BOMA California Advocacy Update: Change of Ownership Measure, Brownfield Program & Building Efficiency Standards Seminar

Change of Ownership Measure Held

A measure that the California real estate industry supported just a week ago was quietly killed in another committee. Ostensibly the bill was held over administrative cost concerns.

Last week, Senate Bill 259 passed the California State Senate Governance and Finance Committee on a bipartisan 6-0 vote. The measure would have corrected an outdated interpretation of change of ownership that some claim has been used by some companies to skirt reassessments. Business and taxpayer groups, including commercial real estate groups, were joined by the California League of Cities in supporting the measure.

SB 259 would have altered the definition of change of ownership in the California Revenue and Tax Code for determining the property tax base value of commercial property. Current law allows for a property to be reassessed if a majority of the ownership interest changes hands in a single transaction. SB 259 would require any property to be reassessed if 90 percent of the ownership interest changes hands within any three-year period.

Although the bill is the same language that was agreed upon several years ago with then Assemblymember Tom Ammiano (D-San Francisco), who sought to address this issue, long time split roll proponent Lenny Goldberg opposed the bill in committee and rallied several community groups to do the same to pressure the committee to hold the bill on Suspense.

Rex Hime, President & CEO of the California Business Properties Association stated, “I am disappointed that this agreement once again has stalled in the Legislature after so much time and effort went into crafting compromise language that fixes the issues. Our industry has sought for years to correct abuses in the system and this measure would have shut down the main issue that we have heard so much about.”

Proposal Seeks an Extension of the Brownfield Program

Senate Bill 820 seeks to make permanent the California Land Reuse and Revitalization Act (CLRRA), which encourages clean-up of hazardous waste and revitalization of blighted properties in California. This bill is a legislative priority by the California Association of Local Economic Development (CALED) and is also supported by California Business Properties Association (CPBA), of which BOMA California is a partner.

The bill's author states that Brownfields remain a significant problem nationwide. These properties represent formerly used industrial sites with hazardous contamination, which deters redevelopment. Clean-up costs can be expensive, and buyers of brownfield sites may be liable for previous contamination at the sites, even if they had no role in contaminating them.

As a result, many sites remain vacant and developers are hesitant to take on such risk. In California, the Department of Toxic Substances Control (DTSC) states that there are “an estimated 90,000 properties throughout the State - including former industrial properties, school sites, military bases, small businesses and landfills;” many of these sites also contribute to urban blight.

2016 Building Efficiency Standards Seminar

California’s building efficiency standards have been updated, with changes that will become mandatory in January 2017. This seminar will cover what’s new in Title 24 for both residential and non-residential buildings, from high performance walls and attics to lighting and lighting controls.

The session will also review challenges that have resulted in implementing the 2103 standards, strategies for addressing them, and solutions to these challenges that may be included in the recent revisions.

With each cycle, California's Energy Code is moving closer toward the goal of ZNE for all new construction. It's vital for you to stay up to date with its evolution.

Click here for more information and to register.

BART DRAFT System Renewal Program Plan

Over the past several years, BART visited more than 160 organizations, including BOMA San Francisco, to explain their Building a Better BART presentation.

Building a Better BART is the organization's new plan to renew 90 miles of deteriorating rail, repair corroding tunnel walls and replace aging speed control equipment. The goal is to rebuild the 43-year-old infrastructure in order to maintain BART’s excellent safety record, increase train reliability, take cars off the road and protect our environment in the years to come.

Based on BOMA member and other stakeholder feedback, BART has created an expenditure plan designed to fix the department's aging infrastructure while addressing many concerns. During the past several months, BART staff has spent a significant amount of time and effort completing the first draft of this plan. This draft document, titled BART System Renewal Program Plan, is BART staff’s first attempt at incorporating stakeholder comments while addressing the needs of our aging system. The drat program takes a fix it first approach - meaning the vast majority of the funding focuses on revitalizing the original infrastructure. The plan is broken down into three major categories:

• Repair and replace critical safety infrastructure needs: This section includes funding for tracks, power systems, tunnels and seismic improvements to the Berkeley Hills Tunnel. 
• Relieve crowding and reduce Bay Area traffic congestion: This section identifies funding for modernizing train control and the expansion of maintenance facilities to service a growing fleet. 
• Improve station access and safety: This section identifies funding to add elevators, overhaul escalators and make BART accessible for seniors and people with disabilities. 

