SS Item A-3 — Beverly Hills City Council, May 10, 2022

STAFF REPORT
Meeting Date: May 10, 2022
To: Honorable Mayor & City Council
From: Timothea Tway, AICP, City Planner
Chloe Chen, Associate Planner
Subject: Request for Direction on Medical Conversion Urgency Ordinance (Ordinance No. 20-O-2826)
Attachments: 1. Urgency Ordinance No. 20-O-2826

2. Ordinance No. 20-O-2831

3. Ordinance No. 21-O-2852

4. City Council Agenda Report – October 26, 2021 (without attachments)

5. City Council Study Session Report – September 21, 2021 (without attachments)

6. City Council Study Session Report – November 17, 2020 (without attachments)

INTRODUCTION
Since November 2020, the City has implemented an urgency ordinance that allows the conversion of existing commercial spaces to medical space through the issuance of a building permit upon meeting certain criteria. The urgency ordinance is intended to create more flexibility for property owners with regard to the use of space in commercially zoned properties during the COVID-19 pandemic, when vacancies of commercial spaces were increasing and demand for typical commercial uses (e.g., retail, office, etc.) was decreasing. The City Council has extended the urgency ordinance for its maximum effective period, with an expiration date of November 16, 2022.

Given this upcoming expiration date of the urgency ordinance, staff requests that the City Council discuss whether: 1) staff should develop permanent regulations related to the conversion of commercial space to medical space with the Planning Commission, and if yes: 2) whether the regulations should be identical to those in the urgency ordinance (effectively making the urgency ordinance regulations permanent), or 3) whether the regulations should differ from those in the urgency ordinance, and how. If the Council does not direct staff to develop permanent regulations with the Planning Commission, the urgency ordinance will expire in November and the regulations that were previously in place would apply.

Meeting Date: May 10, 2022

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DISCUSSION
Background of the Urgency Ordinance
At its November 17, 2020 meeting, the City Council voted to adopt an urgency ordinance that amended existing medical use regulations for commercial areas of the city. The City Council found that the failure to implement immediate changes to the medical use regulations pertaining to the commercial areas of the city would result in an immediate threat to the public health, safety, and general welfare due to the fact that the COVID-19 pandemic and the resulting closures of nonessential businesses and capacity limits on businesses affected the viability of city businesses and the city faced an increase in vacant commercial space. These closures and capacity limits impacted landlords’ ability to rent out vacant spaces, which could have resulted in economic instability placing the public health, safety and general welfare at risk. The regulations adopted were meant to allow the conversion of existing commercial space to medical uses in order to provide flexibility for landlords during the COVID-19 pandemic and associated economic downturn. The urgency ordinance adopted on November 17, 2020 (Attachment 1) took effect immediately and was in effect for an initial 45-day period, until January 1, 2021.

On December 8, 2020, the City Council adopted Ordinance No. 20-O-2831 (Attachment 2) to extend the urgency ordinance for an additional ten (10) months and fifteen (15) days to allow the urgency regulations to remain in place for a one-year period, during which the City would continue to monitor reliance on the ordinance and the amount of medical office conversions completed in the city to ensure that an imbalance of uses was not created.

At the September 21, 2021 City Council study session meeting, the Council discussed the data available regarding medical conversion rates under the medical urgency ordinance. The Council concluded that it wished to extend the medical urgency ordinance for an additional one-year period, and reassess before the extension expires whether permanent changes to the City’s medical use regulations would be appropriate.

On October 26, 2021, the City Council adopted No. 21-O-2852 (Attachment 3), which extended the urgency ordinance for an additional one-year period. This extension means that the urgency ordinance is currently in effect, and will expire on November 16, 2022. At this meeting, staff provided an update on the amount of commercial space that has been converted under the urgency ordinance since its adoption, which at the time was a total of approximately 11,500 SF of converted space, and approximately 37,000 SF of space pending conversion. The City Council received comments from the public that generally supported the extension of the urgency ordinance. The City Council discussed the urgency ordinance, and provided comments, which included that a healthy balance of uses in the city are necessary, especially for tax revenue collection, and they supported the extension of the ordinance for another year.

Medical Urgency Ordinance Regulations
The urgency ordinance currently in effect allows for the establishment of new medical uses throughout the city by converting existing space provided the proposed medical use complies with the following requirements:
• The project site is located in the C-3, C-3T-1, C-3T-2, C-3T-3, C-R-PD, C-R, C3A, C-3B, or E-O-PD zones. • The medical use is not located on the ground floor of a building.

Meeting Date: May 10, 2022

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• New medical uses are required to be parked at one parking space per 350 square feet of floor area. This is the same parking requirement as general commercial/retail, and essentially allows medical uses to occupy existing commercial spaces without requiring the provision of additional parking. • No existing floor area shall be removed, demolished, or vacated to provide parking to satisfy the parking requirements for a medical use. • The additional space shall not be occupied by a “specialty clinic” as defined in Section 10-3-1604.5 of the Beverly Hill Municipal Code. This means that the urgency ordinance does not allow the establishment of new surgical clinics or sleep disorder clinics, only medical offices and medical laboratories. • The applicant has submitted documentation in form and content that is satisfactory to the Director of Community Development demonstrating that the proposed medical space has been leased to a medical tenant at the time of application for a building permit, and if required by the City’s tax regulations, that the medical tenant has an active business tax license under Tax Classification C with the Finance Department and has paid all of the applicable fees for such license.

Implementation of the Urgency Ordinance
Since the implementation of the urgency ordinance, nine requests to convert a total of 13,109 square feet (SF) of commercial space to medical space have been completed, and 17 requests to convert approximately 50,066 SF are currently pending, for a total of 63,175 SF. Prior to adoption of the urgency ordinance, the City’s commercial building inventory included approximately 1.4 million square feet of medical office space or 20% of all commercial square footage. Based on these statistics, the urgency ordinance has resulted in an approximate 4.5% increase in the total amount of the City’s medical square footage, and a less than 1% increase of medical space of the City’s total commercial building inventory square footage. Although the urgency ordinance appears to have been successful in creating flexibility for filling vacant commercial space, the urgency ordinance also does not appear to have resulted in a dramatic surge in medical office space thus far.

When the City Council adopted the original urgency ordinance, the Council discussed its desire to encourage medical uses that serve the residents of the community, and to design the urgency ordinance regulations to encourage such uses. For this reason, the restriction on “specialty clinics” was established with the intent of limiting surgery centers. However, through the course of implementing the urgency ordinance, staff has realized that the restriction related to “specialty clinics” may have been too prohibitive if applied strictly. This is because specialists often perform ancillary surgical activities in the course of providing regular medical care (for example, a dentist performing oral surgery or a dermatologist performing surgery to remove cancerous cells). In addition, various types of surgeons may require an in-office operatory to perform less invasive surgeries, while more invasive procedures are performed in an off-site hospital or surgery center setting. As such, staff has implemented a threshold of allowing a maximum of one operating room that is no more than 10% of the overall floor area of a suite being converted to a medical use. This has allowed greater flexibility and medical uses that are consistent with the City Council’s intent related to the urgency ordinance.

However, staff has made it clear that any surgical activities that are proposed within a converted space must also be ancillary uses, and must not be the primary use of the medical suite.

Meeting Date: May 10, 2022

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In addition, the City Council may wish to consider some relevant market condition data that may facilitate the discussion regarding whether the medical conversion regulations should be maintained or further modified. Based on CoStar data for the Beverly Hills submarket on retail and office uses (commercial uses), the vacancy rates of commercial spaces in the City have been affected by the pandemic. The overall retail vacancy rates appeared to peak around 6.6% in 2020 (up from 4.6% in 2019), and have decreased slightly to 5.9% in 2021, which may indicate a gradual recovery (the lowest vacancy rates for retail in recent years ranged from 2.6%-2.9% in 2013-2015). In contrast, the overall office vacancy rates in the City have seen an upward spike, which is most likely attributed to the pandemic’s effect on the demand for office space (a general decline in demand as at-home work increased). The overall vacancy rate in 2019 was 8.3%, which sharply increased to 13.1% in 2020, and again to 17.4% in 2021. The vacancy rate remains at 17.1% year-to-date. Given it is less likely that vacant retail spaces would be utilized to establish medical space under the urgency ordinance (due to the ground-floor prohibition in the urgency ordinance and the likelihood that retail spaces are more concentrated on the ground floor), this data may not be as relevant as to the potential correlative effect of the medical urgency ordinance. Conversely, the more relevant vacancy rate may be the office vacancy rate because office space may be more likely to be converted to medical uses under the urgency ordinance due to the prohibition on locating medical on the ground floor, and the likelihood that the majority of office spaces are located above the ground floor. Therefore, it may be significant that the office vacancy rate has increased sharply between 2019 and current day, and may indicate an ongoing need for these landlords to have a wider variety of tenancy options while the market continues to recover from the effects of the pandemic.

Public Feedback Regarding the Urgency Ordinance
Since the adoption of the urgency ordinance, the Community Development Department has received numerous inquiries from property owners, commercial brokers, and physicians regarding the process for establishing new medical uses. A significant number of inquiries also include questions about whether the City Council will consider any permanent changes to the medical use regulations, and whether it is possible to allow greater flexibility with regard to their location on the ground floor and the types of medical uses allowed (i.e., to allow more expanded surgery uses). Given these comments, the City Council may consider whether it would like to direct the Planning Commission to explore potential changes to any permanent regulations that allow the conversion of commercial space to medical uses beyond what is already permitted through the urgency ordinance.

