December 22, 2004, Volume 10, Number 9

This Issue of the BOMA-San Francisco Advocate Is Brought To You By

Stuart Dean Company, Inc.

Questions or inquiries about the BOMA San Francisco Advocate should be directed to Ken Cleaveland, BOMA San Francisco’s Government and Public Affairs Director
Phone: (415) 362-2662x11 or Email: kenc@boma.com

HAPPY HOLIDAYS!!!

BOMA San Francisco's 2004 Advocacy Year-End Review   
Legislative and regulatory advocacy remains a fundamental part of BOMA’s mission.  In 2004, an election year, this was even more important. BOMA San Francisco supports its advocacy goals through a number of committees, principally lead by the organization’s Political Action Committee. Other committees involved in creating BOMA public policy includes the Board of Directors, Government and Public Affairs Committee, our Commercial Recycling Task Force, our Building Codes Task Force, our Security Committee, and our Labor Committee. The bottom line purpose for all of these groups is to promote laws, regulations, policies and procedures that help create a better economic climate for our city, our businesses (our tenants) and our industry. BOMA San Francisco will always support the rights of property owners. We will defend against laws, rules, regulations, and policies that unfairly penalize our industry in some fashion. The role of BOMA San Francisco’s committees and task forces is to define the political and regulatory landscape for our industry, and to provide input on the potential impacts of any legislation or regulation. All members are encouraged to participate. 

This year, BOMA San Francisco, through its Government and Public Affairs Committee, defined its 2004 public policy initiatives on a wide range of issues affecting our industry locally. These guidelines helped shape our position on a number of local proposed ordinances.  Click here for BOMA Public Policy Initiatives.

• BOMA SF PAC raised over $75,000 from its membership to support ballot measures and local candidates.
  
• BOMA SF PAC contributed $5,900 to local politicians running for the Board of Supervisors and School Board.
  
• BOMA SF PAC contributed over $16,000 to help fund local bond propositions, primarily supporting workforce housing initiatives, the restoration of local historical buildings, a BART seismic upgrade bond, and the proposition to create a city Office of Economic Analysis.
  
• BOMA SF PAC contributed over $37,000 to independent efforts to help several candidates, including incumbents, gain or retain their seat on the Board of Supervisors. The PAC also adopted a policy against engaging in negative campaigning.
  
• BOMA SF PAC and its members sponsored four fundraising events for Supervisor candidates in 2004.
  
• BOMA takes some credit for successfully keeping any onerous tax measures from being passed and/or placed on the November ballot, especially a new transfer tax increase, or increase in parking taxes. BOMA led a successful effort in 2002 that resulted in the city’s voters rejecting a city tax measure that would have doubled the property transfer tax rate.
  
• BOMA’s helped create a proposal to deal with graffiti abatement on private buildings, which holds property owners responsible for graffiti removal, but gives them adequate time and flexibility to comply.
  
• BOMA’s Codes Task Force worked throughout the year with key staff of the city’s Department of Building Inspection to create a faster, more transparent system for reviewing plans and issuing building permits, including the creation of a special “path of travel” permit to more easily re-confirm accessibility in a building’s common areas. BOMA also strongly urged the Mayor to fully-staff the Department of Building Inspection (even in these budget-cutting days) as a means of helping keep business moving forward (and our tenants happy), and was gratified to see that happen.
  
• BOMA’s PAC and GAPAC committees held a number of meetings with members of the SF Board of Supervisors during the year including Board President Matt Gonzalez, Supervisors Tony Hall, Bevan Dufty, Fiona Ma, Aaron Peskin, Sean Elsbernd, Michela Alioto-Pier, and Sophie Maxwell. The association also met with other key new city officials such as San Francisco’s Chief of Police Heather Fong, Fire Chief Joanne Hayes-White, Fire Marshal Paul Chin, Port Director Monique Moyer, the Office of Emergency Services Director Annemarie Conroy, and Public Utilities Commission General Manager Susan Leal.  BOMA hosted San Francisco Mayor Gavin Newsom as our guest speaker at the July general membership luncheon attended by over 300 people.

