Board of Supervisors President David Chiu Meets with BOMA San Francisco Board of Directors and the BOMA SF-PAC

Supervisor David Chiu converses with Margot Crosman, 2009 President, BOMA San Francisco; and Marc Intermaggio, Executive Vice President, BOMA San Francisco.

BOMA San Francisco’s leaders welcomed the San Francisco Board of Supervisors President, David Chiu, to a special luncheon held in the Bechtel Dining Room at the City Club, for the purpose of establishing a dialogue between Supervisor Chiu and the city’s commercial real estate industry. Chiu, a Harvard graduate, managed a high tech company before winning the District 3 Supervisor seat in November 2008.

Issues Discussed

Supervisor Chiu shared his thoughts and observations on local governance. He identified several things he felt could be done to make government work better and provide for a sustainable economic future, including:

• Streamline onerous overregulation of local business

• Examine where we might streamline and perhaps consolidate City departments

• Address how the City contracts for services, with the aim of local sourcing wherever possible

• Tackle San Francisco’s growing pension liability and address the disparity between public and private sector wage and benefit packages

• Institute a 2-year budget cycle, complimented with a 5-year financial forecast

• Reform our tax system in a way that does not penalize job creation and growth

Supervisor Chiu said it was a difficult and painful process this year to close an almost $500 million deficit to balance the budget and that he didn’t see how the City could cut services any further. He also was very concerned that further state funding reductions will have significant impacts on this fiscal year. (July 2009 – June 2010)

Chiu elaborated on his desire to reform the city’s tax structure to eliminate the payroll tax, as he considered it totally regressive and a job killer. He also said he was familiar with Los Angeles’ recent tax overhaul project, and that its success there should be carefully reviewed for application here.

Chiu defended the city’s formula retail (chain store) bans and restrictions, stating that constituents in his district, in particular, were probably one of the most concerned about losing their local character through over commercialization by national chains. One BOMA member countered: what is preferable - a chain store or a vacant store space? Another member stated that San Francisco had lost approximately 14,000 jobs in the last 18 months, if based on the amount of office space that has come back onto the market for lease. Mr. Chiu reaffirmed his commitment to making economic development a priority. He also stated he wanted to continue to assemble key stakeholders in his effort to deal with the city’s continuing budget crisis.

Chiu also defended the upcoming November ballot measure that calls for lifting the cap on two aides for each Supervisor. He said that staffing needs for Supervisors should be determined in the budgeting process, and not by City Charter.

BOMA members pointed out to the Board President that the City should speed up its reassessment process as millions of dollars are waiting to be paid based on recent commercial property sales. Members gave examples and opined that San Francisco was easily the slowest jurisdiction in the state when it came to issuing out reassessment bills.

BOMA San Francisco’s leadership applauded Supervisor Chiu’s interest in tackling these important issues. They also shared information on the state of local commerce and the employment picture as seen through their eyes, and reported what BOMA members have experienced partnering with and trying to retain their small-business tenants.

The News Links - July 31, 2009

Streetsblog: BART strikes tentative labor deal with unions. Image retrieved from the article.

Commercial Real Estate

• Lawmakers ask fed to extend TALF, boost transparency.
  
• California commercial loan delinquency rising.
  
• CRE: Another half off sale.
  

San Francisco

• BART, unions reach an agreement.
• Enclosed 49ers stadium in Santa Clara?
• Supervisors take new roles on committees.
  

Marin/Sonoma/San Mateo

• Report shows how Santa Clara stadium for 49ers would affect traffic, air quality, noise.
• Belmont gives $1 million loan -- to itself.
• Olympic gold medalist joins Foster City council race.
• Sonoma County Supervisor Valerie Brown to head up National Association of Counties.
• Governor’s signature means $2.14 million in red ink for Sonoma.
  

California

• California Keeps On Dreaming: Despite claims of despair by the New York Times, the Golden State still shines.
  
• Capitol Alert: Ballot initiative to lower vote requirement for passing a state budget has been approved.
• Dan Walters: California tax changes may lie ahead.
• California could have $15 billion shortfalls.
• California looks to Republican women.
  

The Economy

• 41 U.S. cities have double-digit unemployment.
  
• Deutsche Bank AG CEO Josef Ackermann says bad loans are the ‘next wave’ of crisis.
  