Potential Next Steps
Staff requests that the City Council provide direction regarding the next steps, given that the medical urgency ordinance is set to expire this fall. Staff requests that the Council provide direction on the following options, and staff has provided some potential regulations for the Council to consider.
• Should staff work with the Planning Commission to develop a permanent ordinance with regulations that allow the conversion of existing commercial space to medical space, or should the urgency ordinance expire with no permanent ordinance to replace it?
• If the Council would like staff to work on developing a permanent ordinance to allow the conversion of commercial space to medical uses with the Planning Commission, staff requests that the Council provide direction regarding the following:

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o Should the regulations in the permanent ordinance be identical to the urgency ordinance?
o Should ground floor medical uses be allowed in any instance? For example, in areas outside of the Pedestrian Oriented Area, the Business Triangle, or set back a certain distance from the front of the building? o Should any surgery uses be allowed beyond the current threshold that has been implemented (i.e., one operating room that is no more than 10% of the overall floor area of the suite being converted)? Should surgeryonly uses be permitted through the conversion process if they are located in certain spaces, such as spaces above the ground floor or outside of the Pedestrian Oriented Area, or the Business Triangle?
o Should the ordinance contain additional restrictions related to the types of medical uses that are allowed in converted suites? For example, should there be a prohibition on certain medical uses, regardless of the limited percentage of a tenant space allowed to be allocated to surgery uses? o Given that the 2011 Medical Ordinance prohibiting new medical uses from establishing in the city is still in effect, should staff undertake a more comprehensive review of the City’s medical regulations? If permanent regulations allowing the conversion of commercial space to medical space are adopted, should staff eliminate previously enacted regulations that may conflict with such regulations?

FISCAL IMPACT
Extension of the urgency ordinance could have a fiscal impact on the City. Due to the way business taxes are gathered and categorized, it can be difficult to fully analyze the potential fiscal impact of changes. In general, if regulations are changed to allow more medical space, tax revenue in commercial areas may decrease if medical offices replace uses that generate higher business tax revenue such as real estate firms, talent agencies, and high-end retail or restaurants. However, in the event that medical uses occupy currently-vacant commercial spaces or replace businesses with lower/equal business tax revenue (such as Class A businesses - business and personal services, such as interior design, hair salons, property maintenance, massage/spa, etc.), then tax revenues in commercial areas could increase. There may be secondary fiscal benefits to expanded medical uses, such as the potential for medical tourism to increase and create demand for hotel stays and retail/restaurant patronage. Furthermore, given the current circumstances of the pandemic and the resulting increase of commercial vacancies, medical uses may provide an increase in business tax revenue if they occupy such spaces.

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RECOMMENDATION
Staff recommends that the City Council discuss the medical urgency ordinance, and receive public comments. Staff requests the Council provide direction regarding whether:
1) they would like staff to develop permanent regulations related to the conversion of commercial to medical space in the City, and if yes: 2) whether such regulations should be the same as the urgency ordinance or 3) if changes to such regulations should be made, and what those changes should entail.

Ryan Gohlich, AICP,
Director of Community Development
Approved By
Attachment 1
Urgency Ordinance No. 20-O-2826
ORDINANCE NO. 20-O- 2826

AN URGENCY ORDINANCE OF THE CITY OF

BEVERLY HILLS MODIFYING MEDICAL USE

REGULATIONS FOR CERTAIN COMMERCIAL

ZONES IN THE CITY AND DECLARING THE

URGENCY THEREOF

THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS HEREBY ORDAINS AS FOLLOWS:

WHEREAS, international, national, state, and local health and governmental authorities are responding to an outbreak of respiratory disease caused by a novel coronavirus named "S ARSCoV-2", and the disease it causes has been named "coronavirus disease 2019", abbreviated COVID-19 ("C0VID.19"); and
WHEREAS, the Califomia Department of Public Health and the Los Angeles County Department of Public Health have all issued orders including, but not limited to, social distancing, staying home if sick, canceling or postponing large group events, working from home, and other precautions to protect public health and prevent transmission of this communicable virus; and WHEREAS, the ongoing COVID-19 global pandemic has required significant changes to the operations of businesses in the restaurant, retail, office, and service industries. This shift in operations has resulted in negative economic impacts, including the closure of businesses in the City of Beverly Hills, the substantial shrinkage of revenue in certain sectors, and the loss of jobs; and
WHEREAS, demand for brick-and-mortar office and commercial spaces has decreased, and further economic changes affecting commercial leasing demand are expected, while the demand for medical use space has remained more consistent and medical uses are more insulated from economic downturns; and
WHEREAS, modifying the medical use restrictions will provide commercial landlords with greater flexibility to lease vacated commercial spaces, which may enable greater economic stability during the ongoing COVID-19 pandemic; and
WHEREAS, in the interest of public peace, health and safety, as affected by the emergency caused by the spread of COVID-19, it is necessary for the City Council to exercise its authority to issue these regulations related to the protection of the public peace, health or safety.

Section 1. Authority.

Pursuant to Government Code Section 65858, the City Council may adopt, as an urgency measure, an interim ordinance to protect the public safety, health, and welfare to prohibit an uses that may be in conflict with a zoning proposal that the legislative body, planning commission or the planning department is considering or studying or intends to study within a reasonable time.

Section 2. CEQA Findings.

This Ordinance and the Amendments were assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. The City Council finds that adoption of the Amendments will not have a significant environmental impact and is exempt from CEQA pursuant to Section 15305 of Title 14 of the California Code of Regulations because the Amendments represent minor alterations in land use limitations and do not result in any changes in land use or density. Further, the commercial areas of the City in which medical uses are allowed have average slopes of not more than 20 percent.

Section 3. The City Council hereby amends Section 10-3-1620.1 of Article 16 of Chapter 3 of Title 10 of the Beverly Hills Municipal Code as follows:
"10-3-1620.1: MEDICAL USES:

A. Notwithstanding the provisions of sections 10-3-1601 and 10-3-1602 of this chapter, buildings that received a certificate of occupancy from the city prior to February 11, 2011, may be used for medical uses provided that either: 1) the amount of floor area occupied by medical uses does not exceed the amount of floor area occupied by legally permitted medical uses on February 11,2011, or 2) the building is located in a medical overlay zone and the medical uses are approved as part of a planned development. Notwithstanding section 10- 3-4101 of this chapter, medical uses may relocate within the building provided that the total amount of floor area occupied by medical uses does not increase beyond the amount of floor area occupied by lawfully permitted medical uses on February 11, 2011.

B. Notwithstanding subsection A of this section and section 10-3-4101 of this chapter, building owners of buildings that received a certiflcate of occupancy from the city prior to February 11, 2011, may add up to six thousand (6,000) square feet of medical uses to the building by converting general office space to a medical use, even though the building is not located in a medical overlay zone, if all of the following conditions are met:

1. The building is located on property in one of the following commercial zones: C-3, C-3T-1, C-3T-2, C-3T-3, C-R-PD, C-R, C-3A, C-3B, or E-O-PD. -3-

2. If the property is located in the pedestrian oriented area, as defined in section 10-3-1653 of this chapter, the community development director issues a minor accommodation pursuant to the provisions of article 36 of this chapter to authorize a medical use to occupy a space in a pedestrian oriented area provided that all other requirements of this section are met and the director makes all of the findings pursuant to subsection 10-3-1655A of this chapter.

3. The building contains one or more legal medical uses prior to application for either a building permit or minor accommodation pursuant to this section.

4. No new medical uses are located on the ground floor within the pedestrian oriented area. For development located outside of the pedestrian oriented area, no new medical uses are located within the first forty feet (40') measured from the front building facade, on the ground floor of any building with a depth of one hundred feet (ICQ') or greater. For buildings with a depth of less than one hundred feet (100') and that are located on irregularly shaped lots, medical uses may be permitted in all or part of the first forty feet (40') upon a finding by the director of community development that: a) all other provisions of this subsection B have been met and b) the proposed expansion of medical use does not adversely impact surrounding development. Facades facing a "side street", as defined in section 10-3-100 of this chapter, shall not be considered a front building facade for purposes of this section.

5. Parking for the new medical use is provided pursuant to the requirements of section 10-3-2730 of this chapter or pursuant to a restriping permit issued before December 16, 2005.

6. No existing floor area may be removed, demolished or vacated to satisfy the parking requirements for a medical use.

7. The medical use complies with the restrictions of the zone or underlying zone.

8. The additional space shall not be occupied by a "specialty clinic" as defined in section 10-3-1604.5 of this article.

9. The building owner has submitted documentation in form and content satisfactory to the Director of Community Development that the proposed medical use meets the conditions of this subsection B.

C. Notwithstanding the provisions of section 10-3-4101 of this chapter, a legal nonconforming medical use located in a building that has been damaged by a disaster to the extent of more than fifty percent (50%) of its replacement value, may be reestablished without application of the Medical Use Overlay Zone, provided the reconstructed building complies with applicable zoning standards, including parking requirements, in place at the time a building permit is issued for the replacement building. In no event shall the amount of floor area occupied by nonconforming medical uses in the replacement building exceed the floor area that would have been permitted in the damaged building. -5-
D. In order to implement the requirements of this section, no building owner shall utilize the provisions set forth in this section to relocate or expand medical uses unless the building owner has submitted documentation to the Director of Community Development, in form and content satisfactory to the Director, documenting the amount of floor area occupied by legally permitted medical uses on February 11,2011. Such documentation shall be provided no later than August 11, 2011, or the provisions of this section shall not be available to the building owner. This date may be extended by the Director. Additionally, if the submitted documentation includes any false statements or misrepresentations, then the building owner shall not be able to utilize the provisions of this section.

E. The City Council may, by resolution, establish fees for reviews and approvals required by this section.

F. Notwithstanding any other provision in this section, a cosmetic spa permitted pursuant to section 10-3-1620.2 of this article is not subject to the regulations of this section.

G. Interim Allowance for the Establishment of New Medical Uses:

Notwithstanding any other provision in this section, conversion of existing commercial spaces that have received certificates of occupancy from the city may be converted to a medical use, as defined in section 10-3-100 of this chapter upon meeting the following conditions:
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1. The building is located on property in one of the following commercial zones: C-3, C-3T-1, C-3T-2, C-3T-3, C-R-PD, C-R, C-3A, C-3B, or E-O-PD.

2. The medical use is not located on the ground floor of the building.

3. Notwithstanding the provisions contained in Article 27 of this code, Parking for medical uses established under the interim regulations contained in this Section G shall require one parking space per 350 square feet of floor area.

