January 27, 2005, Volume 11, Number 1
This Issue of the BOMA-San Francisco Advocate Is Brought To You By
Lurie Management, LLC
BOMA San Francisco Goes To Washington
Legislative and regulatory advocacy at the Federal level is an important component of BOMAs total advocacy program. This week Marc Intermaggio, the BOMA Executive Vice President, Bob Spicker, of Colliers International, and BOMA San Franciscos 2005 President, Ken Cleaveland, BOMAs Director of Government and Public Affairs, Michael Oddo (Metro Maintenance) and former BOMA SF Presidents Lisa Vogel and Tom Gille attended meetings in our nations very cold capitol to establish and refine BOMA governmental policies at the national level, and to visit with our Federal legislators to express our positions on a number of important issues. At the top of the list is a continuation of the leasehold depreciation schedule at 15 years, which is currently only allowed for this year. BOMA maintains that the former depreciation schedule of 39 years for leasehold improvements was entirely unrealistic and punitive on our industry, and that the 15 year schedule approved for this year should be extended indefinitely. In fact, if Congress were to make tax policy that accurately reflected the market place, they would allow leasehold depreciation over a 10 year period or until the improvement goes our of service. BOMA estimates that over $35 billion is spent annually on tenant improvements and renovations.
A second major issue is the necessary extension of terrorism risk insurance coverage by the Federal Government. BOMA requests that the legislation passed in 2002 be extended. Under TRIA (Terrorism Risk Insurance Act) federal funds of up to $100 billion are available to cover losses from a terrorist attack. If another attack occurs, the federal governments share would be 90% of the losses above the deductible. Insurance company deductibles were set at 7% of the first years premiums, 10% of the second year, and 15% of the third year. BOMA believes this legislation has made terrorism insurance possible for the vast majority of commercial office building owners. While BOMA had hoped that after three years the insurance/reinsurance markets would be sufficiently developed to continue to offer such overages at reasonable rates and terms, that has not happened. Thus, BOMA calls upon Congress to extend their re-insurance assistance legislation (TRIA) for another two years.
Other key national issues for BOMA include passage of some kind of energy efficiency legislation which would provide building owners with tax incentives to further enhance the energy efficiencies of their properties. This legislation would be most beneficial to the small and medium-sized building owners who have not had the resources to do this up to now. Tort reform remains a major problem for commercial property owners, and the re-working of the 1996 Telecommunications Act would provide problems for BOMA members if mandated access for communication companies slips into the amendments.
BOMA USA and BOMA Canada represents 19,000 members who own or manage over 9 billion square feet of office space, roughly equivalent to 323 square miles of space. San Francisco BOMA members represent approximately 65 million square feet of space. Real Estate provides about 20% of the gross domestic product annually and contributes $300 billion a year in Federal tax revenues. 70% of local government tax revenues come from real estate and real property owners. The real estate industry employees over 2 million people in the U.S. BOMA members pay over $8 billion annually for custodial services alone. Design and construction investments are now averaging over $20 billion annually for new office buildings, and over $140 billion spent annually on other types of commercial buildings such as retail facilities, hotels, hospitals, and institutional facilities. Consequently, the performance of commercial real estate has historically been a key driver of long term economic growth.
BOMA Cal Board Briefed on New Legislative and Regulatory Issues
At the January 12th BOMA California Board meeting in San Diego, state advocates Cliff Moriyama and Rex Hime (California Business Properties Association) discussed the nature of the new Legislature, and outlined key issues that will be introduced as legislation this year.
Within the first few days of the session, two different initiatives have been introduced establishing a split roll tax in California. Both increase the tax rate on non-residential construction beyond the current 1%, one by 30% and the other by 50% and direct that extra money to education. Both measures, as well as other anti-business initiatives, can be found on our state website at www.bomacal.org
Last year, BOMA Cal was made aware of several lawsuits in which building owners were forbidden from using security deposits to offset lost rent. BOMA Cal is considering legislation to clarify what has been the standard practice of applying security deposits to cover lost forward rent when a tenant breaches a lease.
