would appear on property tax bills starting July 1 of this year. Increasing salaries may help reduce a teacher shortage but the additional tax may be burdensome to some San Francisco businesses and residents.
  • FAILED Proposition H - Ordinance: Use of Tasers by San Francisco Police Officers
    • “The Safer Policing Initiative”
    • This initiative ordinance authorizes the San Francisco Police Department to train and deploy officers to use Tasers as a non-lethal alternative to firearms. Most big-city police departments equip officers with Conductive Energy Devices (CEDs), including Tasers. While the Police Commission has approved a taser policy, it places unreasonable limitations on their use and has yet to be implemented.
    • BOMA San Francisco has supported providing our City’s law enforcement professionals with all tools and equipment that helps them to protect public safety.
  • FAILED Proposition I - Declaration of Policy: Relocation of Professional Sports Teams
    • “Thou Shall Not Covet” other cities sports teams.
    • A non-binding Declaration of Policy that aims to discourage the Golden State Warriors from moving from Oakland to San Francisco next season. This last-ditch demand won’t stop the move or prevent other sports teams from relocating as they choose.
  • PASSED Regional Measure 3
    • Toll revenues would be used to finance a $4.45 billion slate of highway and transit improvements in the toll bridge corridors and their approach routes.
    • If approved by a majority of voters in San Francisco, Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, and Sonoma counties.

Thank You to BOMA San Francisco Members For Your Support!

 
We are ecstatic that Mayor Breed is now representing the City and County of San Francisco. Mayor Breed is a San Francisco native and has been on the Board of Supervisors – most recently as Acting Mayor and Board of Supervisors President – since 2012.
 

 

BOMA San Francisco congratulates Mayor London Breed on her historic win! Thank you to BOMA members for volunteering or attending an event for London over the last few months.

If you have any questions, please contact John Bozeman, BOMA San Francisco's Director of Government and Industry Affairs at johnb@boma.com.

About London Breed

Board of Supervisors President London Breed recently served as Acting Mayor, leading San Francisco following the tragic passing of Mayor Edwin Lee.

London first won election to the Board of Supervisors in November 2012. In January of 2015, her colleagues elected her President of the Board. She was re-elected as District 5 Supervisor in November 2016 and unanimously re-elected as Board President two months later.

London is a native San Franciscan, raised by her grandmother in Plaza East Public Housing in the Western Addition. She graduated with honors from Galileo High School and attended the University of California, Davis, earning a Bachelor of Arts degree in Political Science/Public Service with a minor in African American Studies. She went on to earn a Master’s degree in Public Administration from the University of San Francisco.

Before her election as District 5 Supervisor, London served as Executive Director of the African American Art and Culture Complex in the Western Addition for over a decade, transforming the struggling center into a vital, financially-stable community resource that provides after school arts and cultural programs for youth and seniors. She also served as a San Francisco Redevelopment Agency Commissioner for five years and in 2010 was appointed by then-Mayor Gavin Newsom to be a San Francisco Fire Commissioner, where she served until her election to the Board of Supervisors.

London has dedicated her entire adult life to serving our communities and improving the City’s housing, environment, public safety, transportation, and quality of life.

 

By Manuel Fishman, Partner at Buchalter

 
Recently, BOMA San Francisco member Manuel Fishman, Partner at Buchalter, led a panel discussion for BOMA members on the newly enacted Proposition C - the Early Care and Education Commercial Rents Tax. 
 

Manuel Fishman is a Partner at Buchalter, a full business law firm with offices in Northern and Southern California. Mr. Fishman served as a member of the BOMA San Francisco Board of Directors and past chair of the BOMA Government Affairs Committee and the current BOMA liaison on the Gross Receipts and Commercial Rent Tax Ordinances.  Mr. Fishman can be reached at 415.227.3504 or MFishman@buchalter.com


On July 17, 2018 I was honored to lead a panel discussion for BOMA members on the newly enacted San Francisco commercial rent tax – formally known as the “Early Care and Education Commercial Rents Tax,” because the large portion of the tax receipts (about 85% of tax revenues) are dedicated to fund early child care and education programs in San Francisco for children under age 6 in families that earn less than 85% of California median income. 