• What law recruiting says about '10 economy.
• It pays to work in S.F.
• U.S. Economy’s contraction slowed to 1% last quarter.
• Restaurant industry outlook remained uncertain in June as restaurant performance index declined for second consecutive month.

General

• Why the bailout buffet is closed for business.
• Waxman: We have the votes on healthcare.
• WSJ: The Waxman-Pelosi follies.
  

To Split Roll or Not to Split Roll Tax – That is the Question

Phil Ting, San Francisco Assessor/Recorder, recently visited with BOMA San Francisco’s Political Action Committee Board to discuss his support for creating a split roll property tax in California. Ting said Proposition 13 needed to be amended to allow commercial property to be taxed at a higher rate, or higher rate of increase, or through more frequent re-assessments than residential property. Ting said the state’s continuing annual budget crisis demanded major reforms, one of which should be the creation of a split roll tax. Ting estimated such action could generate an additional $6-7 billion in annual revenues to local and state governments.

Of course, the Building Owners and Managers Association and its members at this meeting adamantly disagreed with Ting, and stated any split roll tax model would be inherently unfair and discriminatory. Our members also stated the state (and San Francisco!) first needs to reduce its overall costs before taxes are raised by any means.

It’s hard to understand how California can have a $100 billion annual state budget, spend nearly half of that on education and STILL end up with lower per pupil spending than most other states. Californians are also spending far too much money and receiving too little return on their investment if our overwhelmingly poor performing student results are to be believed. Clearly, radical change is needed, but we’re not convinced that means more money or higher property taxes are the solution.

California’s state government needs to be smarter in the way in which it uses the revenues that are collected. Californians need to be provided with greater accountability from every agency and school system that’s funded by their tax dollars.

The fact is, other states are vigorously going after our CA businesses in an effort to get them to re-locate. The Silicon Valley Business Times recently ran a story that illustrated why companies are leaving California for places like North Carolina, Kentucky, and Texas. In fact, 19 Silicon Valley companies have already established satellite offices with more than 100 employees each in Austin, Texas, alone. Their reasons: the cost of doing business in California is simply too high and they considered the state to be unfriendly to business. Consequently, those firms won’t be expanding their shops in the Golden State.

As owners/managers of CA commercial real estate, BOMA members are very concerned about job loss, and want our political leaders to do everything they can to combat it. Adding the uncertainty of a split roll tax on business would not be helpful in trying to convince firms thinking of relocating to not do so. Adding any new taxes onto the private sector when it is shrinking to support an over-extended public sector is simply pushing the state further toward the abyss of bankruptcy.

It may be that the voters of this state will have to re-write California’s constitution to revise the way we conduct and fund government and pass laws. However, BOMA cannot support the raising of any taxes, including property taxes, without demanding reductions and reforms in government spending first. I believe we have reached a “tipping point”, accelerated by the economic recession, wherein our state’s private sector can no longer afford the local and state public sectors that have been built up over the past several generations. It we don’t “right size” state and local governments, the private sector will pick up and leave, and then what kind of property taxes can our local and state governments expect from empty buildings!

The News Links - July 30, 2009

KCBS 5: Midnight deadline nears in BART talks. Image retrieved fromthe article.

Commercial Real Estate

• How the Cap-and-Trade (Waxman-Markey) bill could transform the real estate sector.
• Real estate reality is lost on U.S. CMBS, for now.
  

San Francisco

• Sweet Melissa: Yawn. Fall ballot shaping up to be a snoozer.
  
• Gavin Newsom campaigns for Governor in Fresno.
• Newsom: No Jaye, no problem. Mayor says he's going to be just fine.
  
• BART, unions set to bargain until they get pact.
• Showdown in BART talks nears.
• Muni sees results of fare patrol.
• City plans Hunters Point redevelopment without the 49ers.

Marin/Sonoma/San Mateo

• Golden Gate Bridge chief eyes return to Reno.

California

• Schwarzenegger on Fox News: Cuts, President? and behind the scene.
  
• Governor, Legislature sink to record-low approval.
• Capitol Alert: Survey shows there is support for expanding oil drilling off the CA coast.
  