4. No existing floor area may be removed, demolished or vacated to satisfy the parking requirements for a medical use.

5. The additional space shall not be occupied by a "specialty clinic" as defined in section 10-3-1604.5 of this article.

6. The applicant has submitted documentation in form and content satisfactory to the Director of Community Development demonstrating that the proposed medical space has been leased to a medical tenant at the time of application for a building permit, and if required by the City's tax regulations, that the medical tenant has an active business tax license under Tax Classification C with the Finance Department and has paid all of the applicable fees for such license. "
Section 4: The City Council hereby amends Section 10-3-2730 of Article 27 of Chapter 3 of Title 10 of the Beverly Hills Municipal Code as follows:
"10-3-2730: PARKING; REQUIREMENTS:

A. At the time of the erection of a structure or the establishment of a use, there shall be provided and thereafter maintained off street parking facilities to accommodate the motor vehicles used by the occupants, customers, clientele, and employees of such structure or use as provided in this article. Such off street parking spaces shall be used exclusively for off street parking purposes. For any structure or use enlarged or increased in capacity, additional parking facilities shall be required only for such enlargement or increase.

However, any interior alteration or interior enlargement of an existing structure or use, other than a dwelling, shall not require additional parking to be provided if the alteration or enlargement does not increase the total parking requirement for all uses in the structure by more than two (2) spaces above the amount of parking required for the entire structure on May 22, 1970.

B. The aggregate amount of required parking space for each type of use shall be not less than the following:

Type Of Use Required Spaces

1. Hotels 1 space per rentable room or unit

2. Theaters, auditoriums, and
public assembly areas with fixed
seats, including, but not limited to,
churches and schools above the
elementary level
1 space per 4 seats

3. Elementary schools and
childcare uses other than family
daycare homes
1 space per classroom

4. Public assembly areas without
fixed seats
1 space per 28 square feet of such area

5. Eating and bar facilities located
in the Business Triangle
1 space per 350 square feet of floor area

6. Eating and bar facilities located
outside the Business Triangle that
are less than 3,000 square feet
1 space per 350 square feet of floor area

7. Open air dining on public
property and on privately owned
portions of the Robertson
Boulevard sidewalk
No additional parking required

8. Open air dining on private
property
Parking shall be provided as required for indoor dining pursuant to this section except that the planning
commission may establish parking requirements for
open air dining areas that are different than those set forth in this section if the planning commission
determines that the open air dining area will generate a need for parking different than the amount of parking
required by this section or the planning commission
determines that parking demand will be met by means
other than those means specified in this section

9. Eating and bar facilities not
governed by subsections B5
through B8 of this section
1 space per 350 square feet of floor area for the first 3,000 square feet of such area and 1 space per 100
square feet of floor area in excess of 3,000 square feet.

However, 25 percent of the spaces required to be
provided for a building or structure by subsections B1
and B11 of this section may also be applied toward the
requirements of this subsection

10. Commercial uses not otherwise
specified in this section
1 space per 350 square feet of floor area

11. Medical offices as defined in
section 10-3-100 of this chapter,
including all areas devoted to
administrative or reception
purposes
1 space per 200 square feet of floor area; provided
buildings constructed before December 6,1989, that
received building permits before December 16, 2005, to
restripe parking areas to increase the number of parking spaces and permit additional medical floor area in the
building, shall maintain on site free validated valet
parking for all medical patrons and maintain posted
signage in the parking garage and in or adjacent to all medical offices indicating the availability of free
validated valet parking for medical office patrons as
required by the zoning code at the time such projects
were permitted. Any building area converted to medical
use on or after December 16, 2005, which relies on a
valid restripe permit shall also comply with the above
requirements.

Any medical uses established pursuant to the regulations set forth in Subsection G of 10-3-1620.1 shall require 1 space per 350 square feet of floor area.

12. Manufacturing uses 1 space per 500 square feet of floor 2irea

13. Warehouse uses 1 space per 1,500 square feet of floor area

14. Exercise club 1 space per 100 square feet of floor area

15. Private training centers 1 space per 200 square feet of floor area. Provided, however, that if a private training center of more than 2,000 square feet of floor area is located in a building which has at least 1 parking space per 350 square feet of floor area, then the planning commission, as part of the issuance of a conditional use permit, may reduce the
amount of required parking for a private training center to an amount no less than 1 parking space per 350 square feet of floor area. The planning commission shall not,
however, approve any reduction in the required parking
unless the planning commission determines that such
reduction will not unreasonably burden the parking
supply of the building
16, Medical laboratories as defined
under section 10-3-100 of this
chapter
1 space per 200 square feet of floor area. Buildings
constructed on or after July 1,1999, may provide
parking for medical laboratory uses at a ratio that is less than 1 space per 200 square feet of floor area upon the granting of a minor accommodation pursuant to the
minor accommodation requirements set forth in this
subsection and provided the parking ratio for the
building is at least 1 space per 350 square feet of floor area. Buildings constructed before July 1,1999, which
have an existing parking ratio that satisfies the city's parking requirements in effect on February 21, 1961,
may satisfy the 1 space per 200 square feet of floor
area requirement for any new medical laboratory use by
any combination of tandem and compact spaces and
restriping provided an on site parking attendant is
present at all times during which access to the site is permitted. Any building constructed before July 1, 1999, which has an existing parking ratio that satisfies the
city's parking requirements in effect on February 21,
1961, but cannot satisfy the 1 space per 200 square feet of floor area requirement as provided by this subsection may convert commercial space to medical laboratory
space upon the granting of a minor accommodation
pursuant to the minor accommodation requirements set
forth in this subsection.

Any medical uses established pursuant to the regulations set forth in Subsection G of 10-3-1620.1 shall require 1 space per 350 square feet of floor area.
a. Minor Accommodation: Where specified reduced parking for medical laboratory uses may be authorized under this subsection through the granting of a minor accommodation, the director of
planning and community development may, pursuant to
the provisions of article 36 of this chanter, permit such reduced parking provided the director of planning and
community development finds that the number of
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parking spaces in the building has been maximized to the extent feasible and that the proposed reduction in
parking will not have a significant adverse effect on
traffic and parking in the area due to any of the
following:
(1) The size or configuration of the building or portion thereof housing the proposed medical laboratory;
(2) The number and size of the loading areas on the site; (3) The nature and number of deliveries for the proposed medical laboratory;
(4) The proximity of the proposed medical laboratory to schools and parks;
(5) The proximity of the proposed medical laboratory to neighboring residential areas;
(6) The existing concentration of other commercial
operations in the vicinity of the proposed medical
laboratory;
(7) The hours of the operation for the proposed medical laboratory
b. General Prohibition: Notwithstanding any of the provisions of this subsection B17, under no circumstances shall a building located
within 100 feet of a public school or active park be
permitted to provide parking at a ratio of less than 1
regular stall size space per 200 square feet of floor area Section 5. Severability.

If any section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance or the application thereof to any person or place, is for any reason held to be invalid or unconstitutional by the final decision of any court of competent jurisdiction, the remainder of this Ordinance shall be and remain in full force and effect. -11-
Section 6. Approval and Extension of Ordinance
This Ordinance, being an Interim Ordinance adopted as an urgency measure for the immediate protection of the public safety, health, and general welfare, containing a declaration of the facts constituting the urgency, and passed by a minimum four-fifths (4/5) vote of the City Council, shall take effect immediately upon its adoption and shall continue in effect for a period of not longer than forty-five (45) days. After notice pursuant to Section 65090 of the California Government Code and public hearing, the City Council may extend the effectiveness of this Interim Ordinance as provided in Government Code Section 65858.

Section 7. Publication.

The City Clerk shall certify to the adoption of this Ordinance and shall cause this Ordinance and his certification, together with proof of publication, to be entered in the Book of Ordinances of the Council of this City.

ADOPTED: November 17, 2020
AT^ST:
(SEAL)

HUMA AHMED
City Clerk
APPROVED AS TO FORM:

LAURENCE S. WIENER
City Attorney
LESTER J. FRIEDMAN
Mayor of the City of Beverly Hills,
California
APPROVED AS TO CONTENT;
georgechavez
City Manager
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Attachment 2
Ordinance No. 20-O-2831
ORDINANCE NO. 20-O- 2831

AN ORDINANCE OF THE CITY OF BEVERLY HILLS
EXTENDING URGENCY ORDINANCE NO. 20-O-2826

MODIFYING MEDICAL USE REGULATIONS FOR CERTAIN

COMMERCIAL ZONES IN THE CITY, AND DECLARING

THE URGENCY THEREOF

THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS HEREBY ORDAINS AS FOLLOWS:

Section 1. Legislative Findings.

The City Council of the City of Beverly Hills finds and determines that the ongoing COVID-19 global pandemic has required significant changes to the operations of businesses in the restaurant, retail, office, and service industries. This shift in operations has resulted in negative economic impacts, including the closure of businesses in the City of Beverly Hills, the substantial shrinkage of revenue in certain sectors, and the loss of jobs. The demand for brickand-mortar office and commercial spaces has decreased, and further economic changes affecting commercial leasing demand are expected, while the demand for medical use space has remained more consistent and medical uses are more insulated from economic downturns. The City Council finds and determines that modifying the medical use restrictions will provide commercial landlords with greater flexibility to lease vacated commercial spaces, which may enable greater economic stability during the ongoing COVID-19 pandemic. Any vacant commercial space and associated blight resulting from declining businesses would create significant risk to the public, health, safety and general welfare of the City. As such, the City Council wishes to consider changes to the medical use regulations in commercial areas of the City.

Because the public process of adopting these ordinances may be lengthy, and to prevent the increase in vacant commercial spaces in the intervening period, the City Council adopted Ordinance No. 20-O-2826, an interim ordinance that took effect immediately on November 17, -1-
B0785-0009\2480338v 1 .doc
2020, (the "Interim Ordinance"). The Interim Ordinance changes the medical use regulations for commercial areas of the City.

Section 2. Authority,
Pursuant to Government Code Section 65858, the City Council may adopt, as an urgency measure, an interim ordinance that prohibits any uses that may be in conflict with a contemplated zoning proposal that the City Council is considering, studying, or intends to study within a reasonable period of time. After public notice, the City Council may extend the interim ordinance by a period of ten (10) months and fifteen (15) days, pursuant to Government Code Section 65858. Notice of the public hearing at which the City Council considered adopting this extension ordinance was duly published on November 27, 2020 in the Beverly Hills Courier^ and on November 26, 2020 in the Beverly Hills Weekly.

Section 3. Urgency Findings,
The City Council finds and determines that failing to implement immediate changes to its medical use regulations in commercial areas of the City would result in an immediate threat to the public health, safety, and general welfare. As described in Section 1, the COVlD-19 pandemic and the resulting closures of non-essential businesses and capacity limits on businesses is affecting the viability of City businesses and the City faces an increase in vacant commercial space.