BOMA’s successes in 2004 were due in part to the tireless efforts of many member volunteers, who devoted their time, expertise and resources to speak up in defense of our industry’s interests before policymakers at the local, state and national level.  Whether it’s contacting an elected official or regulatory body directly to voice a concern, writing an email or letter to a supervisor, or personally testifying on behalf of the commercial property industry at a public hearing, BOMA’s members and staff had a positive impact on local government and its relationship with our industry.

California Public Utilities Commission Ruling Will Cost Building Owners More for Power
On December 8, 2004, the California Public Utilities Commission (CPUC) directed PG&E, Southern California Edison and San Diego Gas and Electric Co. to file rate design proposals for large customers due to concerns about insufficient electric generation capacity this coming summer.  All customers with a peak load over 200 kW will be placed on a new electric rate designed to encourage customers to move their usage out of the critical peak periods or pay an increased rate during that narrow set of defined hours. (12 noon – 6 p.m., weekdays)  Additionally, the utilities have been directed to install interval meters for all accounts over 200 kW which do not currently have those meters, and to propose cost recovery mechanisms for same. By January 20, 2005, the utilities must file applications for these new rates for implementation by June 1, 2005.  The specific rate design has not yet been determined and the CPUC is presently seeking input from utilities and consumers. While not a "done deal" as yet, the ruling is a significant signal that the commission is moving in the direction of mandatory CPP rates and ultimately real time pricing. This is a very important development, and one that could cost BOMA owners and our tenants dearly if unfairly high rates are set for peak periods. BOMA members must convince the commissioners that this action will have extremely detrimental impacts on California’s business community and that this financial hardship will have the greatest impact on the small businesses of the state, who comprise the bulk of commercial tenancies. For a complete copy of the ruling, check out the commission’s website at www.cpuc.ca.gov.

Governor Schwarzenegger Appoints Two New Commissioners to CA Public Utilities Commission
On Thursday, December 16, 2004, Governor Schwarzenegger appointed Dian Grueneich and Steve Poizner to the state’s Public Utilities Commission to fill upcoming vacancies being created by the departure of Loretta Lynch and Carl Wood. They are expected to support the Governor’s push to create a more open and viable energy market in California, and to encourage the development of new power plants, while increasing investments in energy efficiency and renewable power. These positions require Senate confirmation.

Dian Grueneich has more than 25 years of experience in energy efficiency and environmental policy and law. Since 1993 she has been the principal of Grueneich Resource Advocates, an energy and environmental law consulting company, which has done work for BOMA California. Grueneich, 52, lives in Berkeley, earned a Juris Doctorate from Georgetown University Law Center and a Bachelor of Arts degree from Stanford University. She is a Democrat.

Steve Poizner, who ran for state assembly in November and lost to Ira Ruskin, brings significant experience in telecommunications and information technology infrastructure to the PUC. From 2001 to 2002, Poizner served as a White House Fellow where he worked with the White House/National Security Council Office of Cyberspace Security, serving as director of critical infrastructure protection. In 1995, Poizner founded SnapTrack, Inc., a cell phone technology company, and served as its chief executive officer until after its sale to Qualcomm in 2000. Poizner is actively involved in the community, serving as co-founder and president of the Poizner Family Foundation, co-founder and past chairman of California Charter School Association, and is an investment partner in the New Schools Venture Fund. Poizner, 47, lives in Los Gatos, earned a Master in Business Administration from Stanford University and a Bachelor of Science in electrical engineering from the University of Texas. Poizner is a Republican.

California Energy News Update (courtesy of Bill Roberts, Economic Sciences Corp.)
The CPUC and CEC recently had a joint meeting on implementing California’s Energy Action Plan, and our BOMA Cal Energy Committee member Bill Roberts attended. Two of the Governor's representatives, Sunne McPeak, Secretary of the Business, Transportation and Housing Agency and Joe Desmond, Secretary of the Resources Agency, were also in attendance.

The meeting was focused on a review the electricity supply balance for last summer, the outlook for California's Summer 2005 and beyond, and a review of actions being taken to keep the lights on. Last summer consumers were very lucky to get through it without outages. Looking forward we may not be so lucky. Reserves continue to be very tight in Southern California and tight but not as critically short for Northern California this coming summer. Worse, a combination of demand growth, generator retirements, and adverse weather could put the state at an even greater risk of power shortages in the summer of 2006. To avoid these potential power shortages, the two commissions stated their usual litany of remedies:
           - accelerate construction of new plants and transmission facilities 
           - work to reduce demand with more energy efficiency programs
           - increase use of interruptible programs and dynamic (variable) pricing with real time
             metering
Two substantive actions were announced at the meeting. First, the CPUC is expected to approve utility long term procurement plans at their next meeting. This action should spur new power plant construction. Second, the upgrade to North Path 15 has been completed. This important project will finally relieve some of the previous transmission bottleneck that has impacted the Bay Area for years. 