• California seeks sponsors for state parks.
• Not so fast, Arnie: Dems claim Governor's last-minute vetoes were unconstitutional.
• Reality of new budget deal sinks in across California.
• Business owner sues over IOUs.
• George Skelton: Winners and losers in the budget battle.
• Water politics ripple through Capitol.
• Calbuzz: Arnold's offshore oil drill project not dead yet.
• California credit rating assessment to take time, reviewers say.

The Economy

• Economy in West showing ‘signs of stabilization’.
• Job levels won't rebound in state until 2013.

Green Issues

• White roofs catch on as energy cost cutters.

General

• Coffeepot maker vents about doing business in California.
  
• Pension spikes: Lavish retirement pay is drawing closer scrutiny.
  
• The most important number in politics today: 46
• Waxman confident health care compromise will pass.
• The Economist archive: Requiescat.
  

Board of Supervisors & Property Owners Approve Expansion of the Union Square BID

Image retrieved here.

The Union Square Business Improvement District (BID) expansion was approved by the San Francisco Board of Supervisors and the District property owners yesterday . Started in 1999 as the first BID in the City, the Union Square BID will increase from 10 blocks to 27 blocks and allow all property owners within the BID to collectively benefit from cost effective services such as: sidewalk sweeping, steam cleaning, graffiti removal, landscaping, and increased SFPD patrols.

For more information on the Union Square BID, please click here.

San Francisco Assessor Phil Ting Speaks to BOMA San Francisco PAC Members

Picture retrieved from the Assessor's website, here.

San Francisco Assessor Phil Ting met with BOMA San Francisco PAC members on July 28th to discuss his push to modify Proposition 13 to create a split roll property tax. BOMA San Francisco and BOMA California strongly oppose a split roll tax, and the BOMA SF PAC Board questioned the wisdom of increasing taxes on businesses (which a split roll tax would do) during these tough economic times instead of reducing the size of state government.

The following are the highlights from the meeting:

What's the impetus behind creating split roll property tax?

• Mr. Ting has seen first hand how school districts in San Francisco and the Bay Area have deteriorated since the passage of Proposition 13. His stated long-term objective in introducing this proposal is to raise enough revenues to rebuild California's aging infrastructure and improve its educational institutions. The Assessor said he wanted to pass on a better California to the next generation. For that to happen, Ting felt Prop 13 needed to be changed by creating a split roll tax structure for business properties. He did not advocate changing Prop 13’s protections for residential property owners.
• The Assessor understood that setting up a split roll tax structure would not completely solve California's budget woes. In his opinion, California has a systemic budget problem that is in need of major reforms across the board. He cited the out of control ballot initiative process, and the 2/3 requirement to pass a state budget as two things that needed to be changed. He also acknowledged the need for state budget reforms that included greater efficiency measures.
  

What are BOMA San Francisco's objections to a split roll tax?

• BOMA San Francisco is opposed to a split roll property tax because it would treat business and commercial properties differently from residential, which is unfair, and unequal treatment. Prior to Prop 13, and under Prop 13, both commercial and residential properties were/are assessed and levied per the same formula. Thus, each was/is equally protected under the law. Therefore, what the voting public bears is equally borne by non-voting commercial business entities. Once the property tax formulas for commercial property are segregated from those for residential property, then commercial property owners will no longer be equally protected, and there is no reason to believe that more and more unequal treatment will follow.
• BOMA San Francisco is opposed to split roll because any increases in property taxes would be passed onto the tenants who (by and large) are small businesses.
• BOMA is opposed to split roll because the current state of the economy, both in California, and locally, simply cannot handle any higher costs, including more taxes, at this time. In San Francisco, the commercial real estate industry is grappling with double digit vacancy rates (indeed, 2.8 Million square feet of San Francisco office space have been vacated since January 2008--the equivalent of 5 1/2 Pyramid Center buildings), and businesses are already relocating to more affordable and more business-friendly locales outside the Bay Area. San Francisco is already one of the most expensive places to do business in California due to its payroll tax, healthcare and sick leave requirements, and sky-high fees for any type of city permit.
• BOMA is opposed to split roll, finally, because any money collected from such a tax would go to directly into the State's general fund, with very little of it coming back to localities for their infrastructure improvements and other needs.

