Allocations that used this threshold of 25 25,000 square feet. We are not always great at this in policy making, but i think the more consistent we can be i think it makes sense to maintain that threshold while also considering a lower fee for the set of projects that i hear theres a lot of concern about. Im going to reverse here. I would move that we continue until there is more data. Commissioners, today, obviously, we are hearing this on the eve of the full Board Hearing this item. Ways you can take a look at it is, you can provide direction in terms of recommendations specifically to the board of supervisors for tomorrow. The next thing is to make some recommendations on the record for the future. Again, as i think courtney has said, there has been some consideration. There has been some conversation about looking at the smallcap. I recommend not using the term smallcap because it would be confusing. You should just call a 50,000 or whatever. I would also prop m tells us how much office space we can build every year. It is very easy to now come over of Office Projects will be smallcap. That is good to know. All right. The first suggestion would be raising the 25,000 squarefoot limit up to 50,000 avoiding that term which shall not further be uttered, smallcap. Its always good to check and see what consequences you have intended or otherwise. You had a suggestion, commissioner zouzounis to assure the fees actually go to a horrible housing. No, i was reiterating the legislation, earmarked. Good to know. I think the other strong recommendation from this group is that the proposed hike is too high. More consideration should be given to the Economic Analysis that was done by the organization that we have in our employee that does Economic Analysis area they has suggested that something in the range of 10 is where their analysis puts it. Between the ten on the 40 that is being proposed. It is sort of disrespectful of the analysis that has been done to just sort of disregard it. I would like to see our recommendations, on the record, just saying, with due respect to the Economic Analysis that was done by smallcap that the proposed rate hike is too high. Would like to see that across the board . Yeah. I mean, we are suggesting you are suggesting no increase up to 50, a tier increased from 50 up to 100, a full increase, whatever that might be for 100 plus, is that correct . Right. One element of the proposal is that there be a tier of 50100 is at a different rate, a lower rate. And then a separate, but related recommendation is that each of those fees, both of those fees, the tier rate and the full rate be moore one line with what the Economic Analysis by oewd is recommending. A point of clarification. I was not looking for an exemption for 50, but a middle tier for a reduced rate. For the 2550. S. Yes. The modification of the tier is that there is a tear at 25, 50 and 100. How about 25, 50 at oewd recommended rate of five is not agreeable to you . The nexus, according to what mcdonald said, that nexus is based on a 25 year study, or n not . Yeah. We have experience in this body knowing the controller is not accounting for the full view of things. We have dealt with before. I would say we need to find a middle ground. Especially regarding the point that this is reassessed annual annually. Maybe we should understand the equation that it came to this a little more so we understand that it is an incremental increase, we are expecting to see growth, or can we reverted to a rate where it is an incremental increase as opposed to a one time increase. Let me suggest this to you. Between 25 and 50, somewhere between 110 of all new development 110 of all new development. The differences that we are talking about, uh, it is going to be one of two things. Its either going to be material to these smaller developments, and lead to them not being bui built, or it is going to be a marginal increase in the number of units being built. We have not yet heard any testimony regarding what the actual cost is. In terms of decreased tax revenue, decreased construction jobs. Decreased what i would suggest, uh, or urge you to give consideration to is by just backing off the hair. I am amenable to signing off on fees from 2550. I am not amenable to them being one on Small Projects like tha that being a 140 increase on Small Projects like that. It is written here that thi this in the Planning Department record it says the jhlf rate is updated yearly. Then updated at the end of the year. If it looks like theres room to increase at 100 plus then go ahead and increase it then. I think there is good reason i may be misinterpreting that. It is based on a set index. No one goes every year and says lets change it. It goes up by something related to inflation or something. It is updated automatically. I wanted to make sure you understood the difference. Theres not going to be major changes. Where im going with this, commissioner zouzounis, is that we should go slower on the Small Projects which are more likely to affect Small Business. We can afford to let up on that accelerator a little bit. It will not have a Material Impact on the number of affordable houses that are being built. We have heard today from somebody, the only person actually representing the beneficiaries with that. They were concerned about asking for too much. At a reasonable starting point because it is still an increase. It would be the oewd position for that 2550 if you could agree to that, i would probably agree to having some rate on 2550. And then if