The CEC is targeting a 7% reduction in peak demand through curtailment, efficiency and dynamic pricing in 2005.  However, their experience with critical peak pricing (the version of dynamic pricing that they have been experimenting with) has not been very successful and suggested the program should be made mandatory before Summer 2005 for all customers who now have interval meters. (See story above.) The imposition of such pricing would be punitive to building owners and their tenants.

Sacramento Update – No Changes in Democrat/Republican Ratio in State Legislature for 2005/6 Session
After one of the most expensive general elections in state history, the partisan make-up of the Legislature – both the Senate (25 Democrats and 15 Republicans) and Assembly (48 Democrats and 32 Republicans) – remains the same.  Over $60 million was spent during the General Election in an effort by both parties to increase their numbers in both houses.  In the Assembly, nearly a dozen Assembly Districts were considered “battleground” districts in which both parties believed they had a good chance of winning those races, while two Senatorial districts were considered “competitive”.  However, the result was that no seats changed hands.  Those Assembly and Senatorial seats that were previously held by a Democrat or Republican last year will remain controlled by the same party. This 2004 election clearly demonstrated that the 2000-based census reapportionment of legislative districts – a process overseen by the incumbent Legislators themselves – did an excellent job of protecting their seats, regardless of the millions spent by challengers.

-- Business Community and CA Economy Big Winners in Nov. Election
California businesses scored several major victories this week with the passage of two key ballot measures (Proposition 1A and 64) and the defeat of one measure (Proposition 72) in the November 2 election. 

Proposition 1A embodied a key element of Governor Schwarzenegger’s budget – Local Government Financing.  Prop. 1A restricts the State Legislature's ability to raid local government funding, including the local governments share of existing sales taxes, property taxes and VLF revenues.  California voters approved Proposition 1A (83.6% vs. 16.11%). 

Proposition 64 was placed on the ballot to stop a recent trend of filing frivolous lawsuits in order to shakedown businesses.  Prop. 64 returns California to a standard of justice that reflects the ultimate purpose of the American civil judicial system: to "make whole again" an injured party who has suffered at the hands of another.  Recently, in an effort to multiply opportunities to sue, trial lawyers have expanded this standard to allow civil suits even if there is no injured party.  Prop. 64 will correct this practice by requiring an attorney who files a lawsuit to have an actual client who has been harmed or suffered financial injury.  California voters approved Proposition 64 (58.9% vs. 41.1%). 

Proposition 72 would have forced California businesses to pay an estimated $7 billion for a mandated health benefits program.  If Prop. 72 had passed it would have made California the only state in the nation to impose an expensive new healthcare tax on employers and employees.  California voters narrowly rejected this measure (49.1% vs. 50.9%).

-- Summary of 2004 Legislative Year in Sacramento Available Online
Want to know How Your State Legislator Voted on BOMA Issues in 2004? Check out www.bomacal.org. There you will find a summary of the bills that our organization took a position on, and how the legislators voted on them. In most cases, our Bay Area legislators did not support BOMA’s positions. Fortunately, we were usually saved by Governor Schwarzenegger’s vetoes.

BOMA Request for Publication of Legal Opinion on Tenant Deposit Issue Goes To CA Supreme Court
Although the presiding justice of the California Court of Appeal recommended against it, BOMA San Francisco’s appeal to the CA Supreme Court is still under consideration. In the appeal, BOMA requested the opinion in the lawsuit Sherwood Partners, Inc. v ZORO, LLC be published so it could be used as precedence to provide clear direction to building owners and leasing practitioners as to the method whereby the parties’ intent with respect to the application of security deposits can be enforced, thus avoiding future litigation in this area. The ZORO opinion establishes that the provisions of Civil Code Section 1950.7, which addresses the specific matters to which a security deposit held by a landlord under a commercial lease may be applied, is waivable under Civil Code Section 3268. This is an important holding in an area of continuing public interest, as almost all commercial leases contain a provision pursuant to which a tenant pays a security deposit to a landlord, and where a landlord has an interest in drafting an enforceable provision that describes the charges, expenses, damages and other obligations under the lease to which the security deposit can be applied in the event of a default by the tenant. Click here for a copy of the Sherwood Partners opinion.