The BOMA San Francisco Political Action Committee expressed its gratitude to Mr. Ting for his management and leadership as the county’s Assessor, and thanked him for sharing his thoughts on this topic, although we firmly oppose it. Mr. Ting invited the BOMA SF PAC to provide him with ideas to help balance future state budgets, and said he valued the close relationship he has with Ken Cleaveland, and the rest of the BOMA Advocacy team, and membership.

The News Links - July 29, 2009

Mayor Gavin Newsom is profiled in this month's issue of Fast Company Magazine.

Commercial Real Estate

• Commercial real estate mess hits regional bank bonds.
• Borrowers to banks: show me the money.
• Property bond sales may resume with $3 billion in TALF deals.
• Rapidly falling prices changing dynamics of office leasing, ownership.

San Francisco

• Speaker Pelosi has her eye on Treasure Island.
  
• Board of Supervisors approve the City budget.
• Supes pull $368 million streets bond off ballot.
  
• Avalos to battle Daly once and for all.
• Newsom staffers off to bigger things.
• Another week, another major Newsom profile.
  
• Dufty comes to the rescue for the arts.
• New taxes, fees nixed for November ballot.
• Chiu wants BART surcharge cut for SFO staff.
• BART talks continue.
• City plans Hunters Point redevelopment without the 49ers.
  

Marin/Sonoma/San Mateo

• San Mateo seeks input on general plan.

California

• Schwarzenegger to call special session on taxes.
• California IOUs: Where's my cash?

The Economy

• Highlights from the Fed's latest economic survey.

Green Issues

• McKinsey report cites $1.2 trillion in potential savings from energy efficiency.

General

• Health care reform: Waiting for white smoke from Pelosi's office.
  
• Kerry: Climate change will depend on China.
• U.S., China end talks with smiles but no progress on climate change.
  

The News Links - July 28, 2009

Commercial Real Estate

• Will distressed assets cause rental rates to plummet?

San Francisco

• Market Street poised for car restrictions.
  
• State cuts deliver $105M blow to the City.
  
• Rec & Parks chief in a real race for money.
  
• Union Square business district has foes.
• Troubles getting around SoMa? The City wants your input.
  

Marin/Sonoma/San Mateo

• Marin officials assess local damage following adoption of state budget deal.
• San Mateo-Foster City district plans survey on parcel-tax renewal.
  
• San Mateo Daily Journal launches its 2009 Election Guide.
• Lee Buffington, San Mateo county's treasurer and tax collector since 1985, said he will not seek re-election.

California

• Gov. Schwarzenegger to sign $24 billion budget revision today.
• California politicos chant reform mantra in budget aftermath.
• The full California budget summary and breakdown of additional cuts can be found, here.
  
• Calbuzz: Newsom hunkers down: Jaye books, South rises.
  
• California 2010 gubernatorial democratic candidates: possible alternatives to Newsom and Brown?
  
• Republican candidate for California governor Tom Campbell on the budget agreement of July 24th.
• CQ offers interactive crystal ball into 2010 congressional midterm elections.
  

The Economy

• Fed's Yellen: outlook for the U.S. economy and community banks.
• California companies for sale sit on the shelves.

Green Issues

• Opinion: Why informed criticism of California's AB 32 never gets any ink.
  

General

• The Senate Judiciary Committee has voted to approve Supreme Court nominee Sonia Sotomayor.
• Former East Bay official confirmed as U.S. Treasurer.

The News Links - July 27, 2009

Commercial Real Estate

• Commercial mortgage delinquency up 585%.
• Almost $165 Billion in Commercial Loans Due in ‘09.
• Wells Fargo buys mortgage bonds as defaults rise.
• Profit from commercial real estate's fall.
  

San Francisco

• Lennar Candlestick plan still raises hackles.
• Street safety stagnant in San Francisco.
• BART Director Tom Radulovich: Expanding transit sustainability.
  
• BART: contract talks moving forward.
• City lobbyists' work reports fall years behind.
• George Gascon is S.F.'s first police chief in 30 years who wasn't homegrown — and he's promising big changes.
  
• Where are the Chris Daly supporters?
• Chris Daly's residency to undergo city probe.
  
• Matier & Ross: Daly wins big in Fairfield housing free fall & Firehouse flip could create home for Fisher art.
• Autodesk provides drivers with a 3-D preview of rebuilt Doyle Drive.
• SFPUC's power enterprise and Mayor's Office plan major energy improvements for City Hall.
• David Chiu - city supervisor, rock violinist.
  