You can download the first draft of the program by clicking here. BART cannot emphasize enough that the release of this draft plan signals the beginning of a public discussion. You can send your comments to betterbart@bart.gov or replying to this email.

In February. March, April and May, 2016, the draft will be shared with the BART Board of Directors, community groups, Bay Area elected officials, along with county and regional transportation management agencies. The process of creating this program has been both challenging and rewarding. BART looks forward to your comments and to spending the next year accelerating our efforts to educate the public about our vital infrastructure needs through the Building a Better BART plan.

BOMA International Advocacy Update: Energy Legislation in Limbo

On February 4, major bipartisan energy legislation, the Energy Policy Modernization Act of 2015, failed to pass a key procedural hurdle in the U.S. Senate. After days of intense floor discussion and votes on a handful of amendments, Senate Democrats voted against ending debate on the bill and moving forward with a vote over concerns that the bill did not do enough to assist the city of Flint, Michigan, during its water crisis.

The bill, with BOMA-supported measures, seeks to upgrade the U.S. electrical grid and boost energy efficiency without creating costly mandates for building owners. The legislation directs the U.S. Department of Energy to formulate voluntary standards and work with stakeholders to find ways to implement energy efficiency provisions into the codes. The bill also directs funds to be made available for grants for energy efficiency projects.

On February 24, it appeared likely that the Senate would come to an agreement on providing assistance to Flint, clearing the way for floor debate on the bill to resume next week. During a meeting with BOMA International and other industry groups, the bill's sponsor predicted that the measure would pass and promised to work with the commercial real estate industry to help improve the bill even further when it goes to conference with its House-passed counterpart.

San Francisco's Existing Commercial Buildings Energy Performance Ordinance - Performance Report

 

UPDATE - January 29, 2016


Recently, the BOMA San Francisco Energy & Environment Committee held a meeting where a representative from the San Francisco Department of the Environment presented a summary of the San Francisco Existing Commercial Buildings Energy Performance Ordinance since its inception.

Click here to review the report in its entirety. 

The goals of this report are to inform industry stakeholders, highlight trends in the local market, and provide recommendations for policy and efficient operations. 

Commercial buildings subject to San Francisco’s energy benchmarking and audit requirements between 2010 and 2014 have demonstrated positive economic and environmental trends: 

• Energy use has decreased by 7.9 percent and source emissions have decreased by 17 percent among properties that consistently comply. 
• Energy audits for over 800 buildings have identified $60.6 million in opportunities for cost-effective energy efficiency investments, with a net present value of $170 million.

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Original Post - March 24, 2014

Our partner in environmental sustainability, the San Francisco Department of Environment (DOE) has provided compliance data for the San Francisco Existing Commercial Buildings Energy Performance Ordinance.

• Click here for the report as of February 28, 2014;
• Click here for the same information via a map with search functionality. 

Please note that 'Benchmark 2012 Status' refers to the benchmark reports due in 2013 about energy use in 2012, and 'Energy Audit Status' is if an energy audit had come due, was it submitted?

Questions?  Please contact benchmark@sfenvironment.org or (415) 355-3700

About the Existing Commercial Buildings Energy Performance Ordinance

This data is available, as required, by the San Francisco Existing Commercial Buildings Energy Performance Ordinance approved by the Board of Supervisors and signed by Mayor Edwin M. Lee in February 2011.

The ordinance requires owners of non-residential buildings over 10,000 square feet to annually benchmark and disclose the energy performance of their buildings, using the U.S. Environmental Protection Agency (EPA) Portfolio Manager tool to obtain ENERGY STAR ratings when possible.

2009 Existing Commercial Buildings Task Force - BOMA San Francisco's Involvement 

In February 2009, then Mayor Gavin Newsom created the Existing Buildings Efficiency Initiative Task Force (Task Force), co-chaired by BOMA San Francisco's 2013 president Steven Ring, to recommend policies and actions to improve the energy efficiency of existing commercial buildings in San Francisco. The Task Force continued the work of the 2007 Green Buildings Task Force that was convened by the Mayor to develop expanded green building standards for major new private construction projects in San Francisco.