San Francisco Department of Building Inspection Update
-- January 2005 Brown Bag Seminar Announced
The Department of Building Inspection (DBI) will be continuing its excellent “brown bag” seminar series with a January 20th free program on “The San Francisco Permit Process from A – Z”. It will be held at DBI’s offices, 1660 Mission Street, Second Floor, Room 2001, from 12 noon – 1:30 p.m. For more information, call Laurence Kornfield, Chief Building Inspector, at 415-558-6244.

-- New Path of Travel Common Areas Compliance Permit Now Available to BOMA Members – Speeds Up OTI Permits
The San Francisco Building Department, at the urging of BOMA, has completed and issued its 6th draft of a bulletin guiding applicants who wish to apply to have their buildings’ common areas certified disabled access compliant, thus saving the owner or tenant a lot of time and costs associated with additional plan submittals and documentation usually required for every office tenant improvement. The process begins with having an architect develop and submit the path of travel/disabled compliance documents for a one-time separate permit process, with a $1 filing fee. Once the path of travel documents are submitted for verification (documentation), even prior to full approval of the permit, DBI can issue a tenant improvement permit by referencing the Access Compliance Status Documentation (ACSD) permit application. If the existing path of travel has non-compliant elements, the upgrades to those elements can be submitted as a separate permit, or as part of the permit submission for the ACSD. Unreasonable hardships and Access Appeals Commission rulings can be part of the permit submission. An inspection will be done by the district inspector and a letter will be issued that verifies the accuracy of the ACSD documents submitted. This letter will then be attached by the architect (owner’s or tenant’s) to subsequent tenant improvement permit submissions. The letter will be good for 3 years, after which a re-submission of the path of travel documents will be required by DBI for renewal of the ACSD permit. For more information, contact Neil Friedman at the DBI, who is in charge of this new service.  (415-5548-6168 or email him at neil.friedman@sfgov.org.  Click here for a Draft #6 of Administrative Bulletin Dated November 29, 2004 – AB – 056.

-- 15 Most Common Errors Found during Plan Review
The San Francisco Building Department recently issued a list of their top 15 most common errors noted during plan review. They were:

#1. Incomplete information regarding existing conditions.
#2. Confusion due to too much information on one set of plans. (too much overlay)
#3. Architectural, structural, mechanical, and electrical designs often not coordinated on
views, elevations, etc.
#4. Inadequate dimensioning of plans.
#5. Fire-resistant assemblies are not detailed and/or do not conform to approved designs.
#6. Incorrect determination of first story or basement, and subsequent incorrect story count.#7. Lack of clarity and consistency of plans, including symbols and designations, such as existing vs. new walls.
#8. Sloppy, illegible, incorrect or incomplete permit applications.
#9. Lack of adequate accessibility documentation and/or accessibility checklist.
#10. Failure to provide adequate cover-sheet information, including correct codes being used for design. (Frequently, the SFBC and various department Administrative Bulletins are overlooked which are very important.)
#11. Failure to provide a second means of egress into the design.
#12. Emergency rescue windows in bedrooms not provided with access to yard or street. 
#13. Failure to meet sound transmission requirements limiting exterior noise in new residential buildings.
#14. Failure to design fire-rated walls at decks and stairs on property lines.
#15. Failure to provide complete drawings detailing seismic bracing of walls and ceilings and various shear connections.