While none of us in the commercial real estate industry object, as a general matter, to the social goal that is trying to be achieved, our industry does object to being viewed as an open checkbook for funding social programs that benefit all San Franciscans – and a rent tax on commercial office space and certain retail space – a tax that is anticipated to raise over $145MM a year beginning in 2019, targets a specific industry and its tenants, to achieve a societal benefit.  To make matters worse, this law was not adopted by a vote of our Supervisors.  It was placed on the June 2018 ballot by just 10,000 voters and then passed by the slimmest of margins, 50.3% of the people who voted in the June election.

Here is a short summary of some of the questions we discussed.

Q:  Is the tax the same as the Gross Receipts Tax?

A:  No. This is a new tax, and property owners have to pay it in addition to the Gross Receipts Tax.  So, rents subject to the commercial rent tax are taxed twice – once as a gross receipt under the Gross Receipts Tax and second as rents under the commercial rents tax.

Q:  What is being taxed and is it different from what is being taxed under the Gross Receipts Tax?

A:  This commercial rents tax only tax “gross receipts from the lease of commercial space” in San Francisco– which, for the most part, means rents.  The San Francisco Gross Receipts Tax is a tax on a broader group of income – all gross receipts from all business activities in San Francisco. 

Q:  How much is the tax?

A:  The tax is 1% on “gross receipts from the lease” of warehouse space, and 3.5% on “gross receipts from the lease” of other “commercial space”, which includes office and retail unless the property class is excluded. 

Q:  What is a “gross receipt from the lease of commercial space”? 

A:  We don’t know.  The Ordinance uses the word “lease” in several places, as opposed to the Gross Receipts Tax, which also refers to licenses and other business activities.  Does it include parking management fees?  Does it include service fees in connection with management services/ administrative services/construction management services provided to tenants?  Are rooftop license agreements considered leases of commercial space?  What about “profits” shared with landlords by tenants who sublease space?  Property managers need to get specific advice on these questions. 

Q:  What property classes are excluded?

A:  Commercial space excludes space that is used for industrial uses, art uses (a use that refers to art studios and theatres, but not movie theatres) and for retail sales or service activities that are not formula retail. “Formula retail” is a retail establishment that has 11 or more establishments in operation located anywhere in the world and has certain standardized operations or decor.  In addition, rents received from non profits and from federal, state and local governments are excluded.

Q:  Are certain person exempt from the tax?

A:  Yes.  Non profits that own or lease property are exempt from the tax and nationally chartered banks and certain insurance and public pension funds that directly own real estate are exempt from the tax.  Small businesses with total gross receipts (not just rents) in San Francisco of less than $1MM per year are also exempt.

Q:   How are our tenants affected?

A:  Tenants are impacted two ways.  First, a tenant that subleases space in San Francisco has to pay the tax on the rents it is paid.  Second, landlords will most definitely pass along to tenants the cost of the commercial rent tax assessed on the rents paid by tenants.  This clearly makes it more expensive for tenants to do business in San Francisco, and certain start-up industries will find the tax burdensome.

Q:  Do my leases allow me as a property owner to pass along the commercial rent tax to tenants.

A:  It should – so please check with your attorney. This is very important as the tax goes into effect in January 2019, and if you have a base year lease you want to exclude the tax from the base year.

Q:  How is the City going to collect this tax?

A:  There is no formal guidance from the City.  The tax is administered by the Tax Collector.  Based on preliminary discussions with the Tax Collector’s office, the City intends to add a page to the current Gross Receipts Tax filing for the commercial rent tax, and estimated payments will be required to be made quarterly together with the Gross Receipts Tax.

 

Forthcoming Report on Seismic Effects on Tall Buildings in San Francisco

 
In light of the potential for seismic activity, The City and County of San Francisco's Office of Resilience and Capital Planning is in the process of producing a report on the subject of seismic effects on tall buildings in San Francisco, as well as geotechnical considerations related to tall buildings.
 

 

A recent article in the New York Times, At Risk in a Big Quake: 39 of San Francisco’s Top High Rises, "includes a list of buildings that are potentially vulnerable to a large quake." The San Francisco Bay Area is in seismic zone and those who live and work in the area are likely aware of that fact.