The Task Force report identified seven areas as key factors to improving energy efficiency in existing commercial buildings.  The Task Force's recommendations provided the framework for the City and County of San Francisco to introduce and enact the Existing Commercial Buildings Energy Performance Ordinance.

BOMA San Francisco's applauds its members and the City and County of San Francisco for leading  in environmental sustainability and stewardship.  BOMA members look forward to partnering with the City of San Francisco achieve it's future environmental goals.  Indeed, the Existing Commercial Buildings Energy Performance Ordinance is a manifestation of a true private/public agency partnership.

UPDATE: California Proposes New Elevator Maintenance Rules

UPDATE - January 29, 2015

Elevators are a major part of the high-rise building environment. As such, it's incumbent upon BOMA members to participate in discussions regarding vertical conveyances. Thankfully, if you haven't had the time, your BOMA San Francisco Codes and Regulations Committee has been doing just that. It’s time to take reassess where the issue of elevator design and a maintenance stands.

California's position has been that some machine-room-less (MRL) elevators are not safe for maintenance personnel to service. Their examples are laid out in the this power point presentation. 

The Commercial Real Estate Industry says these are rare occurrences. Also, the State's proposed new Group V regulations will effectively prevent the future installation of MRL elevators or that the elevator cab designs will have to be customized for the California market, raising costs along the way.

Click here and here for two additional documents from the U.S. Navy and the U.S. Army Corps of Engineers regarding the installation and maintenance of future elevators. The State has submitted them as evidence to support their call for higher safety standards for all new Group V commercial elevators.

Additional resources:

• NEII Summary of Key Group V Proposals
• Draft Elevator Safety Orders, Group V: Briefing of Issues - Department of Industrial Relations, Division of Occupational Safety and Health (Cal/OSHA), August 26, 2015

If you have any feedback, please send it to mhargrove@cbpa.com.

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UPDATE - June 25, 2015

As detailed in our previous posts. the rules are most likely going to change for Group V elevator maintenance and inspections.

To represent our members' interests, BOMA San Francisco's Codes and Regulations Committee representatives had a rare opportunity to discuss the proposed changes with the California Department of Industrial Relations, Occupational Safety and Health Division, Elevator Unit (Cal/OSHA) chief, Dan Barker recently. The purpose of the gathering was to help the Department understand any negative impacts, e.g., cost, availability, safety issues, et cetera, that may result from these changes.

Also, the National Elevator Industry, Inc. (NEII) is making building owners aware of the efforts underway by the Cal/OSHA to develop the Group V elevator codes.  Cal/OSHA has proposed over 60 pages of changes - more than 125 specific modifications - to the ASME A.17.1 (2013) /CSA B44-13 Safety Code for Elevators and Escalators.  

The draft amendments to the ASME Code under discussion are so significant and controversial that, if enacted through formal rule making, they will drastically alter current elevator designs for all of the major elevator companies and impose significant new costs and construction delays on California building owners.

Key areas of concern in Cal/OSHA's pre-rule making draft and initial estimates of potential costs are set forth below.

KEY AREAS OF CONCERN:

• Prohibits certain machine-room-less (MRL) designs in California.
• Adds new restrictions for other MRL designs.
• Prohibits elevator controls from being located in the building hoistway, requiring control rooms to be constructed.
• Significant cost increases and delays for new construction.
• Significant cost increases for elevator maintenance on existing buildings.
• No demonstrable safety benefit; in fact, creates new workplace safety issues.
• Lack of empirical data to support changes.
• Disproportionate impact on low to mid-rise buildings.
• Stunts technological innovation and eco-efficient building designs.
• Moves California building transportation backwards 20 years.

SIGNIFICANT NEW COSTS:

• Elevators unique for California
• $100K-$200K per elevator
• Larger cars, larger hoistways, less space to rent
• $25M annually
• No Hydraulic machine room-less elevators
• $25M annually
• Control rooms must be outside of hoistway
• $100M annually
• Licensed mechanics required to perform new tasks
• $33.6M annually

The draft proposed rules are currently under review internally at Cal/OSHA. Formal rule making has not commenced, but we expect the rule making package to be completed and ready to file by late summer.