we could take it, a tier approach, you know, from 50 up to 100, i think that would be wise. You know i mean, it is amended, it is said here in the Land Use Committee it was amended that it is going to raise 59 per square foot by 2022. Can you just clarify. I think in terms of the feasibility study, the 10dollar increase is for the class a . We did a more general study just looked at what office space whether it be small, or large, could afford and came down around 10. At that point because, we didnt distinguish, you know, could one be seven and the other 12, we did not get to that level. Without tells me, at 40 it shuts off the spigot. It doesnt matter if not. What you are talking about, right now, is really not going to have a material effect on the outcome either way. If this goes up to 40 immediately, on just the big projects, are all the projects, its going to shut down if it has the effect that is predicted by the oewd study trade that will affect negatively the large projects in a way that is not going to matter what happens. That is the whole thing. I think, you know, parsing the details sub 100 is not going to have a material effect. Parsing the big detail, is 40 across the board. I think now we are just talking about general policy for the city. We do not want to see the city shoot its tail off. And then lose out on benefits for Affordable Housing that we would get, even at the current rate if those projects move forward. I think, you know, we keep our eyes on the prize there. It is really about the overarching effect that a large increase could have on the entire development landscape. Surely there is a compromise here. I mean, the 10 is from 25 years ago. Am not requesting a number. Im requesting oewd, their study is that hes seen suggests it is 10, with the caveat they have presented, okay . And that the Supervisors Office is recommending effectively a 40dollar increase by their study were not will not curtail job growth in a material way. There is greater upside for Affordable Housing in their proposal than the downside of the proposal that oewd is presenting. Maybe its 20. Has me more than it was 25 years ago. Things have changed. Just remember. This is one of the fees. Other fees have gone up. Where we have extracted things from developers and other ways. This is one component of that. To say that this one has lagged and therefore should catch up in a big way, does not take in account that we have squeezed this turnup really hard and other places. We just want to be careful that we are not putting that last straw on the camels back and what name it is in the spirit. Whether it is affordable housi housing, or whatever good cause. It really is getting down to not the cause, but with the effect might be. The Collateral Damage will be in an area we dont want to damage, that is Affordable Housing construction. There is the other issue which is, in this town now, people are not able to hire anyone anymore. Cant we have a compromise here and say not the 69 but somewhere in the middle for the 1 million . Yes. I heard from the commission about data. I think a direction instead of a solid number. Im hearing from the commission that there definitely needs to be a consideration for a tier and a tear housing get fee for properties that are 2550, or 50100. You can give a very generalized direction that the 40dollar increase fee is beyond what you think, the impact of that increase of if you will have on our small office. It needs to be reassessed and follow some of the guidance of the study has suggested. Jhlf we have heard that the supervisor is amenable to a rate adjustment, some kind. And that the supervisor is not amenable to changing the 25,000 squarefoot number up to 50. I think if we want to make a recommendation that is fine. To go on the record of doing so. I think we also ought to make a recommendation that reflects the reality that tomorrow they are going to move forward with the limits which they have suggested them at a rate of some kind. So, i think we should be on the record recommending that that rate be somewhere between what they are recommending and what oewd is recommending. I dont think we have to peg it out a number because we do not have any analysis who are we triple the the number out of the air . What we are trying to emphasize is that we believe that the Economic Analysis that is done by the City Department tasked with doing so should be given more consideration than it should be here. The tier approach would be better than a non tier approach. That is right. I dont have any objection to that. Just taking your lead, right . We should, you know, refrain from being overly specific about our recommendations. I think what i have heard from most of us is a tier approach. That would be more prudent. We are still building consensus here. Hold on. Let me finish here. A tier approach, most of us can get behind a tier approach. Most of us feel within the context of that tier approach more middle ground can be found between the oewd recommendation and the proposed increase . Are those two things do we have consensus around those two sort of admittedly . Can i make a motion . I moved to approve the motion trent ansari, can i make the motion . I put a lot of work into that one. I move that our recommendation is that the supervisors take a tier approach to the jobs housing linkage fee, and they make adjustments within those what is the right terminology . That the fee increases in between the controllers report and. Closer to the oewd recommendations. That they fall somewhere