In light of the potential for seismic activity, The City and County of San Francisco's Office of Resilience and Capital Planning is in the process of producing a report on the subject of seismic effects on tall buildings in San Francisco, as well as geotechnical considerations related to tall buildings.

BOMA San Francisco, through our Codes and Regulations Committee, participated in the first stakeholder meeting on March 6, 2018 that provided an overview of the Tall Building Study and learned more about the team's progress to date. The team leading the Study from Stanford University and the private sector, also provided an overview of their effort at the March Codes and Regulations Committee.

The Study is expected to be completed in October 2018.

The report will:

  • Clearly characterize the issues and available information;
  • Propose regulatory and procedural recommendations where appropriate to the subject studied;
  • Scope out future work items.

The work under this project will be performed under the six tasks, detailed below, and compiled in the report.

  • Task 1: Seismic Performance Characterization of Existing Tall Buildings 
    • This task is developing an inventory for purposes of establishing the broad scope and context of tall buildings in San Francisco.
  • Task 2: Tall Building Effects 
    • This task summarizes seismic risks with tall buildings with recommendations for new policy and further research. 
  • Task 3: Standards for Post- Earthquake Structural Evaluation
  • Task 4: Barriers to Reoccupancy of Tall Buildings
  • Task 5: Costs and Benefits of Higher Performance Goals for New Construction
  • Task 6: Geotechnical Engineering for Tall Buildings 
    • This task will review and compile best practices in geotechnical engineering that could apply in San Francisco.

Please contact johnb@boma.com with any questions you may have.

 

Jim Collins with Shorenstein is leading the effort for BOMA San Francisco

Donate today!

 
Help BOMA Advocacy Leader, Jim Collins, as he leads the effort for BOMA San Francisco to ensure that congressional seats are held by individuals who understand real estate's issues and challenges and can have a positive impact on your livelihood.
 


 
BOMAPAC is BOMA International’s political action committee. It enables BOMA International’s advocacy team to raise money to re-elect political candidates for federal office who know and understand – and support – commercial real estate issues.
 
Whether or not you are politically aware, there is no better way to support the candidates and the issues that impact your professional and personal lives. Your contribution, combined with the donations from your BOMA colleagues from across the U.S., will help ensure that BOMA International has the power to back those members of Congress who show leadership and commitment to commercial real estate issues. So let your voice be heard!
 
Help BOMA San Francisco Advocacy Leader, Jim Collins (pictured above), as he leads the effort for BOMA San Francisco to ensure that congressional seats are held by individuals who understand real estate’s issues and challenges and can have a positive impact on your livelihood.
 
Can we count on you to send a check or fill out this form with your credit card information? Members typically donate $100 to $250, but any amount would help the cause. Checks or credit card information should be sent to:
 
BOMA San Francisco
Attention to: John Bozeman (johnb@boma.com)
233 Sansome Street, Suite 800 
San Francisco, CA 94104
 
Your support of the BOMA International PAC enables them to pursue their vital effort to protect and enhance our industry in the following ways:
 
  • BOMAPAC is the only voice solely representing multi-tenant office building owners and managers in Washington, DC.
  • BOMA has been the lead organization in pressing for a permanent 15 year Leasehold Depreciation schedule with Congress.
  • BOMA has been a key leader in promoting tax credits for energy efficiency upgrades to commercial real estate.
  • BOMA was one of the key groups who lobbied Congress to renew the Terrorism Risk Insurance Act coverage for commercial property owners, which was recently passed.
  • BOMA continues to lobby to retain the so-called carried interest tax obligation on real estate developments as a capital gains tax item rather treating it as ordinary income. 
  • BOMA International is the only commercial real estate organization that is active and effective in the international building codes writing and adoption process. New codes or amended existing codes can have a huge and long-lasting impact on our industry.
*Federal law requires political action committees to report the name, mailing address, occupation and employer of each individual who contributes in excess of $200 in a calendar year. Contributions are not tax deductible. Corporate contributions or contributions by foreign nationals are prohibited.
 