Such business closures and capacity limits and the resulting economic impact are affecting landlords' ability to rent out vacant commercial space, which may cause blight and economic instability, and thus places the public health, safety, and general welfare at risk during the Council's review and consideration of permanent regulations. To preserve the public health, safety, and general welfare, the City Council declares it necessary that this Ordinance take immediate effect to prevent these harms.
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B0785-0009\2480338vl .doc
Section 4. CEOA Findings,
The City Council hereby finds that it can be seen with certainty that there is no possibility that the adoption and implementation of the Interim Ordinance or extension thereof may have a significant effect on the environment. This extension of the Interim Ordinance does not authorize construction and, in fact, represents minor alterations in land use limitations and does not result in any changes in land use or density in order to protect the public health, safety, and general welfare. This extension is therefore exempt from the environmental review requirements of the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulations.

Section 5. Severabilitv.

Section 6. Approval and Extension of Ordinance.

This Ordinance, adopted as an urgency measure for the immediate protection of the public safety, health, and general welfare, containing a declaration of the facts constituting the urgency, and passed by a minimum four-fifths (4/5) vote of the City Council, shall take effect immediately upon its adoption and shall amend and extend the effect of the Interim Ordinance for a period often (10) months and fifteen (15) days. After notice pursuant to Section 65090 of the California Government Code and public hearing, the City Council may extend the effectiveness of the Interim Ordinance for an additional one year period, as provided in Government Code Section 65858.

B0785-0009\2480338v 1 .doc
Section 7. Publication.

The City Clerk shall certify to the adoption of this Ordinance and shall cause this Ordinance and her certification, together with proof of publication, to be entered in the Book of Ordinances of the Council of this City.

ADOPTED: December 8, 2020
ATTEST: ->■
UMA dWjpEAL)

HUMA AHMED
City Clerk
LESTER J. FRIEDMAN
Mayor of the City of Beverly Hills,
California
APPROVED AS TO FORM:

LAURENCE S. WIENER
City Attorney
APPROVED AS TO CONTENT:

GEORG&C^iAVEZ
City Manager
lEALY KEENE
Jctor of Community Development
-4-
B0785-0009\2480338vl ,doc
Attachment 3
Ordinance No. 21-O-2852
ORDINANCE NO. 21-0- 2852
-------

AN ORDINANCE OF THE CITY OF BEYERL Y HILLS EXTENDING
URGENCY ORDINANCE NO. 20-0-2826 MODIFYING MEDICAL

USE REGULATIONS FOR CERTAIN COMMERCIAL ZONES IN

THE CITY, AND DECLARING THE URGENCY THEREOF

THE CITY COUNCIL OF THE CITY OF BEYERL Y HILLS HEREBY ORDAINS AS FOLLOWS:

Section 1. Legislative Findings.

The City Council of the City of Beverly Hills finds and determines that the ongoing COYID-19 global pandemic has required significant changes to the operations of businesses in the restaurant, retail, office, and service industries. This shift in operations has resulted in negative economic impacts, including the closure of businesses in the City of Beverly Hills, the substantial shrinkage of revenue in certain sectors, and the loss of jobs. The demand for brick-and-mortar office and commercial spaces has decreased, and further economic changes affecting commercial leasing demand are expected, while the demand for medical use space has remained more consistent and medical uses are more insulated from economic downturns. The City Council finds and determines that modifying the medical use restrictions will provide commercial landlords with greater flexibility to lease vacated commercial spaces, which may enable greater economic stability during the ongoing COYID-19 pandemic. Any vacant commercial space and associated blight resulting from declining businesses would create significant risk to the public, health, safety and general welfare of the City. As such, the City Council wishes to consider changes to the medical use regulations in commercial areas of the City. -1-
80785-0001 \2587231v1.doc
Because the public process of adopting these ordinances may be lengthy, and to prevent the increase in vacant commercial spaces in the intervening period, the City Council adopted Ordinance No. 20-0-2826, an interim ordinance that took effect immediately on November 17, 2020, (the "Interim Ordinance"). The Interim Ordinance changes the medical use regulations for commercial areas of the City. The City Council subsequently extended the Interim Ordinance via adoption of Ordinance No. 20-0-2831, for an additional ten (10) months and fifteen (15) days.

Section 2. Authority.

Pursuant to Government Code Section 65858, the City Council may adopt, as an urgency measure, an interim ordinance that prohibits any uses that may be in conflict with a contemplated zoning proposal that the City Council is considering, studying, or intends to study within a reasonable period of time. After public notice, the City Council may extend the interim ordinance by a period of one year (12 months), pursuant to Government Code Section 65858. Notice of the public hearing at which the City Council considered adopting this extension ordinance was duly published on October 15, 2021 in the Beverly Hills Courier, and on October 21, 2021 in the Beverly Hills Weekly.

Section 3. Urgency Findings.

The City Council finds and determines that failing to implement immediate changes to its medical use regulations in commercial areas of the City would result in an immediate threat to the public health, safety, and general welfare. As described in Section 1, the COVID-19 pandemic and the resulting closures of non-essential businesses and capacity limits on businesses is affecting the viability of City businesses and the City faces an increase in vacant commercial space. -2-
B0785-0001 \2587231vl.doc
Such business closures and capacity limits and the resulting economic impact are affecting landlords' ability to rent out vacant commercial space, which may cause blight and economic instability, and thus places the public health, safety, and general welfare at risk during the Council's review and consideration of permanent regulations. To preserve the public health, safety, and general welfare, the City Council declares it necessary that this Ordinance take immediate effect to prevent these harms.

Section 4. CEQA Findings.

The City Council hereby finds that it can be seen with certainty that there is no possibility that the adoption and implementation of the Interim Ordinance or extension thereof may have a significant effect on the environment. This extension of the Interim Ordinance does not authorize construction and, in fact, represents minor alterations in land use limitations and does not result in any changes in land use or density in order to protect the public health, safety, and general welfare.

This extension is therefore exempt from the environmental review requirements of the California Environmental Quality Act (CEQA) pursuant to Section 1506l(b)(3) and 15305 of Title 14 of the California Code of Regulations.

Section 5. Severability.

Section 7. Publication.

ADOPTED: October 26, 2021
City Clerk
APPROVED AS TO FORM:

LAURENCE S. WIENER
City Attorney
80785-0001 \2587231v1.doc
-4-
ROBERT
~(J~ WUNDERLICH
Mayor of the City of Beverly Hills,
California
APPROVED AS TO CONTENT:

City Manager
Attachment 4
City Council Agenda Report – October
26, 2021 (without attachments)

AGENDA REPORT
Meeting Date: October 26, 2021
Item Number:

To: Honorable Mayor & City Council
From: Ryan Gohlich, AICP, Director of Community Development Timothea Tway, AICP, City Planner
Subject: AN ORDINANCE OF THE CITY OF BEVERLY HILLS EXTENDING URGENCY ORDINANCE NO. 20-O-2826 MODIFYING MEDICAL USE

REGULATIONS FOR CERTAIN COMMERCIAL ZONES IN THE CITY,

AND DECLARING THE URGENCY THEREOF
Attachments: 1. Draft Ordinance

2. Interim Urgency Ordinance No. 20-O-2826

3. Ordinance No. 20-O-2831

4. City Council Study Session Report – September 21, 2021 (without attachments)

RECOMMENDATION
Staff recommends the City Council extend the urgency ordinance pertaining to medical use regulations for one year (12 months) beyond its current November 16, 2021, expiration date.

INTRODUCTION
At its November 17, 2020 meeting, the City Council voted to adopt an urgency ordinance that amended existing medical use regulations for commercial areas of the city. The City Council found that the failure to implement immediate changes to the medical use regulations pertaining to the commercial areas of the city would result in an immediate threat to the public health, safety, and general welfare due to the fact that the COVID-19 pandemic and the resulting closures of nonessential businesses and capacity limits on businesses affected the viability of City businesses and the City faced an increase in vacant commercial space. These closures and capacity limits impacted landlords’ ability to rent out vacant spaces, which could have resulted in blight and economic instability placing the public health, safety and general welfare at risk. The regulations adopted were meant to allow the conversion of existing commercial space to medical uses in order to provide flexibility for landlords during the COVID-19 pandemic and associated economic downturn. The urgency ordinance adopted on November 17, 2020 (Attachment 2) took effect immediately and was in effect for an initial 45-day period, until January 1, 2021.

Meeting Date: October 26, 2021

Page 2 of 4 ends

On December 8, 2020, the City Council adopted Ordinance No. 20-O-2831 (Attachment 3) to extend the urgency ordinance for an additional ten (10) months and fifteen (15) days to allow the urgency regulations to remain in place for a one-year period, during which the city would continue to monitor reliance on the ordinance and the amount of medical office conversions completed in the city to ensure that an imbalance of uses is not created.

Staff will return at a future City Council study session with updated medical conversion data prior to the expiration of the medical urgency ordinance (November 16, 2022) to facilitate a discussion and receive direction regarding the possibility of adopting permanent changes to the medical use regulations.

DISCUSSION
Prior to the adoption of the urgency ordinance, the City had adopted a number of permanent ordinances that limited the amount of medical uses that could be maintained and established in commercial areas. These restrictions were put in place largely due to concerns regarding overconcentration of medical uses and the perceived negative secondary impacts that these uses could cause (such as traffic and parking impacts, lack of pedestrian activity in commercial areas, impacts to City revenue based on the way medical uses are taxed, and the lack of office space for other uses). Under the existing permanent regulations, new medical uses can be established under two scenarios:
 A registered medical building can add up to 6,000 square feet of medical uses through a by-right building permit process. The new medical space would have to provide one parking space for each 200 square feet of medical use; or  Any building located in most commercial zones can request to apply the “medical use overlay zone” to a property. This requires Planning Commission and City Council approval, and the decision makers must find that: the proposed medical use would not have any negative impacts, and the medical use would provide public benefits that could offset the long-term impacts of additional medical uses in the commercial area. The new medical space must provide one parking space for each 200 square feet of medical use.