between the oewd recommendation, and the proposed recommendations. Further tier category that we are asking for, the fee increase is between the controllers report recommendations and the sponsors proposal. Think the recommendation is that the increase across the board be somewhere between those two numbers. As we have noted the fee increase, it is the 8020 rule. In this case the 9010 rule. The fee increase affects 90 of the development above 100,000 squarefoot threshold. If it throttles development, that is where it is going to be felt. Not below that. If youre making a recommendation to moderate the fee proposal to better include the 90 or its not going to have any effect . What are we proposing . That at any level that you tier it. The level be somewhere between that number proposed, the number that comes out of the study that oew, and the number being proposed currently by the sponsor. That is all you need to say. We dont have any data that suggests it should be 39, 25, or ten, you know, other than what we had presented to us today. The final fee be somewhere between the oewd and the current proposal . Right. Fine. Wait, wait, i thought we were going to propose a tier. We did. Lower fee . Yes. We are not specifying the tier. The motion, as i understand it is a more prudent approach would be that there would be a tier, and those tier fall between the two numbers that have been printed presented today. May i read about . Support amended with tier approach that the fee increases across the tier fall in between the sponsors proposal and the oewd proposal. Motion by commissioner. Four to support the legislation as amended to the jobs housing linkage fee. Do we have a second . Sure, i will second it. The fee increases across the tier fall between the sponsor proposal and the oewd proposal. Roll call vote. [roll call] motion passes 60 with 1 absent. Item four, board of supervisors file 190 191005. Initiate a ordinance. Business and tax regulations administered of codes excise tax on keeping commercial property vacant. Motion ordering submitted to the voters come at an election to be held on march 3, 2020, an ordinance amending the business and tax regular asian code and administrative code to tax on persons keeping ground floor commercial space and neighborhood commercial districts or neighborhood amount collected of the tax for four years from march 3, 2020 and affirming the Planning Departments determination under the california environmental. Discussion and action item. The presenter is, lee hepner , legislative aide good afternoon. I have another doozy for you. I would try to keep it brief. I am from supervisor peskins office. I have a powerpoint here. Im going to use this microphone. The retail storefront vacancy tax propose for the march 2020 ballot, by way of describing what the problem is i want to really root it in a budget and Analyst Report that came out about a year ago. This is the list of the contributing factors to vacancies. I think there are a lot, they did a pretty good job of describing them. Normal turnover of course, Building Code compliance issues, speculation, absentee landlords, neighborhood conditions, making property unattractive to a new tenant, city regulations and zoning, among partnerships, or family ownership. Landlords not willing to improve the property. Landlords are waiting for a particular type of tenant. I think you can think of multiple. This is designed, i think to go after these. This is not suggested to be a Silver Bullet for the Retail Vacancy issue. Certainly, i think the intent here is to address things like Property Owners offering spaces for higher rents than exist. Absentee landlords, as we have multiple in north beach neighborhood district which have Left Properties vacant and not even offered to freely use it for years upon years. Commissioner dooley, i think has some experience in that. And, you know, disputes among partnerships, hopefully Something Like what they are talking about today, some of those folks being kicked into action as well. Landlords not willing to improve the property. Landlords waiting for a particular type of tenant. Lets be realistic about what we are offering spaces for in terms of rent and to the extent work needs to be done. Lets find ways to encourage that work to be done. Existing tools to address vacancy very briefly, we have been thinking about this for a long time in San Francisco in 2,009 for the board of supervisors passed a vacant or abandoned building registration ordinance. Attached to that is a 711 Registration Fee for businesses who are on that register. Interestingly, while the United States Postal Service reported almost 3500 commercial vacant addresses based on businesses not receiving mail for 90 plus days. Certainly an implementation and problem there. Which brings us to the 2019 vacant storefront ordinance that the board of supervisors passed in march introduced at the end of last year. I believe it was unanimously passed by the board of supervisors. The intent here is to strengthen the veracity of that register so we are capturing a more accurate picture of vacant commercial spaces. Still leaves the annual Registration Fee of 700 we are as with all fees bound by cost recovery. In this instance distinguishable from a lot of fees which we would like to see assessed differently against Small Businesses and reduce. This is one where i think inasmuch as it is designed to be effective to actual lease spaces. 