Changes to the Measure Effective as of June 1, 2018

Teaser here

 

The Accessible Business Entrance program helps property owners comply with state and federal accessibility laws and helps people with disabilities gain greater access to goods and services offered by businesses in San Francisco. Passed by the Board of Supervisors in 2016 (Ordinance No. 51-16), the ordinance requires that existing buildings with a place of public accommodation have all primary entrances accessible for people with disabilities.

Under state and federal law, a place of public accommodation is generally a business where the public will enter a building to obtain goods and services, such as banks, day care centers, hotels, offices, restaurants, retail stores, et cetera. 

The following changes to the measure are now effective as of June 1, 2018. 

  • Extend all compliance deadlines by six-months resulting in the first deadline of January 1, 2019.
  • Eliminate the administrative fee of $97.
  • Require property owners to provide a 30-day notice to building tenants prior to filing the permit application.
  • Qualify buildings under Category 1, if any of the following descriptions apply:
    • building owners mandated to meet earthquake retrofit electing to comply with this ordinance’s requirements prior to this Program’s compliance deadlines.
    • building owners fi ling a permit application on or after the effective date of this ordinance to alter a building or a portion thereof was altered, or is proposed to be altered, with the owner electing to comply with this ordinance’s requirements prior to this Program’s compliance deadlines.

 For more information, please visit www.sfdbi.org/businessentrance.

 

Mandatory Benchmarking Law; Two BOMA California Sponsored Bills Signed by the Governor

 
Please take a moment to review this important update from our team at BOMA California. 
 


California Mandatory Benchmarking Law - AB 802


California’s mandatory commercial building benchmarking law is one of the topics we are contacted about the most and since the law finally went into place on June 1, of this year, the amount of questions we have received have spiked dramatically. 

Because of the increase in interest (and the fact that many of your buildings must comply with the law) we thought now might be a good time to re-present information on this topic to help our members understand the process and how to comply.

It all started in the year 2007 with AB 1103, a bill that passed the Legislature and was signed into law by then Governor Schwarzenegger, over our industry’s strenuous objections. We weren’t opposed to benchmarking, per se, but believed the way the bill was going to be difficult to implement in that it required every non-residential building in the State of California to be benchmarked. Period. No flexibility.

Our warnings that such a sweeping mandate would be an overwhelming regulation to implement came to fruition and after several years the complicated process was abandoned, and stakeholders were brought together to start over and write a statute – that retained the “mandate” but did so in a manner that could actually work in the Real World.

The result was that in 2015 the original statute placed on the books by AB 1103 was repealed and new, more flexible statutory language was signed into law by Governor Brown in the form of AB 802. That bill re-calibrated the regulatory process and addressed a number of complaints our industry has had with the original law:

  • AB 1103 mandated ALL buildings must be benchmarked regardless of size or use; AB 802 states that buildings 50K s.f. and above must be benchmarked and allows the Energy Commission some discretion to exempt certain building types and situations (i.e. the CEC could decide that long-term empty buildings or buildings scheduled for razing need not be benchmarked).
  • AB 1103 was a transaction based program – benchmarking was triggered by a sale/lease of whole building/refinance. The transaction based approach had many unintended consequences such as requiring actively managed buildings to be benchmarked more often than buildings that are not; put an unnecessary technical process in the middle of a real estate transaction; and required benchmarking be provided to parties that were not making management decisions (i.e. lenders); AB 802 allows the CEC to determine the best trigger for benchmarking – that could be transaction based or time certain (i.e. once every two years).
  • Under AB 1103 many building owners were unable to get tenant energy information from local utilities; AB 802 clarifies that utilities are required to provide information; in an aggregated format if there are privacy concerns in multi-tenant buildings. Although some building owners are currently having trouble accessing this information from some utilities the law is clear that owners do not need to get permission from tenants and/or utilities for these purposes.
  • AB 1103 treated income producing properties separately by only focusing on commercial; AB 802 – with the support of the Apartment industry - includes certain multi-family housing properties.

Our industry was also given two years to prepare for implementation as reporting did not begin until June 1, 2018. 

Now that the implementation phase is underway the rule of thumb is that, with some exceptions, if you have a building that is 50K s.f. or more you must benchmark it annually using Energy Star and report the numbers. See below for more info.