In addition, BOMA Cal hopes to modify the current AED (automatic electronic defibrillator) law to protect building owners from lawsuits by injured parties when the equipment is installed in their building. Currently, the "good Samaritan" protections only apply to operators of the equipment.
Another important bill to watch will be one by Assemblyman Todd Spitzer (R-Orange) which will expand Megans Law to employment centers. Currently, information is available on-line regarding the residence of known sex offenders. This bill would mandate information be provided regarding an offenders place of employment, some thing building owners and managers are not equipped to track, nor are their tenants. BOMA believes that if the state wants to make that kind of information available, it should track it.
On the regulatory side, local BOMA members were made aware that the state is considering implementing its own California Peak Pricing (CPP) program. Put simply, commercial electricity customers over 200 kW who fail to reduce their consumption during summer peak hours of 3 and 6 p.m. on specified days (up to 15) with one day advance warning would be subject to fines in the form of extremely high rates, up to 50 cents a kilowatt hour. This proposed program will not apply to customers in municipal-owned districts such as Los Angeles, Sacramento, etc., but will apply to commercial and industrial customers in PG & E, Southern California Edison and San Diego Gas and Electric territories. BOMA members and BOMA California have submitted strenuous objections to the implementation of such punitive rates on office buildings, especially as the brunt of these increases will fall upon the tenants in the offices, most of whom are small businesses. Further, PG & E has submitted to the Public Utilities Commission that the energy crisis will not occur this year (at least in Northern CA) and that these CPP rates should not apply to customers who use over 500 kW as these customers have already done much to voluntarily reduce consumption in their properties. Landlords are also precluded from installing time of use meters in tenant spaces and that rule must be changed to get tenants actively involved in energy conservation. Lastly, BOMA believes that the greatest threats to energy shortages come from transmission problems, lack of energy production in the state, and the fact that residential customers have not really paid their fair share of energy costs in the state, and are thus not as engaged in energy conservation as they should be or would be with more accurate cost of service pricing for their power.
BOMA California Will Host Annual Legislative Day in Sacramento March 14 15, 2005
Please mark your calendars now to attend this important legislative conference. Members of BOMA San Franciscos Board of Directors, Government Affairs and Political Action Committees are particularly requested to attend. This years schedule is as follows:
Monday, March 14
- 1 p.m.- BOMA California Board meeting
- 5 p.m.- Reception and dinner with legislators and other public officials
Tuesday, March 15
- 8 a.m.- Continental Breakfast and issues briefing
- 9 a.m.- Schwarzenegger administration officials briefing
- 10 a.m.- Visits to the Capitol
- 12 noon- Luncheon with freshmen legislators
Los Angeles Mayor James Hahn Pushes Plan to Increase Security Guard Training/Unionization of Guards
Mayor James Hahn sent a proposal to some of the larger building owners in Los Angeles this month outlining ways to improve the quality of security. The proposal entitled Los Angeles Safe and Secure Project - stated that security guards are not paid enough, turn over too often, and are not properly trained by many security guard firms. The proposal seeks to provide minimum wages and benefits, improved and standardized training, and improve communication between building security staff and the LA police and fire departments. The proposal specifically points to the non-union private security market as a problem that has made raising benefits and wages difficult, if not impossible for contractors to implement without putting themselves at a competitive disadvantage. The goal of the project is to train and certify 10,000 commercial office building security guards in Los Angeles to be able to respond consistently and effectively to emergencies in their buildings.
BOMA Greater Los Angeles is reviewing the proposal, and will be submitting comments to Mayor Hahn in early February.
San Francisco Ethics Commission Adopts Permit Processing Code of Conduct
The San Francisco Ethics Commission, after much deliberation and public input, issued its Code of Conduct for Permit Processing on January 10, 2005. The code of conduct was the result of a recent investigation into the citys Department of Building Inspection by Former Mayoral Assistant Rudy Nothenberg, whose report suggested that employees were not being adequately instructed as to what is ethical behavior and what is not, in their dealings with the public. This code is applicable to employees and customers of the DBI, Planning and Public Works. It calls upon the city employees to be honest in their dealings with permit applicants, consultants, members of the public and their colleagues at work, and reaffirms that they will enforce compliance with all building, planning, and public works codes in a consistent manner. It calls upon the public to be sensitive to the fact that officers and employees of the City must adhere to laws and rules that govern their conduct and that the public should respect their procedures. It also calls upon permit applicants to provide full, clear and accurate information to the citys employees and officers. While a laudable action, the adoption of this code of conduct by the Ethics Commission is unenforceable.