If you have any feedback, please send it to mhargrove@cbpa.com.

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UPDATE - May 29, 2015

BOMA San Francisco's Codes and Regulations Committee members reviewed a letter that the National Elevator Industry Association wrote to the head of the California Department of Industrial Relations. Click here for a presentation related to the missive and here for an attachment to the letter.

The communication states that the 60 pages of amendments that the Department is considering adopting would make California unique as having the strictest and most expensive elevator requirements in the country.

Please be aware of these proposed changes for elevator maintenance if they are permanently adopted.

If you have any feedback, please send it to mhargrove@cbpa.com.

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UPDATE - April 28, 2014

Since 2012, members of BOMA San Francisco's Codes and Regulations Committee have been working with BOMA California and the California Division of Occupational Safety and Health on changes to statewide elevator maintenance rules.  Our members' feedback was detailed in a BOMA amended 2012 Division Circular Letter.

On April 22, 2014, the Division held a meeting to review a draft of new elevator regulations regarding:

• Elevator maintenance;
• The qualifications for elevator inspectors and/or mechanics;
• And, requirements for other conveyances.

BOMA California members continue to maintain their feelings that routine upkeep of elevators - specifically those that do not affect the safe operation of the system - may eventually require Division mandated oversight by a certified elevator mechanic.  Any proposed changes along those lines would increase the time and cost for the maintenance of elevators and add a modicum of value to the safety of the elevator system.

BOMA San Francisco Board Member Kevin FitzPatirck kindly attended the April 22, 2014 meeting for BOMA members and relayed their comments.

If you have any questions or feedback regarding the draft proposal of new elevator regulations, please contact kenc@boma.com.

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Original Post - October 12, 2012

Elevator Categories of Work Circular Letter Withdrawn

BOMA California representatives are pleased to report that the California Division of Occupational Safety and Health has given notice that it has formally withdrawn Circular Letter 11-01 in its entirety, effective immediately.   Prior to this retraction, BOMA San Francisco's Codes and Regulations Committee members suggested edits to the Circular Letter which was sent to the Division on May 12, 2012.

According to the Division, the Circular Letter was initially published because they had received inquiries regarding if certain work on conveyances were covered by state law. After receiving more information from the elevator industry the Division has decided that clarifications are more appropriately addressed through a formal rule making process. BOMA California members agree and applaud the Division for this decision.  BOMA thanks our colleagues in the elevator industry for their diligence.

There will be future efforts by the Division regarding rule making so this issue is likely to be revisited by year end.

BOMA Protects the Commercial Real Estate Industry - Proposition 13/Split Roll Property Tax

UPDATE - January 29, 2016

A proposition to change Proposition 13 in a manner that would allow an almost doubling of state property tax is currently out for signatures and seems to be gaining momentum.  This is a threat that we are taking very seriously and putting out a call to our industry to get educated, active, and engaged to prepare to defend against this huge tax increase.

The property tax initiative known by proponents as Lifting Children and Families Out of Poverty Act is referred to in shorthand as the Collis initiative after one of its primary advocates, former State Board of Equalization Member Conway Collis.  

The measure would undo Prop. 13 by creating a property tax surcharge on all properties in the state (commercial and residential) assessed at more than $3 million.  The increased taxes generated are then directed to fund poverty reduction programs.  

As of last week, the initiative had over 25% of the signatures needed to qualify for the ballot.  Advocates have until March 21, 2016, to collect the required 585,407 signatures.  

According to a CalTax review, the 47-page initiative does not differentiate between commercial and residential properties. It refers to the property tax hike as “a surcharge not to exceed 1 percent of the full cash value of real property in excess of $3 million,” and says the “surcharge shall not be considered … a higher tax or new ad valorem tax on real property ….”

The surcharge, commencing with the 2017-18 fiscal year, would be an additional 0.3 percent tax on the portion of assessed value between $3 million and $5 million; 0.6 percent on the value between $5 million and $10 million; and 0.8 percent on the value in excess of $10 million.