Marin/Sonoma/San Mateo

• Huge tunnel to be built under San Francisco Bay.
• San Mateo county braces for state budget hit.
  

California

• CA officials concerned about new budget woes.
  
• John Myers: The budget hangover.
• Will junkets corrupt California's climate regulators?
• George Skelton: Send the legislators home at night.
  

The Economy

• Obama opens China economic and policy talks.
• The $23.7 trillion bailout's biggest message: Fail catastrophically.
• Is the recession over? Not really.
• U.S. House's Pelosi doesn't support another stimulus.
  

General

• Competing brands of Republicanism.
  
• Channeling Henry Waxman on health care reform.
  
• CBO: Medicare council would have little savings effect.

The News Links - July 24, 2009

Commercial Real Estate

• Willis Tower's high occupancy rate can't correct Chicago's commercial office space woes.
  

San Francisco

• Newsom calls on fellow mayors to advocate for health reform.
  
• Ken Garcia: Expect uncharitable contributions from S.F. voters.
  
• Doyle Drive construction plan scrutinized.
• San Francisco stays out of state budget lawsuit.
• BART officials set deadline on contract talks.
  
• Trauma' comes to Justin Herman Plaza.
• Daly says moving family to Fairfield isn't 'contradictory'.
  

California

• Governor Schwarzenegger on the California budget solution: Solving the entire problem.
  
• California Senate approves budget plan.
• Assembly approves most of state budget, which now goes to governor.
  
• Steinberg says CA Dems have hit limit on future cuts: "Enough is enough".
  

Marin/Sonoma/San Mateo

• Exhibit examines San Mateo County's reaction to Loma Prieta quake.
• Peninsula trash authority defends way it awarded huge garbage contracts.
• South San Francisco voters to decide hotel-tax hike.
  

Green Issues

• Quantifying the benefits of green buildings.
  

San Francisco Business Times' Structures Breakfast

Your BOMA San Francisco Advocacy Team and member leadership attended the San Francisco Business Times' 2009 Structures breakfast recently. The guest speakers included:

• Mayor Gavin Newsom
• Michael Covarrubias, Chairman & CEO, TMG Partners
• Oz Erickson, Chairman, The Emerald Fund
• Monique Moyer, Executive Director, Port of San Francisco
  

With the tumultuous downturn in the commercial and residential real estate markets, the event, which focused on the future of San Francisco from a development standpoint, was informative and timely. Here are the highlights:

Stay Positive - Joan Story, Partner, Sheppard Mullin Richter & Hampton LLP

• The doom and gloom of the current economic environment is hard to avoid: with residential foreclosures, commercial real estate defaults and frozen credit markets, the key is to stay positive.
• With the projected population growth, the demand for real estate will continue to exist in the Bay Area regardless of the economic environment.

Mayor Gavin Newsom

• There are challenges, but we need to focus on what's right: San Francisco's unemployment is high, but it's the lowest in California; the vacancy rate for Class A commercial space in San Francisco is high, but it is the lowest in the Bay Area; and lastly, the City's bond rating is low, but it's the highest in California.
  
• The City's budget: All parties have come to a reasonable agreement. It's balanced without borrowing or raising taxes.
• San Francisco's bond rating is up, which has allowed the city to sell $130 million in bonds (e.g., General Hospital Bond).
• There are development projects in the pipeline. The Hunters Point project is in its first phase with 400 units being built; they will be available for purchase later this year. This project is important as the various stakeholders have been talking about redevelopment at Hunters Point for 30 years. What's transpiring--development and environmental clean-up--is beneficial for the City, the residents of Hunters Point, and the environment.
  
• In addition to Hunters Point, there are a number of other development projects that will help drive the local economy: Treasure Island has a planned carbon neutral development in the works; and, the Port of San Francisco has a number of planned projects.
• The City has been successful in improving the parks and building 21st Century libraries in San Francisco.
• The Road Repair and Safety Improvements Bond is part of the City's 10-year Capital Plan. While there have been some reservations about this bond measure, the Mayor made it very clear that if the San Francisco electorate doesn't pass the Road Repair bond, there will be a painful escalation cost to help maintain the roads in the City--$753.2 million vs. $550 million (or $119,000 per block vs. $90,000). A larger benefit to the local economy from the bond measure is job stimulus. Passage of the bond will guarantee that 'real' jobs will be produced, helping the local economy over the long run.
• San Francisco, under Mayor Newsom's leadership, has opened a new office in China that reaches out to Chinese businesses and helps them create new economic opportunities in San Francisco.