San Francisco Department of Building Inspection Offers Building Code Training Courses
-- February 14th Class to Cover Special Requirements for Assembly Occupancies
The Department of Building Inspection (DBI) will be augmenting its excellent brown bag seminar series in 2005 with a series of detailed technical classes on a variety of subjects, most of which would be of interest to office building managers, contractors and architects. The series is free, and open to everyone. They are held on selected Monday mornings from 8:30 9:30 a.m. with the next class to be held on February 14th. Other classes will cover disabled access for commercial renovations, building height and size limitations, special high rise requirements, the number of exits required, etc. The classes will be held at DBIs offices, 1660 Mission Street, Second Floor, Room 2001. For more information, call Laurence Kornfield, Chief Building Inspector, at 415-558-6244.
San Francisco Sustainable Products Training February 2-3, 2005 @ Presidio Golden Gate Club
An impressive array of speakers is planned for this two day training course on the use of sustainable products in construction. Hosted by the Northern California Green Buildings Council and the State of California, attendees will learn about credible, transparent, consensual, and life cycle-based product standards such as the Unified Sustainable Textile Standard for carpet, fabric, and apparel. Keynote speakers will include Scott Muldavin, CEO, The Muldavin Company, who is a national expert on Green Mortgage Backed Securities which are expected to increase the green building markets by 70% over the next five years. Terry Tamminen, the new head of the California EPA, will discuss California and the Governors commitment to green buildings. Craig Sheehy, building manager for Thomas Properties, will provide a summary of the economic benefits of managing a LEED certified building. For further details, and to register for this creative program, go to www.sustainableproducts.com.
San Francisco Planning and Urban Research Association (SPUR) Calls for Parking Restrictions in Downtown SF/Other Select Areas
The January 2005 issue of SPURs monthly newsletter carried some real surprises for commercial real estate owners and managers when it published a policy paper approved by the SPUR Board of Directors calling for severe restrictions on parking in the City. In the report, SPUR urged the citys political leadership to determine the optimal number of commuter, residential, and short-term parking spaces relative to the citys streets capacity to carry traffic. Then it recommended that following a study on the impact of different types of parking spaces on peak hour congestion, to create a limit on the total number of parking spaces that could be placed within those surveyed sub-areas of downtown. SPUR also called upon the Board of Supervisors to actively enforce Californias parking cash-out law that prohibits employers from offering free parking for their employees unless they offer those employees the option to accept cash in lieu of the cost of parking. The law does not cover employers who own their employee parking spaces, but it does cover companies who lease parking spaces for their employees. The SPUR report called upon the city to enact measures that would forever tie parking requirements to the capacity of the streets to carry traffic during peak periods and to update set limits every 10 years. The report also called for the creation of transferable parking development rights that would mirror the current administration of TDRs. It called for eliminating minimum parking requirements for new housing, and unbundling parking costs from the costs for housing projects of a certain minimum size. If parking spaces were priced separately in multi-unit buildings, then the price of the units could be less, and households who dont own cars could avoid hidden parking costs, emphasized the report. The report also called for higher prices or surcharges for cars entering parking facilities during peak congestion times, and more generally called for a higher tax on parking in the City (already at 25% of the total tariff, and among the highest in the country). The report called for all street parking spaces to be metered and that carpool commuters should continue to be offered reduced rates while City CarShare parking spaces be exempt from any fees or taxes. SPUR also called for parking space reductions to be treated favorably in environmental review processes as a favored traffic mitigation measure. Lastly, the report called upon the City to implement tools which would reduce traffic congestion that results from drivers looking for parking by instituting more locator signs that would direct them to available garages, etc.