California Mandatory Benchmarking Law - Resources

With a few exceptions, if you have a building that is 50K s.f. or more you need to benchmark it annually using Energy Star and report numbers to the Energy Commission. Our industry has worked with policymakers and regulators all along the process to provide input that will hopefully make compliance for a vast majority of our members relatively simple. 

However, we know some situations may not go smoothly or may present unique questions that require more information. Below are links that we hope will help.

  • Detailed information about the Building Energy Benchmarking Program including fact sheets and frequently asked questions are on the CEC's benchmarking website.
  • Several webinars for different stakeholders have been held. Here are links to recordings of each webinar:
CEC AB 802 Building Owner & Representative Stakeholder Webinar

CEC AB 802 Public Agency Stakeholder Webinar

CEC AB 802 Utility Stakeholder Webinar

CEC AB 802 Energy Consultant Stakeholder Webinar 

We hope that one or all of these resources can help those companies that are having trouble implementing the law. For additional information or questions, please contact the Benchmarking Hotline at (855)279-6460 or Benchmarking@energy.ca.gov.

SPONSORED BILL SIGNED INTO LAW: AB 2173 – Abandoned Property

Sponsored by BOMA California and signed into law by Governor Brown in July, this bill updates the state’s commercial/retail abandoned property laws by increasing the threshold amount needed to trigger an official disposition (auction) process. The new threshold is now $2,500 or an amount equal to one month’s rent for the premises the tenant occupied, whichever is greater.

Under current law, a commercial property owner/manager is obligated to go through an expensive public notification and auction when a business moves out and leaves behind unwanted items, believed to be $750 or more in value or the equivalent of $1 per square foot of the rental for the property, whichever is less. 

If a company moves out of a leased space and purposefully abandons property (i.e. old shelving, a few desks and chairs, or obsolete computer equipment) that low threshold is very easily met and triggers an expensive auction process for a relatively small amount of money on items that were unwanted to begin with.

Due to AB 2173, state law now better reflects the practical realities in the commercial real estate industry by setting a new commercial threshold. This proposed new threshold amount more appropriately aligns with the actual costs of storage and disposal of abandoned property in commercial real estate.

AB 2173 (Santiago; D-Los Angeles) Governor’s Signature Press Release and Click here to read the text of the new law.


SPONSORED BILL SIGNED INTO LAW: AB 2847 (Rubio; D-Baldwin Park) – Separating Residential and Commercial Leasing Language

Sponsored by BOMA California and signed into law by Governor Brown in July, this bill continues the effort to separate commercial from residential sections in statute where it does not make sense to have them intermingled. 

AB 2847 clarifies that current Civil Code §1951.3 pertains to residential real estate only and creates a new section mirroring it to deal with commercial/retail. This fix was needed as the statute provided certain obligations/protections for residential owners/tenants without parallel in commercial context. 

The current section requires that when property is deemed “abandoned” the property owner must wait until the fifteenth of the following month to start the Notice of Abandonment. This waiting period does not make sense on the commercial side as there are strict contractual obligations guiding property leases. This bill clarifies that the residential and commercial sections are not comingled which may lead to further reform in the future.

AB 2847 (Rubio; D-Baldwin Park) Governor’s Signature Press Release and click here to read the text of the new law.

ENERGY STARŪ Preserved in Appropriations Bills

 
Please take a moment to review this important advocacy update from BOMA International. 
 

ENERGY STAR® Preserved in Appropriations Bills

In a recent legislative victory for BOMA, both the House of Representatives and Senate Appropriations Committees passed their Interior, Environment and Related Agencies 2019 Appropriations Bills. Included in the bills, and accompanying report language, is funding for the ENERGY STAR® program, which includes the popular Portfolio Manager® tool.

Previously, the Trump administration called for the elimination of ENERGY STAR and later for the program to be funded as a user-fee system. BOMA opposed both proposals and vigorously defended the merits of ENERGY STAR and called on Congress to preserve funding for this important program.

Our efforts have proved successful, and language was inserted in the appropriations report to preserve the program and continue funding at its current level. The bills will now go to the full House and Senate for a potential floor vote. We will continue to advocate for the program as the process moves forward.