While the aforementioned medical restrictions are still in place, the urgency ordinance relaxed many of the restrictions that made it otherwise difficult or prohibitive to add certain medical uses to existing commercial buildings. However, if a proposed medical use is not able to meet the relaxed standards, outlined below, they are still able to establish a new medical use based on the existing permanent regulations.

The current urgency ordinance allows for the establishment of new medical uses throughout the city provided the proposed medical use complies with the following requirements:

Meeting Date: October 26, 2021

Page 3 of 4 ends

 The project site is located in the C-3, C-3T-1, C-3T-2, C-3T-3, C-R-PD, C-R, C3A, C-3B, or E-O-PD zones.  The medical use is not located on the ground floor of a building.  New medical uses are required to be parked at one parking space per 350 square feet of floor area. This is the same parking requirement as general commercial/retail, and essentially allows medical uses to occupy existing commercial spaces without requiring the provision of additional parking.  No existing floor area shall be removed, demolished, or vacated to provide parking to satisfy the parking requirements for a medical use.  The additional space shall not be occupied by a “specialty clinic” as defined in Section 10-3-1604.5 of the Beverly Hill Municipal Code. This means that the urgency ordinance does not allow the establishment of new surgical clinics or sleep disorder clinics, only medical offices and medical laboratories.  The applicant has submitted documentation in form and content that is satisfactory to the Director of Community Development demonstrating that the proposed medical space has been leased to a medical tenant at the time of application for a building permit, and if required by the City’s tax regulations, that the medical tenant has an active business tax license under Tax Classification C with the Finance Department and has paid all of the applicable fees for such license.

Since the adoption of the urgency ordinance, the Community Development Department has received numerous inquiries from property owners, commercial brokers, and physicians regarding the process for establishing new medical uses. A significant number of inquiries also include questions about whether the City Council will consider any permanent changes to the medical use regulations, and whether it is possible to allow greater flexibility with regard to their location on the ground floor and the types of medical uses allowed (i.e. to allow more expanded surgery uses). In addition, staff has received inquiries regarding what will happen to the medical offices that were established under the relaxed standards should the Council decide not to extend the urgency ordinance.

To date, approximately 19 requests to convert an existing office space to a medical use have been submitted to the Community Development Department. Of those, eight requests have completed the conversion process, resulting in approximately 11,507 square feet of new medical floor area in the city. Eleven requests are still in the review process and represent approximately 36,829 square feet of potential new medical floor area. One new request was submitted since the September 21, 2021 City Council study session discussion on the medical urgency ordinance.

Prior to adoption of the urgency ordinance, the City’s commercial building inventory included approximately 1.4 million square feet of medical office space or 20% of all commercial square footage. Based on these statistics, the urgency ordinance has resulted in less than 1% of the City’s total commercial building inventory being converted to medical offices, or an approximately 3% increase in medical office space within the City. Although the urgency ordinance appears to have been successful in creating flexibility for filling vacant commercial space, the urgency ordinance also does not appear to have resulted in a dramatic surge in medical office space thus far.

Meeting Date: October 26, 2021

Page 4 of 4 ends

PUBLIC NOTICE
This item was noticed in compliance with local and state regulations. A notice regarding this proposed action was published in two newspapers of local circulation: on October 15, 2021 in the Beverly Hills Courier, and on October 21, 2021 in the Beverly Hills Weekly. A list of interested parties for this topic were also notified via email.

PUBLIC COMMENT
Staff has not received any written comments on this topic.

ENVIRONMENTAL REVIEW
The ordinance has been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA, Public Resources Code Sections 21000 et seq.), the State CEQA Guidelines (California Code of Regulations, Title 14, Sections 15000 et seq.), and the environmental regulations of the City. Upon review, the project appears to be exempt from CEQA regulations, pursuant to Section 15061(b)(3) of the State CEQA Guidelines, which is applicable to projects for which it can be seen with certainty that there is no potential to have a significant effect on the environment. In addition, the ordinance appears to qualify for a Class 5 Categorical Exemption (Minor Alterations in Land Use Limitations) in accordance with the requirements of Section 15305 of the State CEQA Guidelines, which is applicable to projects with minor alterations to land use limitations in areas with an average slope of less than 20% and do not result in changes to land use or density. Since the ordinance does not authorize construction and consists of minor changes to land use limitations that do not make changes to land use or density allowed, these exemptions are applicable. Accordingly, the City Council will consider a recommendation to find the ordinance exempt from further environmental review under CEQA pursuant to Section 15061(b)(3) and 15305.

FISCAL IMPACT
Extension of the urgency ordinance could have a fiscal impact on the City. Due to the way business taxes are gathered and categorized, it can be difficult to fully analyze the potential fiscal impact of changes. In general, if regulations are changed to allow more medical space, tax revenue in commercial areas may decrease if medical offices replace uses that generate higher business tax revenue such as real estate firms, talent agencies, and high-end retail or restaurants. However, in the event that medical uses occupy currently vacant commercial spaces or replace businesses with lower/equal business tax revenue (such as Class A businesses), then tax revenues in commercial areas could increase. There may be secondary fiscal benefits to expanded medical uses, such as the potential for medical tourism to increase and create demand for hotel stays and retail/restaurant patronage. Furthermore, given the current circumstances of the pandemic and the resulting increase of commercial vacancies, medical uses may provide an increase in business tax revenue if they occupy such spaces.

Ryan Gohlich, AICP,
Director of Community Development
Approved By
Attachment 5
City Council Study Session Report –
September 21, 2021 (without
attachments)

Page 1 of 4 ends

STAFF REPORT
Meeting Date: September 21, 2021
To: Honorable Mayor & City Council
From: Ryan Gohlich, AICP, Director of Community Development Subject: Update Regarding the Urgency Ordinance Modifying Medical Use Regulations for Certain Commercial Zones in the City
Attachments: 1. Urgency Ordinance No. 20-O-2826

2. Ordinance No. 20-O-2831
(Ordinance Extending Urgency Ordinance No. 20-O-2826)

The regulations adopted were meant to allow medical uses to establish in existing commercial buildings in order to provide flexibility for landlords during the COVID-19 pandemic and associated economic downturn. The urgency ordinance adopted on November 17, 2020 (Attachment 1) took effect immediately and was in effect for an initial 45-day period, until January 1, 2021. On December 8, 2020, the City Council adopted Ordinance No. 20-O-2831 (Attachment 2) to extend the urgency ordinance for an additional ten months and fifteen days to allow the urgency regulations to remain in place for a one-year period, during which the city would continue to study potential permanent modifications to the ordinance.

The purpose of this report is to discuss the implementation of the urgency ordinance and to seek direction from City Council on whether to extend the urgency ordinance for an additional year.

Meeting Date: September 21, 2021

Page 2 of 4 ends

The current urgency ordinance allows for the establishment of new medical uses throughout the city provided the proposed medical use complies with the following requirements:
 The project site is located in the C-3, C-3T-1, C-3T-2, C-3T-3, C-R-PD, C-R, C-3A, C-3B, or E-O-PD zones.

 The medical use is not located on the ground floor of a building.  New medical uses are required to be parked at one parking space per 350 square feet of floor area. This is the same parking requirement as general commercial/retail, and essentially allows medical uses to occupy existing commercial spaces without requiring the provision of additional parking.
 No existing floor area shall be removed, demolished, or vacated to provide parking to satisfy the parking requirements for a medical use.
 The additional space shall not be occupied by a “specialty clinic” as defined in Section 10- 3-1604.5 of the Beverly Hill Municipal Code. This means that the urgency ordinance does not allow the establishment of new surgical clinics or sleep disorder clinics, only medical offices and medical laboratories.

Meeting Date: September 21, 2021

Page 3 of 4 ends

 The applicant has submitted documentation in form and content that is satisfactory to the Director of Community Development demonstrating that the proposed medical space has been leased to a medical tenant at the time of application for a building permit, and if required by the City’s tax regulations, that the medical tenant has an active business tax license under Tax Classification C with the Finance Department and has paid all of the applicable fees for such license.

To date, approximately 18 requests to convert an existing office space to a medical use have been submitted to the Community Development Department. Of those, eight requests have completed the conversion process, resulting in approximately 11,100 square feet of new medical floor area in the city. Ten requests are still in the review process and represent approximately 32,200 square feet of potential new medical floor area.

FISCAL IMPACT
An extension of the urgency ordinance could have a fiscal impact on the City. Due to the way business taxes are gathered and categorized, it can be difficult to fully analyze the potential fiscal impact of changes. In general, if regulations are changed to allow more medical space, tax revenue in commercial areas may decrease if medical offices replace uses that generate higher business tax revenue such as real estate firms, talent agencies, and high-end retail or restaurants.

However, in the event that medical uses occupy currently vacant commercial spaces or replace businesses with lower/equal business tax revenue (such as Class A businesses), then tax revenues in commercial areas could increase. There may be secondary fiscal benefits to expanded medical uses, such as the potential for medical tourism to increase and create demand for hotel stays and retail/restaurant patronage. Furthermore, given the current circumstances of the pandemic and the resulting increase of commercial vacancies, medical uses may provide an increase in business tax revenue if they occupy such spaces.

Meeting Date: September 21, 2021

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RECOMMENDATION
Staff recommends the City Council provide direction to staff regarding whether a one-year extension of the existing urgency ordinance modifying medical use regulations for certain commercial zones in the city should be brought forward prior to expiration of the current urgency ordinance.

Ryan Gohlich, AICP
Director of Community Development
Approved By
Attachment 6
City Council Study Session Report –
November 17, 2020 (without
attachments)

STAFF REPORT
Meeting Date: November 17, 2020
To: Honorable Mayor & City Council
From: Ryan Gohlich, AICP, Assistant Director of Community Development
Subject: Request by City Council / Planning Commission Liaison for Discussion on Medical Use Regulations
Attachments: 1. September 15, 2020, City Council Staff Report

INTRODUCTION
The City Council / Planning Commission Liaison Committee met on August 19, 2020 and discussed the medical use regulations in the City. At the conclusion of the discussion, the Liaison Committee requested that staff bring forward a study session on the topic of medical uses at a City Council meeting. Subsequently, the City Council held a study session on the item at its meeting on September 15, 2020. At this meeting, the City Council provided direction to staff to return with additional information on medical uses as well as an urgency ordinance to amend the current medical use regulations.