San Francisco 4th Favorite City for Foreign Investment in Real Estate
According to the San Francisco Business Times report by Lizette Wilson earlier this month, San Francisco ranks fourth among all U.S. cities attracting foreign investment in real estate. Top three were Washington, D.C., New York, and Los Angeles. The main reason seems to be access to venture capital and an educated workforce bode well for in-migration and office occupancy increases. The Association of Foreign Investors in Real Estate (AFIRE) estimates that its members invested $90 million in San Francisco real estate last year. Following the U.S., the U.K. and France are the top markets for real estate investing by foreigners.
Update on Mayor Newsoms 10 Year Homeless Plan and Care Not Cash Program
At a recent meeting of the Market Street Association, Dariush Kayhan, Director of Housing and Homeless gave an encouraging report. The Mayors Ten Year Plan to end homelessness calls for 3000 new units to be made available for singles and families in the next ten years. These units will made up of new, underutilized and rehabilitated buildings. One thousand units will be online by January 2005. Since the start of Care Not Cash, where cash grants are replaced with housing and services, the general assistance (CAAP) case load has dropped by 60%. More than 500 of those who were collecting GA have been moved into housing instead of being given cash as part of their benefits package. The Mayors Office, through Care Not Cash funding, is focusing on the most visible, chronically homeless on our streets. It is estimated that there are 3000 persons who are defined as chronically homeless in the City currently. Outreach workers are targeting the downtown and Tenderloin areas offering shelter and other services to those who will take it. To date 5000 contacts have been made (many are repeats), and 60 persons have been moved off of the street. Care Not Cash funds also make it possible for a Behavioral Health Roving team to reach residents of SRO hotels and to stabilize them in order to avoid further episodes of homelessness. In addition, Care Not Cash funds will be used to expand substance abuse treatment for homeless CAAP clients. For more information and to see the monthly Care Not Cash update go to www.sfgov.org/dhs.
So what do commercial property owners want from their Assessor?
At a recent meeting of the California Assessors Association, Ken Cleaveland had the opportunity to present the assessors gathered there with his list, based on a survey of local BOMA members, of what commercial property owners want from their Assessors office. He found out that BOMA members first and foremost wanted accessibility. Giving BOMA members the ability to meet with people in that office who were knowledgeable on their issues was considered critical to their ability to build a relationship between the Assessor and themselves. Part of being accessible also meant having information on assessments readily available and a clear picture from staff on how the assessment had been determined. BOMA members also wanted more information on the web in an easy to navigate site with information on how assessments are determined as well as the actual assessment figures for local properties posted so the total assessments on commercial and residential and industrial properties could easily be determined. Accessibility also meant being proactive in printing and distributing as many different types of brochures as possible that assist businesses and property owners in filing their annual taxes with the county/city. These include explanations of state laws such as exemptions for seniors, builders, disabled veterans, historic buildings (Mills Act), parent-child transfers, spousal transfers, possessory interest taxation, eminent domain takings, and change of ownership statements for real property. Taxes assessed on business personal property items should also be explained with brochures, etc. Members suggested the Assessors office not only print these up, but have them easily downloadable from the Assessors website.
BOMA members also want to see a well-trained and competent staff in the Assessors office that is efficient, courteous and professional in all their dealings with the public.
They support the Assessors office in its attempts to keep funding for training as this department is a revenue generator for the city/county, and needs the best possible talent to make sure assessments are consistently accurate, and defensible. Cross training of staff would help make the office more efficient by allowing for better coverage when employees are out sick or on vacation.
BOMA members also support contracting out specialized services to the private sector.
BOMA members want to see a commitment to service set of principles be prominently posted for all employees and the public to see. San Diegos Assessor recently received an award from BOMA there for that offices dedication to public service, and its set of principles which are clearly posted for all employees to read.
Most importantly, BOMA members wanted their assessments and supplementals done in a more timely fashion, and were ready to pay their taxes as soon as they received the bills. That means the city needs better coordination with other city/county agencies such as the Treasurers office, the Building Department, etc.
Lastly, BOMA members would like to see Assessors be required to possess certain skills and expertise in financial management and real estate appraisal as a pre-requisite for running for election to the office.
A government which robs Peter to pay Paul can always depend on the support of Paul. George Bernard Shaw