Michael Covarrubias, Chairman & CEO, TMG Partners

• Where are we? The casualties are behind us, and we are waiting for a recovery. The question is, will the recovery come from job growth or demand?
• Commercial real estate--as bad as it is--is still good thanks to our location: San Francisco. More specifically, we can't overbuild and, thus, we are a safer location for capital than other localities.
  
• While true that it's tough to build here, it doesn't need to get any tougher (i.e., via fees, affordability issues, etc.). Luckily, in Mr. Covarrubias' view, the government and commercial real estate are on the same page.
• There are development possibilities in the current market environment: the Moscone Center expansion, for example. It is one of the smaller convention centers in the country, and if there were to be a push to expand the Center, it would need to be done in the next business cycle to be a viable project.
  

Oz Erickson, Chairman, The Emerald Fund

• How's the residential real estate (RRE) market? Bad: there currently exists 8 months of RRE inventory in San Francisco that needs to be absorbed. Consequently, construction of new RRE units has slowed to 600 total for 2010.
  
• The only RRE game in town is affordable housing.
  
• Most RRE construction money will be spent in 2011-2012.
• Professionals, such as architects and engineers, who are involved in RRE construction have seen their business shrink 50% and 40%, respectively.
• Construction unions have a 25% unemployment rate.
• The City, namely the Board of Supervisors, hurts construction, mostly through fees. For example, at 1 Rincon Hill, the fees alone cost $90,000 per unit. In 6 years, there has been a 14 fold increase in city fees.
• Solutions: A moratorium on fees and the City's assistance in reviving RRE construction in San Francisco.

Monique Moyer, Executive Director, Port of San Francisco

• The Port is debt free as of July 2009 and plans to reinvest the money saved going forward.
• There are many new exciting projects are on the horizon, including the $250 million Exploratorium project at Piers 15-17, and a modern cruise ship terminal at Pier 27. Please click here for a full list of the developments under consideration.
  

The News Links - July 23, 2009

Commercial Real Estate

• Is commercial real estate really that bad?
  
• Bernanke: CRE may pose a risk for the economy.
  
• The U.S. hotel industry posted declines in all three key performance measurements during the week of 12-18 July 2009.
• Frank Fudem's July 2009 Corporate Real Estate Ladder report can be found, here.
• CoStar spotlights the nation's most active retail tenants.
• Banks reducing CRE exposure, tightening credit, while demand remains flat.

San Francisco

• SF pensions: Once a model, now cause for alarm.
• School-related tax for ballot kept alive.
  
• Supervisor Daly’s family moves to Fairfield.
• Sweet Melissa: Gavin doesn't need Antonio's help; Board of Supervisors finalize the City budget & Supervisor Michael Alioto-Pier's run for insurance commissioner.
• BART threatens layoffs if talks stall.
• More bond sales on tap to rebuild SF water system.
• San Francisco struggles to maintain and repair cracked sidewalks.
  

Marin/Sonoma/San Mateo

• Cities prepare to fight state budget raids.
• San Mateo County cities to feel the pain of state budget deal.

California

• Skelton: Budget's a mess, but it's our mess.
• Local officials: State budget plan is giant 'Ponzi scheme'.
• GOP 2010 gubernatorial candidates weigh in on latest budget brouhaha.
• Waste board and other panels are set for elimination.
• Calif. controller says he may still issue IOUs.
• Tom Campbell urges approval of budget deal despite flaws.
  

The Economy

• Harvard’s Feldstein sees risk of ‘double-dip’ recession in the U.S.
• Foreign immigration to California slows markedly.
• Do June's positive economic indicators = economic recovery in 2009?

Green Issues

• California tops in green city rankings, but can it stay there?
  
• U.S. business warns Congress of 'green trade war'.
  
• Cool roofs vs. green roofs: What is the difference in cost?
  

General

• While Obama rallies, health bill given breathing room.