711 does not changing anyones behavior. We can talk about the strategy behind this tax which i think it ultimately about changing the behavior of Property Owners we are sitting on extremely valuable properties in our commercial corridors. Into the details, three principal goals here and we can talk about whether the proposal matches this intent preventing speculative rent increases on existing Small Businesses. We are talking about bob hill market in north beach that saw an enormous rent increase shortly after supervisor peskin came to office and in 2016. It has been vacant ever since. Unclear what is happening with our property. We have another cafe which is also confronting a very large rent increase. Those rent increases are eviction notices. They are trying to get that business out. Our theory here is that if we impose commercial vacancy tax. Some of the incentive to try to find that higher paying tenant that may not exist, may prevent these speculative rent increases on existing businesses. As for prospective businesses is to the extent that some landlords are offering commercial vacancies at unrealistically high rates. This might actually have the impact of bringing some of those rates back into a realistic area. Lastly, incentivizing bringing longterm vacancies to market. This again is about the clusters of properties that we all know, or the particular landlords who lets be clear are bad actors. If you are leaving commercial space vacant on our prime commercial corridors for over five years at a time, you are not offering them for rent. You are not taking any steps to rehabilitate properties that are unusable, you are not participating in the community in a way that is beneficial to your neighbors, to adjacent businesses who have to confront that blight. It is a real problem that we see in a lot of our commercial corridors. It is not explained by other variables like the amazon effe effect, you know, various neighborhood issues that are contributing to problems the retail. This is really a unique one that we are talking about bad actor Property Owner landlords. What with the storefront vacancy tax due . This is the real meat of it. It would propose a 1,000dollar per foot of store frontage per year tax. I tried to light that if you ways to make it less confusing. It is 1,000 per foot of store frontage, per year. For storefronts that are left vacant for more than 182 days, approximately six months in any given tax year. The tax is limited, the affordability to ground floor commercial space only in the cities neighborhood commercial and neighborhood commercial transit districts. There are three exemptions. I know how that 182 days it seems like a short amount of time to turn around even a normal explainable vacancy. Incentivize some of the positive behavior. There is an exemption for a construction exemption. If you submit a Building Permit application, you get a oneyear exemption from the vacancy. 182 days becomes one year in six months. There is a sixmonth exemption for businesses that are in the process of an application. That brings hundred 82 day exemption without any Building Permit application to a full year. You add all of those together. We can walk through some hypotheticals later. Ultimately we are talking 2. 5 years of vacancy with these exemptions. Even notwithstanding a Natural Disaster before you would be assessed this vacancy tax. Again, this is really going after those longterm vacancies. Lastly, the Small Business Assistance Fund which i hope it isnt music to this commissions ears. All proceeds would be deposited into that fund and it be used for rehabilitation, maintenance, its a pretty general description. The idea is that it would have to go to the benefit of Small Businesses in San Francisco. These are the approximately 26 neighborhood commercial districts and neighborhood transit districts in article seven of the citys planning code. Im not going to read all of them, you can see these are the premier commercial corridors. I would just say because i think about district three a lot. This is a polk neighborhood district. North beach neighborhood commercial district on broadway neighborhood commercial district and district three alone, it also includes other premier corridors, castro street, you know, west port off 24th street, pacific avenue, folsom. This is an extremely hard to see matt. What we are looking at here is the purple areas, the dark purple areas. Those would be the applicable zones for this commercial vacancy tax. And then i got some closeups here. This is district three, you can see the polk street neighborhood commercial district on the left. The top right that non linear purple blob is the north beach neighborhood commercial distri district, you know, polk street when it turns right and you get a horizontal stretch of purple, and then you have a handful of blocks of broadway to the lower right of that district in north beach. Just because i was making this for use in one of our meetings, this is in soma, for instance, there is not a whole lot that would be covered by this. It is that folsom street and sixth street, lshaped, there was a question about all of these new commercial spaces with tall ceilings and huge frontage of mission bay in south beach. The way we designed this is only applied to the neighborhood commercial district. They are principally zoned and have been constructed and built to prioritize vital commercial activity on the ground floor. That is why we have chosen those zones for this commercial tax to apply. A little bit of data about the north beach commercial district. There are varying methodologies for storefront. This