San Francisco Department of the Environment Issues New Draft Ordinance Requiring Construction and Demolition Debris Recycling
In consultation with BOMA and other real estate and construction organizations, the city’s Department of the Environment is set to forward legislation to the Board of Supervisors early next year which will institute new recycling requirements for all construction and demolition debris generated from job sites within the City. Written by Kevin Drew at the Department of the Environment, this document will require that all such materials (defined in the ordinance) must be transported off the site by a registered transporter, unless transported by the permittee, and must be recycled at a registered facility. Facilities who qualify to process such materials must meet a minimum of 60% recovery rate. Based on improvements in technology and/or market conditions, the Director of the city’s Environment Department may increase the recovery rate. Approved facilities must implement a hazardous waste load checking program and have no outstanding notices of violation from any governmental agency that could affect their permits for operation. Approved facilities will have to submit quarterly reports to the Director. Transporters of C & D materials may hold one permit for multiple vehicles, and also cannot have any outstanding violations that would affect the permits or licenses to operate vehicles. The transporters are responsible for reporting each truck load of materials delivered to a facility and to provide that facility with the construction permit number, if any, for each load. Transporters will receive a registration that will be valid for two years, after which they will have to apply for a renewal. Proof of registration must be prominently displayed at all registered facilities and in registered transport vehicles.   The Environment Department Director will maintain and update a list of registered facilities and transporters who will be allowed to dispose/recycle construction and demolition debris in San Francisco. The decision by the Director to suspend a registration may be appealed to the Board of Appeals. Violations of this proposed ordinance can result in civil penalties of $1,000 a day for each violation. Click here to view the proposed ordinance.

Susan Leal, General Manager of the San Francisco Public Utilities Commission, Receives BOMA Award
In an appearance before the BOMA Government and Public Affairs and Political Action Committees on December 20, 2004, Susan Leal accepted her BOMA Good Government Award as our Public Official of the Year. Susan Leal was recognized by the organization for her service as the city’s Treasurer for six years, where she enhanced that office’s efficiency, created a more customer-oriented approach by placing much of the tax payment information on the web, and wisely invested the city’s funds for exceptional return rates. Three months ago, Mayor Gavin Newsom appointed Ms. Leal to be the General Manager of the City’s Public Utility Commission, which manages the city water and sewer systems, which includes producing electric power for all city-owned properties. The city’s PUC is also in charge of the $3.6 billion seismic strengthening program for the massive Hetch Hetchy water delivery system that stretches all the way from Yosemite Valley to San Francisco. This system delivers over 300,000,000 gallons of water every day to residents in San Mateo, San Francisco, and the Central Valley irrigation districts of Modesto and Turlock. The SFPUC is expected to issue a request for proposals for construction management of the project by the end of January 2005. Ms. Leal stated she was very concerned about the campaign underway to drain the Hetch Hetchy reservoir, which a number of environmentalists are calling for. Such an action would leave the PUC’s customers with no emergency backup potable water supply and would eliminate 80% of the power currently being produced for the city by the dam (about 20% of the city’s total daily power consumption). She urged BOMA members to contact state legislators and the Governor’s office and register their concern and opposition to any efforts to study such an idea as completely ill-advised and dangerous to the economic health of the entire Bay Area. For more information, visit the Hetch Hetchy Action Center. Scroll down and generate either a fax or e-mail. All it takes is a few button clicks but it will have a big impact.

Recent Federal Legislation Gives Shorter Depreciation Period of Leasehold Improvements in 2005
Enactment of the American Job Creation Act of 2004 last October by Congress (H.R. 4520) has meant that commercial real estate owners will be able to depreciate leasehold improvements – including changes to walls, floors, ceilings, lighting, and plumbing – over 15 years instead of the previous 39 years. The Joint Congressional Committee on Taxation estimates that the tax savings for real estate will amount to over $1.5 billion in 2005. BOMA has contended for years that the 39 year depreciation schedule was simply not realistic given the five to ten year typical lease periods in today’s market, and will continue to push for a ten-year schedule. The  15-year depreciation period is only good until January 1, 2006.  In addition to relaxing the depreciation schedule, the Act increases the flexibility of the REIT industry’s tax rules and will ease penalties for errors that under current law could jeopardize a company’s REIT status.  President Bush signed the American Jobs Creation Act of 2004 into law on October 22, 2004.

9/11 Commission Proposals to Impact Real Estate
The 9/11 Commission has proposed new emergency preparedness reforms for office buildings. In the recently released report, new standards of emergency preparedness will affect those who own and manage commercial real estate, and the report suggests that insurance companies and financial institutions use these factors to assess insurability  and credit-worthiness. Specifically, the Commission proposes the use of a voluntary uniform national emergency preparedness standard for all commercial office buildings and government properties. The National Fire Protection Agency (NFPA) Standard 1600 on Disaster/Emergency Preparedness and Business Continuity Planning was recommended. A copy of this standard can be downloaded at http://www.nfpa.org/assets/files/PDF/NFPA1600.pdf.  In addition, BOMA members may wish to purchase BOMA International’s Property Professional’s Guide to Emergency Preparedness” that offers a step-by-step analysis on how to prepare for an emergency with special emphasis on evacuation and recovery, and incorporates the elements contained in NFPA 1600. Check http://www.boma.org for more information.