Additional information on medical uses is included in this staff report, as well as a summary of recommended changes to include in an urgency ordinance, which is scheduled for consideration at the formal City Council meeting on November 17, 2020.

FISCAL IMPACT
The changes recommended in the draft urgency ordinance that are outlined in this staff report could have a fiscal impact on the City. Due to the way business taxes are gathered and categorized, it can be difficult to fully analyze the potential fiscal impact of changes. In general, if regulations are changed to allow more medical space, tax revenue in commercial areas may decrease to the extent that medical offices replace uses that generate higher business tax revenue such as real estate firms, talent agencies, and high-end retail or restaurants. However, in the event that medical uses occupy currently vacant commercial spaces or replace businesses with lower/equal business tax revenue (such as Class A businesses), then tax revenues in commercial areas could increase. There may be secondary fiscal benefits to expanded medical uses, such as the potential for medical tourism to increase and create demand for hotel stays and retail/restaurant patronage, with certain types of medical uses. For example, if short stays in the City are necessary for scheduled surgeries (elective or not), these patients will often patronize local hotels and restaurants during their stay, as will their family or companions accompanying them. In addition, patient visits for check-up and routine appointments with general practitioners, dentists, or wellness and mental health Meeting Date: November 17, 2020

Page 2 of 13 ends

practitioners, the majority of which do not affect a patients’ physical condition, may result in patients patronizing the City’s retail and restaurant establishments during their visits.

Furthermore, given the current circumstances of the COVID-19 pandemic and the resulting increase in commercial vacancies, medical uses may provide an increase in business tax revenue if permitted to occupy such spaces. Allowing more medical uses may also be advantageous to the City at this time since medical uses are generally considered to be better insulated from economic recessions due to consistent demand.

In addition, allowing more medical space can help ensure that there are adequate medical services available to the public, particularly in light of increased pressures from the COVID-19 pandemic.

BACKGROUND
Existing Medical Use Regulations
Since 1989, the City has adopted a number of ordinances that limit the amount of medical uses that can be maintained and established in commercial areas of the City. A complete legislative history can be found in Attachment 1. These restrictions were put in place largely due to concerns about overconcentration of medical uses in the City and the perceived negative secondary impacts that these uses could cause (such as traffic and parking impacts, lack of pedestrian activity in commercial areas, impacts to City revenue based on the way medical uses are taxed, and the lack of office space for other uses).

Current regulations reflect the policy changes that were adopted over time by various ordinances. The following is a summary of current medical use regulations:
 Medical uses require one parking space for every 200 square feet of medical use. The parking requirement for other office spaces in the City is one space for every 350 square feet of office use.
 Building owners were asked to “register” their medical buildings with the City in 2011. Through this process, staff verified the amount of medical uses that were present in the building at that time, and a registered building could retain the rights to that amount of medical space into the future.  Medical offices that were not registered with the City are now considered to be legally nonconforming. When a medical tenant leaves this type of space, a new medical tenant can occupy the space as long as there is no intervening conforming tenant or use (such as a lawyer or accountant). Once the space is leased to a non-medical tenant, a medical tenant cannot reoccupy the space.  New medical uses are not considered a “by-right” use in the City. In order to establish additional medical space within a building, there are two options:
o A registered medical building may add up to 6,000 square feet of medical uses through a by-right building permit process. The new medical space must provide one parking space for each 200 square feet of medical use. o Any building located in most commercial zones can request to apply the “medical use overlay zone” to a property. This requires Planning Commission and City Council approval, and the decision makers must find that: the proposed medical use would not have any negative impacts, and the medical use would provide public benefits that could offset the long-term impacts of additional medical uses in the commercial area. The Meeting Date: November 17, 2020

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new medical space must provide one parking space for each 200 square feet of medical use.

As discussed at the September 15, 2020 City Council study session, the existing regulations have generally created challenges for tenants seeking to establish new medical uses in the City. Only one application for the medical use overlay zone has been approved by the City since 2011, when this requirement was put in place.

City Council Discussion and Input from September 15, 2020 On September 15, 2020, staff presented information to the City Council about existing regulations regarding medical uses in the City. At this meeting, the City Council discussed a potential relaxation of the medical use ordinance regulations in order to help mitigate the economic impacts of the COVID-19 pandemic. The City Council agreed that the current medical use ordinance has not kept up with a changing business environment, in which rideshare options, telework, and telemedicine are more prevalent, and the health and wellness industry has expanded to incorporate a wide range of uses and services. In addition, the City Council noted that the existing medical regulations may have unintentionally created negative impacts for medical providers in the City, such as a de facto ownership monopoly of medical space and artificially high rental rates due to the mostly static supply of medical office space. The City Council then provided direction to staff to return at a future meeting with more information about medical uses (including financial information as well as information on medical uses in other jurisdictions). This information is summarized in the Discussion section below. Further, the City Council provided general direction regarding contents that should be incorporated into an urgency ordinance for consideration by the City Council, noting that a longer term study may be required after the urgency ordinance period of one year.

These comments included:
 Create an urgency ordinance to be enacted for a one-year period;  Consider reducing the parking requirement for medical uses to the general parking requirement for other commercial spaces in the City (1 space per 350 square feet) in order to remove the parking barrier for medical uses to occupy existing spaces in the City;
 Explore allowing new medical uses to occupy spaces that were not previously occupied by medical uses nor registered as medical spaces in order to provide flexibility for physicians as well as building owners during the one-year period;  Limit the provisions of the urgency ordinance to apply to certain types of medical uses, such as primary care physicians, and exclude others such as surgery centers;
 Consider limiting the total amount of medical square footage added through the urgency ordinance either through an individual or aggregate limit;  Prohibit medical uses located on the ground floor of buildings in order to preserve a pedestrian-oriented business and retail environment; and  Consider methods to track the medical uses permitted during the temporary period when the urgency ordinance is effective.

Meeting Date: November 17, 2020

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DISCUSSION
This Discussion section provides additional information on medical uses, as requested by the City Council on September 15, and also provides a brief summary of the changes to the medical regulations that are included in the draft urgency ordinance for Council review at this evening’s formal City Council meeting. Staff is seeking City Council input on the draft urgency ordinance and can amend the urgency ordinance as directed prior to the formal City Council meeting this evening if necessary.

Medical Uses and Business Tax
Commercial uses in Beverly Hills are taxed differently depending on the business tax category to which they belong. The following table provides information on the business tax categories that are relevant to this discussion for commercial uses in the City.

Table 1. Business Tax Rate Information
Business Tax
Classification
Business Type Taxation Details
Classification A
(“Class A”)
Business Services
Details: Includes business and personal services, such as interior design, hair salons, property maintenance,
massage/spa, etc.

Base tax of $283 for the
first 2,080 payroll hours
Hourly rate of $0.005919
for additional payroll hours
Classification B
(“Class B”)
Retail, Wholesale, and Manufacturing
Details: Includes retail and restaurant uses
Minimum of $75
$0.00125 per $1.00 of
gross receipts over
$60,000
Classification C
(“Class C”)
Professionals/Semiprofessionals
Details: Professional businesses that require State
licensing to practice such as physicians, attorneys, and accountants, or any person who engages in occupation
requiring technical expertise or higher education.

Classification C-1: Non-professional employees of
Class C businesses
Base tax of $1,571 for the
first 2,080 payroll/billed
hours
Hourly rate of $0.75529 for
additional
professional/semi
professional payroll/billed
hours
C-1: Hourly rate of
$0.15171 for additional
non-professional
payroll/billed hours
Classification F
(“Class F”)
Commercial Property Rental
Details: Paid by either the tenant or the landlord, this tax is based upon the rental rate of the commercial property
$0.02350 per $1.00 of
gross receipts
Meeting Date: November 17, 2020

Page 5 of 13 ends

Classification
G (“Class G”)
Lenders, Brokers, Real Estate Brokers/Offices
Details: Includes real estate firms, consulting firms, talent management, property management companies
Classification G-1: Tax paid based on the commission
of real estate transactions
$0.00350 per $1.00 of
gross receipts
G-1: $0.001 per $1.00
of gross receipts
Medical uses currently fall into the Class C business tax category. Class C taxes are assessed on the number of payroll hours or billed hours worked, which is self-reported.

Staff worked with the Finance Department to research the amount of business tax revenue attributable to medical uses for Fiscal Year (FY) 2019 based on the data used to prepare the Comprehensive Annual Financial Report. In the previous Study Session report, staff estimated that a realistic range for medical Class C tax revenue would be from 34% to 57% of total Class C revenue, or approximately $2.1 million to $3.4 million of the total $6 million Class C revenue. Staff worked with the Finance Department to obtain more specific data regarding the current amounts of medical revenue under the Class C category. As of November 2020, there are 2,035 active businesses registered under the Class C tax category, of which, 1,431 are classified as medical uses (70% of all Class C businesses). The total amount of revenue attributable to these medical businesses is approximately $3.7 million, which comprises approximately 64% of the total tax revenue currently collected under the Class C category (approximately $5.9 million). Although the payments range from $0 (if a credit was applied) to $46,000, the average amount paid by medical businesses was approximately $2,600. This demonstrates that although the majority of medical businesses pay slightly over the minimum amount required for a Class C business, medical business tax revenues under Class C (64%) are more or less commensurate with their proportionate share of the Class C businesses (70%).

However, it is also important to note that medical uses likely contribute tax revenue to other tax categories that are assessed on gross receipts, such as Class B (Retail, Wholesale, and Manufacturing) if the offices sell products to their clients, and Class F (Commercial Property Rental) for the lease of the commercial office space. While the contribution of retail tax revenue from medical offices may be minimal (for example, if a dermatologist sells skincare products), there may be more opportunities for medical uses to incorporate retail sales in comparison to other professional uses. This is especially true if the medical use is a cosmetic spa, which is required to include some amount of retail space as part of the approval process. Since Class F tax revenue is based upon gross receipts for rental of commercial properties, it is possible that medical could contribute a greater amount of Class F tax revenue compared to general commercial offices since the leasing rates tend to be higher for medical space. Based on anecdotal discussions with commercial realtors, medical offices often lease at a premium rate, due to several factors including the desirable location, the lower supply of medical spaces in the City, and the potential convenience of occupying a previously improved medical space with necessary equipment.