This is a very real threat to increase property taxes on all of your properties in this state and we are working to mobilize all of our members to help fund efforts to defeat this threat. If you own property you should get engaged.  If you manage property you should make sure the owners of your property are aware and encourage them to get engaged.  If you rent property you should get engaged before your lease costs increase.

Email johnb@boma.com and kenc@boma.com for more information.

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UPDATE  - June 11, 2015

On June 10th, Senate Constitutional Amendment 5 - a split roll property tax measure - was introduced. 

With a two-thirds vote of the Legislature, SCA 5 would to amend the California State Constitution to allow for regular reassessments of commercial and industrial property to their fair market value, starting with the 2018-19 fiscal year. However, the constitutionally mandated 1 percent tax rate would be retained, and Proposition 13 protections would continue to apply to residential rental property and agricultural property. 

The measure would also provide for a five-year phase-in of regular fair market value reassessments for certain commercial and industrial property owners; and exempt from personal property taxes $500,000 of tangible personal property used for business purposes, beginning January 1, 2019.

If approved by two-thirds of the California State Legislature, the measure would be placed on the November 2016 ballot. The Governor’s signature is not required. 

BOMA California members are coordinating with Californians to Stop Higher Property Taxes and allied groups such as the California Chamber, CalTax, and Howard Jarvis, to respond to this attempt to amend Proposition 13, through news media, social media, and direct contact with legislators. 

Regardless of what you may see or hear from the media, please know that BOMA California is pushing back. Click here for materials that can help you respond locally should you engage with the press or local opinion leaders.

Click here for the text of the split roll property tax measure SCA 5 (Mitchell & Hancock). 

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UPDATE - May 12, 2015

A new effort to change Proposition 13 protections for commercial real estate has manifested. 

Indeed, a group has formed to engender public opinion in support of changing Proposition 13 to include split roll and advance legislative efforts to introduce a bill in the California State Legislature to change existing property tax law. As leaders of the commercial real estate industry in California, please remain vigilant and conversant about the issue to help counter the political hyperbole. 

Sign-up for updates from Californians to Stop Higher Property Taxes - a BOMA California partner organization, to stay appraised of the latest news.

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Original Post - May 16, 2014

L to R: Asm. Ammiano; Asm. Bocanegra

California State Assemblymembers Tom Ammiano (San Francisco) and Raul Bocanegra (Pacoima), announced an agreement recently to amend the change of ownership rules under California’s Proposition 13 through Assembly Bill AB 2372. The amendments are supported by a diverse group of stakeholders including the California Business Roundtable, the California Chamber of Commerce, the California Business Properties Association, which includes BOMA California, and the California Tax Reform Association.

Over the years, a few complex property purchase deals have given the appearance of an attempt to avert  the Proposition 13 change of ownership rules.  The transactions have been highlighted and used to commove the reform proponents of the property tax law.  This current agreement between stakeholders is meant to update some of the laws implementing statutes to address this viewpoint.

Currently, a property is reassessed when it is sold and/or changes ownership.  However, if none of the purchasers acquires more than a 50% interest, reassessment may not necessarily be triggered.  AB 2372 will be amended to clarify that as long as 90% of a property is sold, a reassessment would be triggered, regardless of whether any individual buys more than 50% of the property.  Safeguards are being negotiated by your BOMA California advocates in Sacramento now to clarify that the change of ownership amendments do not apply to normal turnover of stock for publicly traded companies.

As our organizations have done in the past, BOMA San Francisco and BOMA California will continue to defend Proposition 13 - an initiative that protects both residential and commercial properties.  However, part of an effective defense of the property tax law is to recognize that the intent of the original language may need to be updated to assure the voter approved goals of the initiative are being met.  BOMA believes this agreement does just that.

Split Roll Measures Still Loom

For 2014, various members of the California State Legislature continue to pursue public policies that would undermine the intent of the property tax protections approved by voters under Proposition 13.  Indeed, there are upwards of nine California Constitutional Amendments seeking to lower voter thresholds to amend the initiative's tax protection on properties from 2/3rds (66.66%) to 55%.

Rest assured that your fellow BOMA California members are working hard to protect the industry's interest.  Stay tuned for updates in future blog posts.