San Francisco Police Department Needs Help To Combat Graffiti Vandalism
The San Francisco Police Department is attempting to ramp up its anti-graffiti vandalism efforts and to increase the number of arrests of such individuals by the local police. The excellent work currently being done in the Tenderloin can be expanded to other District Stations if the SFPD can get some donations to help out. Specifically, The Police Department’s Graffiti Abatement Unit needs:
      - Two Dell Desktop computers
      - 10 Sony Digital Cameras
      - Two Sony Laptop Computers
      - One Digital Projector
If you can help with one or more of the above items, or wish to contribute funds instead to the police department’s anti-graffiti efforts by making a donation to the non-profit group San Francisco Clean City Coalition, contact Officer Christopher Putz, SFPD Graffiti Abatement Unit, at 415-713-0860. Let’s help the police to better combat this scourge in our city!

San Francisco Fire Department Announces New Higher Fees for False Alarms
Recently, the SFFD’s Chief Joanne Hayes-White met with BOMA and announced the implementation of new and higher fees for false alarms. She cited this as a big expense item to the department, and that the costs had to be born by the owners of the property. BOMA members were invited to talk with Fire Marshal Paul Chin about any specific problems they may be having with false alarms and the new fee increases. He will also handle false alarms that are caused by faulty equipment, etc. Chief Hayes-White reported that the Fire Department responded to 10,000 false alarms last year. Consequently, the fees have been increased (effective from August 22, 2004) to $250 for the first five commercial false alarms, and $500 per instance after that. Residential false alarm fines were increased from $60 to $75. Details: Call Paul H. Chin at 415-558-3320 or email him at paul.chin@sfgov.org. 

Peninsula Update
Last month the San Francisco Business Times presented an excellent and informative program on new development happening on the peninsula. The program featured Ian McAvoy, Chief Development Officer for the San Mateo County Transit District, Chris Meany, Partner with Wilson Meany Sullivan, Deberah Bringelson, President of SAMCEDA (San Mateo County’s Economic Development Authority) and Gary Willard, Managing Partner of Investment Services for BT Commercial. Key projects reviewed included the Grand Boulevard project (improvements to El Camino Real) that Ian McAvoy said will make this historic road more pedestrian-friendly and will incorporate more mixed-use developments with greater densities. Ms. Bringelson stated that water costs and availability will outpace energy as a problem for new development in the County. Rates are tripling over the next 10 years. She lamented that biotech is the shining star industry of the county, but that the county has no official plan to recruit and/or retain this industry. Fortunately, the recently passed stem research bond may help spur more biotech companies to locate here. Gary Willard reported that San Mateo had a 24% office vacancy rate, while San Francisco still hovered around 17-18%. He reported that over 800,000 square feet of space was leased to biotech firms this year in San Mateo County. He also said there were a lot of conversions from office to residential and institutional uses. Willard did not believe the supply would meet the demand and projected a 4% decline in vacancy rates for 2005 in the county. Current rents are running at $2 per square foot per month. Chris Meany’s firm is managing the Baymeadows project, which is an 83 acre site near the horse racing track. This mixed-use development will include 1,250 units of housing, 150,000 square feet of retail, 1,250,000 square feet of new office space, a new town square, new 15 acre park, and a new Caltrain station. The developer has also accepted the 55’ height limit. Approvals are still pending.  SAMCEDA is planning its next program for January 19th with guest speaker Peter Luchetti, CEO of GFP Advisors. Details: www.samceda.org. 

Save the Date!

Join your BOMA Political Action Committee and Associate Committee members to see the Giants vs. Dodgers Opening Night Game
Wednesday, April 6, 2005
Fireworks after the game!
Tailgate BBQ behind China Basin Landing building starts at 4 p.m.; 1st Pitch: 6:05 p.m.

We have 225 View Reserved seats.  Bring your tenants, your clients, your friends and family!
Oh yeah...BEAT L.A.!