is three Community Groups in north beach put together. A survey of all of the commercial perkins vacancies. Thirtyeight vacant storefronts in 2018 which is a big jump from what it was in 2015. The last time a survey was conducted, we have a Natural Disaster exemption, and its worth noting that six were caused by a fire at the building at the corner of columbus on union. A number of storefront vacancies before 2015, eight storefronts and those storefronts are owned by two Property Owners respectively, one of the 500 block of columbus and one cluster on the 700 block of columbus. Actually that visual on the right is the 500 block of columbus. That has been like that for as long as i can remember. Again commissioner dooley lives in that neighborhood, he can speak that is not serving anybody on one of the most brilliant commercial corridors in the city. The left is one of several storefronts on the 700 block of columbus. It has been vacant. While it does have a for lease sign in the window. We know that there have been several efforts made to contact the Property Owner about leasing that space to no end. I think one of the Lessons Learned from the vacant storefronts this year is that hey, you cannot get out of registering your storefront vacancy by putting for release in the window. We are talking about offering your space for rent. Again, just into the particula particulars. I nuance here, 1,000dollar per linear foot of frontage for a corner lot like this one that i stopped a picture of what i was riding my bike the other day. It would be assessed principle being that corner lots, that double frontage is actually more valuable to the Property Owner. It is also more conspicuous unnoticeable to neighbors and adjacent businesses when those lots are left vacant. Storefront vacancies above the first floor are exempt, if that already clear. Throughout this, going to sprinkling here potential amendments that are the fruits of multiple conversations we have had. In this instance, one of the ideas we heard, and liked was to ramp up the tax, 250 per foot of frontage and in year one, 500 in year two. A thousand dollars in year three. I think that is designed to make it a smaller blow in the first year for making Property Owners that are trying to do the right thing that got caught. I will explain why i dont think there will be many of those. I also think, in that sense, it alleviates some of the fear that we are going to be hit really hard with a thousand dollars per foot in year one. It also, by aggravating it year to year, takes into account the fact that longerterm vacancies are disproportionate. Im going to talk about each one of the exemptions. This is the one year construction timeframe. Following the date that the application is submitted, arnel, im sorry, this is following the date that the city issues the Building Permit. Just by way of clarification, many permits are issued, it would only attach to the first one. We do not want to create a loophole where people are submitting Building Permit applications to get a oneyear extension over and over again. This would be a one year, one time exemption. Again, potential amendment here, which we discussed is to extend that one year construction time to include from submission of the application to the issuance of the permit. A lot of the feedback that we have heard about this, while generally positive, we have really been trying to elicit what are the fears, the worstcase scenarios, and the extent that the city is contributing to delay. That should not be held against the Business Owner. That is the principle you will see come up a couple of times in here. I think this aims to account for that in this instance. The oneyear year disaster timeframe. There is a horrifying photo of the north beach fire from 2018. This will create a oneyear timeframe following the date that a building or structure was severely damaged and made uninhabitable or usable due to fire, or Natural Disaster. Again, amended that we are contemplating here is to extend that. Up to two years. I think realistically, and a lot of the conversations we have had, such as the time to rehabilitate these buildings. Youre also dealing with insurance and that time, various claims that can kind of drag that out. If you are not, you know, we want you to start thinking about pulling a Building Permit by the time two years. We are hoping some of this resolves issues more quickly. Extending it from one year up two years following a Natural Disaster makes a lot of sense. Six month conditional use application period. There will be six months following the date that a complete application is submitted to the city. Again, as with the Building Permit exemption if there are multiple fee use it would only be for the first fee. We dont want you to be exploiting this exemption in perpetuity. That would be a loophole that we would want to close. I will note here, because i think they kneejerk reaction is six months, that is not enough time. The city does not process conditional use applications within six months. To that end a couple of points. In 2015, the Planning Commission adopted the Community Business priority Processing Program which requires a hearing for Eligible Properties for Eligible Properties. Within 90 days of filing, and placement of that hearing on the consent calendar which means not putting together a lengthy report. Which they are less likely to hire a permit expediter, an attorney, and some of the commerce and stuff that associate with fee process. And then, i think that one of