To provide a broad strokes comparison of business tax revenues in each category, staff also prepared the following graph (Graph 1), and the following inputs shown in Table 2.

Meeting Date: November 17, 2020

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Graph 1. Business Tax Revenue Scenarios
Table 2. Business Tax Revenue Scenario Inputs
Business Tax Revenue Scenario Inputs
X-Axis Class B Class C
(Professional
and SemiProfessional)
Class C
(NonProfessional)
Class F Class G
Series 1 $1M Gross 2,392 Hrs. 1,664 Hrs. $1M Gross $1M Gross Series 2 $2M Gross 5,252 Hrs. 3,328 Hrs. $2M Gross $2M Gross Series 3 $3M Gross 8,112 Hrs. 4,992 Hrs. $3M Gross $3M Gross Series 4 $4M Gross 10,972 Hrs. 6,656 Hrs. $4M Gross $4M Gross Series 5 $5M Gross 13,832 Hrs. 8,320 Hrs. $5M Gross $5M Gross Series 6 $6M Gross 16,692 Hrs. 9,984 Hrs. $6M Gross $6M Gross Series 7 $7M Gross 19,552 Hrs. 11,648 Hrs. $7M Gross $7M Gross Series 8 $8M Gross 22,412 Hrs. 13,312 Hrs. $8M Gross $8M Gross Series 9 $9M Gross 25,272 Hrs. 14,976 Hrs. $9M Gross $9M Gross The Class C data in the graph reflects a total combined amount of tax revenue that would be paid for both the professional/semi-professional and the non-professional staff in a medical office. Series 1 reflects an office with 1 professional (physician), 1 semiprofessional (trained assistant), and 1 non-professional (administrative employee), and is based on actual payroll hours provided by a practicing dental office. As shown in Table 2, these hours were scaled up proportionately, so Series 2 reflects 2 professionals, 2 semi-professional, and 2 non-professionals, and so on. Although it is possible that group medical practices become more efficient, and require fewer semiprofessional and non-professional staff, it is also possible that physicians share office spaces while having their own dedicated staff persons. While Class B and Class F inputs are most likely lower than actual gross receipts for retail uses and commercial property leasing, the comparison only intends to demonstrate the relative tax revenues for each business tax category, and how the applied rates result in varying revenues (even amongst categories that assess gross receipts). These scenarios demonstrate that Classes B, C, and G result in comparable business tax revenues for the City.

Meeting Date: November 17, 2020

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While it is difficult to provide a true “apples to apples” comparison of business tax revenue without more detailed building and tax information, this report intends to provide the City Council with a general idea of the policy considerations related to commercial uses in the City. This data shows that medical offices may generate a comparable amount of business tax revenue to Class A businesses, or buildings with a mix of boutique retail and personal services. However, it is also important to bear in mind that business tax revenue for Class A, Class C, and Class G businesses can vary widely, as these categories encompass a wide range of activities and industries. For example, there may be instances in which medical offices generate a comparable amount of business tax revenue to a Class G use, such as if a medical group of several physicians operates out of the same office space with a high number of support staff.

For Class C-1 tax revenue (taxes paid for non-professional employees working in a Class C business), there is no “base rate” that every medical use must pay for nonprofessional employees. Thus, it is more difficult to estimate the amount of revenue attributable to medical uses in this category. However, if it is assumed that the number of non-professional employees and number of payroll/billed hours for non-professional employees are directly proportionate to the revenue estimates above, approximately 34% to 57% of total Class C-1 tax revenue ($955,125) could be attributed to medical uses. This would mean that medical uses account for approximately $324,742 to $544,421 of Class C-1 tax revenue.

When considering policy changes related to medical uses in office spaces, the City Council may wish to consider what other types of businesses might occupy commercial office space in the City instead of medical uses. Typical occupants of commercial offices could pay any combination of taxes in the tax categories outlined in Table 1. Comparing a 1-story medical building with similarly sized 1-2 story buildings with a real estate brokerage firm, and a movie production office and ground floor retail can provide an anecdotal understanding of the differences in business tax revenue for these uses.

Based on information provided by the Finance Department, the real estate brokerage firm examined generates approximately 10 times the tax revenue of the medical office, which was slightly higher than the tax revenue of the movie production office/retail space. However, it is important to note that retail uses also contribute sales tax revenue, from which the City receives 1% of taxable retail sales, and the movie production/retail space would likely contribute this additional tax revenue.

Staff reached out to some practicing physicians in the City to gain insight into their perspective on the tax structure for medical uses. While these physicians agreed that the current tax structure is friendly to medical uses, they stated that the average practitioner does not make enough income for this to significantly benefit them, but would more likely benefit surgery centers that gross high amounts of income. Based on the tax revenue data received from the Finance Department, it does appear that most medical businesses in the City pay a few thousand dollars in business taxes, and that the highest amount paid by a medical business was approximately $46,000. While it is impossible to know whether or not the businesses would pay greater amounts of business taxes if they were assessed on their gross receipts (since this data is not shared with the City), some physicians stated that they would pay a significantly lower amount of taxes if they were to pay taxes based on gross receipts for their business.

Meeting Date: November 17, 2020

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Medical Uses in the City of Beverly Hills
During the drafting of the Medical Use Ordinance of 2011, City staff took inventory of the existing medical uses in the City, and determined that there were approximately 1,350,000 square feet of floor area occupied by medical uses, or approximately one fifth of the total amount of commercial office space in the City. Since the adoption of the City’s Medical Use Ordinance, the City has approved approximately 39,672 square feet of additional medical office space in the City. Approximately 33,802 square feet of this medical area has been approved via the Medical Use Overlay Zone provisions that allow a property owner to request the application of the overlay zone to their property upon providing code-compliant parking and a public benefit. In addition, 5,870 square feet of medical use has been approved for a limited term of 10 years (set to expire in 2022) through a Conditional Use Permit1. Approximately 1,150 square feet of medical laboratory uses (which are separately defined and regulated from medical offices) have been approved via a Minor Accommodation to allow a lower parking ratio than typically required.

An application to remove a condition restricting medical uses in a covenant and agreement for the property located at 9150 Wilshire Boulevard is currently being processed. In the event that this application receives approval, the amount of medical use added would be approximately 6,000 square feet. There have been no registered medical buildings that have utilized the provisions for expansion of medical space set forth in Beverly Hills Municipal Code (BHMC) §10-3-1621. B., which allows the addition of up to 6,000 square feet of medical space in a registered medical building upon meeting certain criteria. In total, 64 buildings applied to register the existing medical uses via the City’s Medical Building Registration Program.

During staff’s discussions with physicians practicing in the City, insight regarding the state of the medical office leasing market was shared. Anecdotally, these physicians noted that the City is a desirable location for a medical practice for several reasons, but in particular, the proximity to surgery centers and Cedars-Sinai provides a significant benefit due to the convenience factor and ability to refer patients to other services. In addition, the allure and image of the City provides physicians an ability to market their services as the best in their field. However, these physicians also expressed frustration that the rental rates for medical spaces are much higher in the City, and due to the limited amount of medical space in the City, tenants have little to no negotiating power with landlords. One model that has served to mitigate the high rental rates are group physician practices, in which multiple physicians share office and treatment rooms, thus, cutting down on individual overhead costs and staffing. One physician also mentioned that the pandemic has created challenges for the traditional doctor’s office set up, since more space is needed to physically distance and to treat patients safely.

Staff also reached out to brokers working in the City to discuss the medical office rental market. The brokers noted that medical space rents for approximately $5 - $6 per square foot, and in the Triangle Area, the rates are approximately 20% higher. The brokers also stated that demand for medical has remained consistent throughout the pandemic, and deals for medical space are the only ones going through at this time. One broker speculated that if the City changes the regulations, the demand may level off and rental rates may adjust slightly, but believes that interest in medical space will remain strong.

1 Pursuant to BHMC §10-3-1642, a Conditional Use Permit may be issued to allow medical office and medical laboratory uses in the C-3T-3 zone.

Meeting Date: November 17, 2020

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However, one broker who has worked in Beverly Hills for over 15 years specializing in medical leasing stated that he believes medical rates in existing medical buildings may remain constant, while spaces converted from office to medical may rent at lower rates since medical practitioners often seek to be located in buildings exclusively (or the majority) occupied by medical uses because of the potential for greater synergy and expanding their professional networks. He also noted that he has never heard from medical professional clients that they are attracted to the City because of its tax structure for medical uses, but rather the proximity of other medical centers (i.e. Cedars Sinai), and the reputation and brand name of Beverly Hills as synonymous with top-line is the reason to seek out space in the City. He discussed one of the reasons medical office space rents for a higher amount is that the landlord generally pays a tenant improvement allowance to set the space up for medical uses, and is then able to justify a higher lease rate because of the improvements made and the desire to remain in a space for a more extended period of time (for their own convenience and continuity of location for patients). Another reason that leasing of medical spaces in the City may be higher than regular office space is that many leases are structured as “triple net”, in which the lessee pays 1) rent for the space, 2) their proportionate share of property taxes, and 3) their proportionate share of insurance and building maintenance costs. Due to the high demand for medical space in the City, leases with triple net terms are common, which in turn results in high overhead costs for practitioners, making shared office spaces or group practices potentially more attractive options.

Medical Uses in Other Jurisdictions
Staff has contacted other jurisdictions to gain a better understanding of how different cities regulate medical uses. The following is a summary of the information gathered to help inform the City Council’s discussion on the topic.

City of West Hollywood
The City of West Hollywood considers two different types of medical uses for regulatory purposes:
 Clinics, offices, and laboratories, and
 Hospitals
Use Restrictions: Clinics, offices and laboratories are a permitted use in most commercial zones in the City of West Hollywood. Hospitals require a Conditional Use Permit (CUP) to locate in most commercial areas of the City.

Parking: The City of West Hollywood requires similar amounts of parking for medical uses as for other commercial uses. For medical clinics, offices, labs, and other outpatient facilities, 3 parking spaces per 1,000 square feet are required. For extended care facilities, 1 parking space per every 3 beds in the facility is required. For hospitals, 2 spaces are required for each hospital bed, plus spaces for ancillary services. As a comparison, general retail stores require 2 parking spaces per 1,000 square feet, and office uses require 2 parking spaces per 1,000 square feet for the first 25,000 square feet, plus 1 parking space for each additional 1,000 square feet of development. In addition, the City of West Hollywood allows a change of use to occur within an existing building or tenant space if it is less than 6,000 square feet without requiring additional parking. This allows tenants to move in and out of tenant spaces as long as they are an Meeting Date: November 17, 2020

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allowed use in the zone, without triggering additional parking that may make it difficult to locate in an existing building with limited parking.