the amendments we are talking about here is requiring that all groundfloor applications in the city, entities and the zones that were covered by the tax must be eligible for that priority processing within 120 days. Im sorry, i dont think i included that, within 90 days, i am sorry. It requires processing within 90 days. If we are serious about this tax and not letting the city contribute every applicable zone should be eligible for the program. I think that is the best we can do. And then, just a quick note about the Small Business assistant fun. It would be to provide funding for Small Businesses in San Francisco. Again, deliberately vague. We would like this to be able to cover things like bringing your storefront into compliance with ada laws. Seismic ordinances. It can be for facade improvements, lease negotiation assistance. Heck, there is a perverse version of this where that fund, those fund proceeds can go back to a business that was assessed the tax in the first place, if there was any dispute or rationale justifying the refund of that tax. We thought it was generally in, genuinely in Small Business. There is a lot of possibility what could be done with that fund. Again, potential amendment that came from our conversation with Property Owners and nonprofit Property Owners in particular. Some of these funds can also be used for small type acquisitions. I would just leave out there. A little note on our outreach today. There is an adorable photo of yours truly speaking to the claimant street merchants. We have been speaking a lot of merchant core and a lot of merchant groups. If few among them, north beach association. Of course, lemon street merchants which had a robust and very cool group of people. I am really, really enjoying this small group of communities in San Francisco. Commercial Real Estate Brokers have been providing helpful feedback. Property owners, and nonprofit Property Owners were helping us understand the different behaviors and the different considerations for nonprofit Property Owners. There are are amendments that we are considering basically excluding on the basis that they are already fulfilling a public serving mandate either to the provision of below market rate Affordable Housing and mixed use developments. Or, by actually going through lengthier processes to find tenants that are the beneficiaries of lower rent and below market rate leases. That is something we want to continue to encourage. Outreach has been ongoing. This is one of the many new stories that came out in the wake of our press conference in front of that 500 block of columbus avenue in january of that year. It predates that as of this tax. We have been trying to facilitate and solicit input since then, as well. The rest, you know, i hope to get some cool recommendations out of you. Working through some of the hypotheticals of how this tax can apply. You know, i am not a graphics whiz. I put together some timelines here of different examples of how this can apply that sugges suggests, you know, even if you are paying the slightest amount of attention and pull a Building Permit right before you trigger that 182 days, not pull a Building Permit or submit an application, there are ways for this to stretch out for 2. 5 years. In some instances, well over three years if you are applying before the tax is assessed. We want to see Property Owners making progress on their applications, or on leasing their storefronts out. We do not want to punish folks that are actually doing the work to pull permits for tenant improvements to rehabilitate blighted properties. We do not want to punish them. You get we do want to see make that progress. If youre going to sit on your hands, so many Property Owners, i should say so many, but actually discrete slice of Property Owner that many of us are aware of. Those are the bad actors that we want to spur interaction. I think we kind of share that goal. I am genuinely interested whether you think this tax would help us along in that process, and if not how we might be able to translate this feedback. Just a quick note on timeline. We are making amendments on a very quick basis here. It is insane to be prepping for the march ballot to while we are in the middle of an election cycle. Our pushed up primary data is putting us in that position. We will be considering amendments to this in the next couple of weeks. That is all i have, for now. I am sure there will be a robust discussion. There will be some questions. Can you go back to your slide that shows the north beach numbers . I had a question about that. So, you mentioned of the 38 that are currently existing, six of them are due to the fire. That makes 32. Eight of them were vacant prior to 2015. I presume this is the eight are the ones that have been sitting on these vacancies for a long long time. That presumably leaves 24, we have to be really careful here. Things are changing so rapidly, it is actually quite difficult. Finding the right business, and then also navigating neighborhoods that have enacted their own restrictions, restaurants, bars and other things like that that will make the process either impossible, because certain uses are outlawed in certain neighborhoods. Or just a lot more difficult. You know, i want to make sure that we are not going after everybody because we have two land rovers owners that are very Popular Store on the landscape, but really are the exception. That is just one of my questions. You know, commissioner dooley, you are on the list here, you probably know that better than