Taxes: The City of West Hollywood has a business tax category called “Group V - Professionals”, which includes accountants, attorneys, chiropractors, dentists, physicians, and pharmacists. This group is taxed at a rate of $1.44 per $1,000 of gross receipts, with a $72 minimum tax. In addition, West Hollywood would collect taxes from the leasing of commercial property to medical practitioners, which is assessed at a rate of $1.44 per $1,000 of gross receipts, with a $72 minimum tax. This tax is lower than the City of Beverly Hills’ Class F and Class G gross receipts rate, but higher than the Class B gross receipts rate.

Culver City
The City of Culver City considers three different types of medical uses for regulatory purposes:
 medical offices/clinics, which are primarily engaged in outpatient medical, mental health, surgical, dental, and other personal health services,  hospitals, and
 laboratories.

Use Restrictions: Medical uses are permitted without discretionary approvals within most commercial zones in the City of Culver City.

Parking: Medical uses are parked at 1 space for each 350 square feet of development, except for hospitals. Parking for hospitals is determined on a per bed basis, with one required spot for every 1.5 patient beds, plus any required parking for accessory uses (such as offices, etc.).

Taxes: The City of Culver City taxes consulting and professional services, including medical professionals, at a rate of $3.00 per $1,000 of gross receipts. This tax is lower than the City of Beverly Hills’ Class G gross receipts rate, but higher than the Class B and Class F gross receipts rate. In addition, commercial property leasing is taxed at a rate of $1 per every $1,000 of gross receipts. This tax rate is lower than the City of Beverly Hills’ gross receipts rate for Classes B, F, and G.

City of Santa Monica:

The City of Santa Monica also defines three different types of medical uses for regulatory purposes:
 Hospital (defined as a facility that provides medical, surgical, or mental health services primarily on an in-patient basis),
 Clinic (defined as a facility that provides medical, surgical, or mental health services exclusively on an out-patient basis, but does not include private medical and dental offices), and
 Medical office.

Use Restrictions: The City allows new hospitals and clinics without discretionary review in the Healthcare Mixed-Use district. Hospitals and clinics are allowed either without an Meeting Date: November 17, 2020

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entitlement or with a CUP in the Mixed-Use Boulevard districts, and are not permitted in lower-scale neighborhood commercial districts. In the Mixed-Use Boulevard districts, medical offices are allowed, but sometimes require a CUP if it is a new building or more than a 50% addition, or if the medical space is larger and/or contains a certain amount of street frontage. These regulations are intended to uphold urban design principles of walkability by ensuring that large portions of street frontages are not occupied by medical uses.

Parking: In terms of parking, the Santa Monica zoning code requires more parking for hospitals and clinics than for general commercial. Hospitals and clinics are parking at 1 space for every 250 square feet of floor area, while the general commercial rate is 1 space for every 300 square feet. Parking for medical offices is more complex, with the first 1,000 square feet parked at 1 space for each 300 square feet of development up to 1,000 square feet, and 1 space for every 250 square feet of development beyond 1,000 square feet. The City does allow for a 3 space credit to help with slight intensifications of use, where new parking cannot be accommodated.

Interim Regulations: It should be noted that the City of Santa Monica has made some interim changes to their medical regulations due to the COVID-19 Pandemic. The City passed an interim ordinance that relaxed some of the existing standards to encourage new uses within existing buildings. These changes include elimination of the street frontage limitation and increasing the 3 parking space parking credit for medical uses to 10 parking spaces.

Taxes: The City of Santa Monica has a business tax category called “Group IV - Professions”, which includes medical professionals. This category pays $75 for the first $60,000 of gross receipts, and $5.00 per every $1,000 of gross receipts after that. This tax rate is higher than the City of Beverly Hills’ gross receipts rate for Classes B, F, and G. The Class B tax has the same minimum flat rate ($75 for the first $60,000 of gross receipts), but Classes F and G do not have a flat rate threshold. In addition, Santa Monica assesses business taxes for rental of non-residential property, which is also assessed at $75 for the first $60,000 of gross receipts, and $1.25 per every $1,000 of gross receipts thereafter. This rate is the same as the City of Beverly Hills’ Class B rate, inclusive of the minimum flat rate, but is a lower gross receipts rate than Class F and G.

Building Floor Area: The City of Santa Monica contains several medical corridors, including one along the eastern portion of Santa Monica Boulevard, and the Providence Saint John’s Hospital and UCLA Hospital. The two hospitals, excluding medical clinics, contain approximately 631,000 square feet of floor area, and the medical clinics and offices within the City contain approximately 1.33 million square feet of floor area.

Notification of Draft Urgency Ordinance
Staff completed several courtesy notifications to make interested parties and those potentially affected by the draft urgency ordinance aware of the scheduled Study Session and Formal Session to discuss this topic. Notifications included:
 Mailed notice to all commercial property owners in the City of Beverly Hills  Email notice to all business tax registrants with an email address on file  Email notice to a list of interested parties
 Mention in the weekly Chamber of Commerce newsletter on October 19, 2020 Meeting Date: November 17, 2020

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Updated email notices were sent out to business tax registrants and the list of interested parties to notify them of the change in meeting date from October 22, 2020 to November 17, 2020.

Summary of Changes Included in Draft Urgency Ordinance
Staff has agendized an urgency ordinance for City Council consideration at this evening’s formal meeting, per City Council direction. The main changes that are recommended in the urgency ordinance include:
 Reducing the parking requirement for medical uses established under the interim regulations to 1 space for every 350 square feet of development to allow new medical uses to occupy existing commercial spaces without adding parking, and  Allowing new medical uses that meet certain criteria; currently, medical uses are permitted to occupy only a space that was previously medical, or are located in a registered medical building or permitted through a medical use overlay zone.

New medical uses permitted through the urgency ordinance must:
 Be located in the commercial zones of the City (C-3, C-3T-1, C-3T-2, C-3T-3, CR-PD, C-R, C-3A, or C-3B),  Not be located on the ground floor,
 Not remove, demolish, or vacate floor area to provide parking for the medical use,
 Be a medical use, as defined in BHMC §10-3-100, including medical offices and medical laboratories, and may not be a “specialty clinic” as defined in BHMC §10-3-1604.5, and
 Show that at the time of building permit application, the space has been leased to a medical tenant that possesses an active business tax license under Tax Classification C (if required), with all applicable fees paid (to ensure that building owners do not speculatively convert general office space to medical office space).

The regulatory changes outlined above reflect the direction provided by City Council in a way that allows for the implementation of these new interim regulations. At the previous Study Session, the City Council expressed a desire to remove some of the existing barriers in the current medical regulations, as a potential corrective action that could mitigate the negative effects of the ordinance on medical space in the City. Based on feedback from commercial landlords and prospective tenants, the primary barrier to adding new medical space through the existing expansion provisions (in BHMC §10-3- 1620.1 B.) or the medical use overlay zone is the higher parking requirement for medical uses at 1 parking space per 200 square feet of floor area (or 5 spaces per 1,000 square feet). By reducing the parking requirement for new medical uses allowed pursuant to the proposed urgency ordinance, a commercial tenant space may be more easily converted since the proposed parking requirement for new medical uses is the same as general commercial uses (resulting in no net increase in required parking spaces).

As discussed by the City Council at the previous Study Session, allowing commercial space to be easily converted to medical space for a limited period of time may act as a correction to the medical leasing sector, which is currently characterized by high demand Meeting Date: November 17, 2020

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and a limited supply. In addition, this limited period of time could provide useful data to the City, as it may demonstrate the potential effects of deregulating medical uses, and whether medical creates the same impacts as it did when the medical use ordinance was adopted in 2011. To address the City Council’s concerns that a pedestrian-oriented retail and streetscape environment are maintained in the City’s commercial areas, the proposed ordinance would prohibit new medical uses on the ground floor. Additionally, the proposed ordinance prohibits surgery centers from utilizing the urgency ordinance provisions, since the Council expressed a desire to limit this type of medical use in the City. However, because the proposed ordinance does not modify the medical use overlay zone regulations, surgery centers could still be permitted through the overlay zone approval process.

The City Council also discussed the possibility of placing a maximum floor area cap for medical uses in the City, either on an individual building or citywide basis. However, such a regulation was not included in the proposed ordinance because it could lead to a flood of applications if it were operated on a first-come, first-serve basis, which could also create an artificial demand for medical conversions in the City. If a citywide cap were proposed, this could provide an unfair advantage to commercial buildings with spaces that are currently vacant, or could lead to commercial landlords attempting to vacate additional space. In addition, it is staff’s experience with the medical building registration program that it is a very resource-intensive process to accurately track medical uses within individual buildings, and is based on information provided by building owners, which is difficult to verify.

Staff is also not recommending defining the type of physician that can take advantage of the interim regulations. It can be very difficult for staff, who are not trained in the nuances of the medical profession, to determine what constitutes certain types of physicians, and how practices operate, etc. In addition, most physicians qualify as general practitioners, but may also specialize in a certain field of practice. HIPAA regulations also generally preclude disclosure of patient information and the types of treatment provided. Requiring staff to vet and approve certain types of practices but not others could be a very difficult and time consuming process and for this reason, staff is recommending that the interim regulations be available to medical uses that are not surgery centers (or “specialty clinics” as defined in BHMC §10-3-1604.5).

Staff is seeking input as to whether the changes described above accurately reflect the direction provided by the City Council at the September 1, 2020 meeting. If the City Council wishes to make changes, staff will reflect the changes in the urgency ordinance to be considered at the Formal City Council meeting on November 17.

RECOMMENDATION
Staff recommends that the City Council conduct a study session to discuss the contents of this staff report and provide direction to staff regarding any changes that may be desired to the draft ordinance prior to consideration of an urgency ordinance.

Susan Healy Keene, AICP
Director of Community Development
Approved By

Beverly Hills City CouncilMay 10, 2022

Beverly Hills City Council
May 10, 2022