anyone. Yes, i do. [laughter] is it just me . Why are the 24 spaces i would say at least half of them are because they want astronomical rents. When you say astronomical rent do you mean they want market rate rent . You have to be very careful here. Market rate for what the neighborhood someone who has been on a 15 year lease comes off that lease, they update the market and it is shocking. It is not illegal at its actually not that outrageous. Im a landowner. I have been tamped down by a 15 year. All of a sudden i can mark the market. That is kind of light, that his business 101. I would say, i would understand what youre saying, keeping in mind that the average size of retail in this neighborhood is under 2,000 square feet. When someone who is a landlord raises, doubles or triples the rent on an existing person they are number one, de facto evicting them, and then you get no covers. People look in the neighborhood, they dont want to rent at that high price because they cannot make any money. I want to make a very clear distinction between marking the market which is economic reali reality. If you have a business that is not making money at market rates, and they get marked to market, that is a business reality. Someone else coming in to look at that space going to see that it is marked to market. If it is twice the market rate that is totally different. Someone asking an unreasonable rate relative to the current market rate, that is entirely different. Any broker will advise against that. A broker is not going to rent theyre going to say, look, mr. And mrs. Property owner the market rate for your space is this. I will not be able to lease it for twice the market rate. Can i speak . I would say that is fine, if you believe it is only about market rate, its not about supporting small independent businesses. You are just saying, if you cannot afford very high rent, get out. No one is going to rent it. Im just saying you cant penalize. Let me read let me rephrase what commissioner dooley is saying. If you are marking it market when they get rented . When there be a long list of people ready . Not necessarily, the market rate, well, i mean, technically there should be in equilibrium. Therefore, you are just saying because market rate should rule that we will just write off all of the amazing, unique businesses in this neighborhood. Lets face it, a Small Business in a space that is under 2,000 square feet, most of them are under 2,000 square feet they can accept a rent increase, but what they are seeing now is double, or trouble, and these are people that have been there for 50 years. Yes. As more places are not rented, attempting to rent at the perceived market rate those rents should come down because nothing gets rented. There is an adjustment. If you benefit by renting your space. Think there is a concern. There may be an element the sorts of things that groups of assets owners are not supposed to do. There may be an element of this, without any actual coordination simply an acknowledgment of the reality which is demand for commercial space is so high that we can plausibly consider raising the job linkage fee hundred 40 , demand for office space is so high that if you are the owner of multiple properties, or even if you are the owner of a single property it actually pencils out quite nicely to not rent it out at all. Just let Natural Market forces. By taking your asset off the market, demand is so high and supplies so small you can actually move the market, the local market. I can tell you from my business okay. There has to be some analysis. Im just trying to get out, and want to make sure, we are, you know i dont think its advisable to mess around with market dynamics. There are unintended. The unintended consequence of doing market rate, in some neighborhoods, will be the elimination of basically all of the Small Businesses . Absolutely. Try i dont think that is so positive. The concern here is that folks sitting on Vacant Properties for many, many years, decades of in some cases, im thinking of a property im aware of on valencia. We know. Yeah. That has an impact on not only the Small Business no one argues the impact of a vacancy. So, you know, we do all sorts of things to encourage all sorts of economic behavior. We try to encourage i just want to make sure we are addressing the true nature of the problem. Commissioner ortiz . Thank you. I was just suggesting, if i am a Business Owner and i go get a Business Registration certificate far, i dont know, i sell clothing, or something. Whatever is used in the property, then i can kind of circumvent the anti storefront. Lets say i sell baseball caps by appointment only. How do you define the activity in the building . You could have a sham business. We have developed the sun line close collaboration with the folks at dbi that are enforcing the storefront ordinance with the city attorneys office. All of whom feel confident, not only that this is enforceable. [please stand by] [please stand by] there might be a loophole how you would construct closing that with a proactive addition to the legislation rather than that loophole exists now that you review the video today, that is good, i can figure that out. I will buy a classic car. I have been delighted in my conversations with merchant groups that it shifts to how are we going to close loopholes to make sure this works the way it is to work, that is a conversation i am eager to engage in. With the Tax Collector you have to report itnn
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