WRITTEN PUBLIC COMMENTS NOT READ INTO THE RECORD — Beverly Hills City Council, September 20, 2022

WRITTEN PUBLIC COMMENTS

NOT READ INTO THE RECORD
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A Limited Liability Law Partnership Including Corporations / Los Angeles • San Francisco • Orange County Benjamin M. Reznik
[email protected]
1900 Avenue of the Stars, 7th Floor
Los Angeles, California 90067-4308
(310) 203-8080 (310) 203-0567 Fax
www.jmbm.com
September 19, 2022

BY EMAIL
Mayor Bosse and Members of the Beverly Hills City Council Beverly Hills City Hall
455 N. Rexford Dr.

Beverly Hills, CA 90210
E-Mail: [email protected]
Re: Medical Use Regulations Ordinance
Hearing Date: September 20, 2022 Item D-4
Dear Honorable Mayor Bosse and Members of the Beverly Hills City Council:

Our firm represents Beverly Hills Triangle Medical Plaza, LLC, and we oppose the adoption of the proposed Medical Use Regulations Ordinance. We submitted comments to the City Council, including a letter and comments read into the record, (see Exhibit A) but the City Council failed to respond to the legal and policy issues raised by the letter either in the discussion or in the staff report for this hearing. As such, we state again that the City Council has failed to evaluate the proposed Medical Use Regulations Ordinance in compliance with the California Environmental Quality Act ("CEQA"), harmed retail and restaurant establishments that rely on the business community for lunches, meetings and events, and violated due process without providing proper hearing notice. The City Council has repeatedly identified the reasonable forseeability of a proliferation of medical office conversion due to the proximity to UCLA medical center and Cedar Sinai medical center, and the higher rent levels obtained for medical office use. Therefore, it is highly likely that the virtually unlimited medical office conversion and new building medical office use in the Ordinance will cause a significant impact on the environment, and will turn the Business Triangle into a large medical office complex.

I. The City Council Failed to Evaluate the Medical Use Regulations Ordinance in Compliance with CEQA.

A. The Medical Use Regulations Ordinance is a Project under CEQA, and the City Council has Sufficient Information to Fully Evaluate Potentially Significant Impacts Under CEQA
The proposed ordinance violates the California Environmental Quality Act (PRC § 21000 et seq.) ("CEQA") as it fails to evaluate the environmental impact of the change of use at all.

CEQA defines a “project” as an “activity which may cause either a direct physical change in the Mayor Bosse
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environment, or a reasonably foreseeable indirect physical change in the environment . . . .” Public Resources Code § 21065. CEQA “projects” include amendments to zoning ordinances. CEQA Guidelines § 15378(a)(1). Therefore, the proposed Text Amendment qualifies as a Project under CEQA.

The City Staff Report recommends finding the ordinance categorically exempt from CEQA pursuant to Sections 15061(b)(3) (common sense exemption) and 15305 (minor alterations in land use limitations not resulting in change in land use or density), "because it can be seen with certainty that there is no possibility that a change to the regulations related to medical uses would have a significant effect on the environment." (See City Council Staff Report, 9-20-22) “A categorical exemption can be relied on only if a factual evaluation of the agency’s proposed activity reveals that it applies. The agency invoking the categorical exemption has the burden of demonstrating that substantial evidence supports its factual finding that the project fell within the exemption.” (Save Our Big Trees v. City of Santa Cruz (2015) 241 Cal.App.4th 694, 705, citing, Muzzy Ranch Co. v. Solano County Airport Land Use Com. (2007) 41 Cal.4th 372, 386.) However, the question of which class of exemption is applicable to the Ordinance is a pure question of law, and as such, it is reviewed de novo by the court. (Pub. Resources Code § 21168.5.) Here, the City Staff Report fails to provide substantial evidence in the record supporting any exemption, and only claims it is not related to a specific development, and therefore there is no possibility of a significant impact. The Staff Report makes only the following findings: "Since the project is not related to any specific development proposal and do not enable any physical changes in the environment, there is no possibility that it may have a significant effect on the environment. In addition, the project reflects minor changes in land use limitations, and do not result in changes to land use or density." (See City Council Staff Report, 9-20-22) This conclusory statement does not provide any evidence or findings to support a CEQA exemption under either the Common Sense exemption or Minor Alterations exemption. (See discussion below) In addition, the Medical Use Regulations Ordinance is related to a specific development proposal and will enable physical changes to the environment, because the City can specifically quantify the amount of medical office that will be converted or constructed in the commercial zones in the City. The City stated that in 2020, there were a total of 1,395,672 square feet of medical office, including 1,350,000 square feet identified in a 2005 survey, 39,672 square feet converted under the Medical Use Overlay Zone provisions, and 6,000 square feet proposed for conversion at 9150 Wilshire Boulevard (See City Council Staff Report, 11-17-2020). In 2022, the City identified that an additional 63,175 square feet of medical office had been approved or was pending under the Urgency Ordinance. (See City Council Staff Report, 5-20-2022) Therefore, the existing approved or pending medical office use in Beverly Hills is currently 1,458,847 square feet. At the City Council hearing on September 12, 2022, the City staff stated that there was approximately 11.8 million square feet of total commercial space in the City, and that 7.5 million square feet was commercial office and medical office use. (See City Council Hearing video, September 12, 2022) The proposed Ordinance would approve permitting new medical office use in up to 90% of the space in existing commercial office buildings, excluding ground floor area, Mayor Bosse
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(City Council Staff Report 9-12-2022, page 3), therefore the Ordinance would approve conversion of approximately 5.4 million square feet of commercial office space to medical office use. Once the Ordinance is approved, this medical office use will not require additional CEQA review quantifying the impact of the change of use, because the use will be permitted in the Code.

The City Council Staff Reports also confirmed that medical office use was a highly desirable tenant that brought in approximately $5-$6 per square foot of rent that was much higher than commercial office rates. (City Council Staff Report, 5-10-2022) The Staff Report included evidence from real estate brokers showing that Beverly Hills is an ideal location of medical office use as it is sandwiched between UCLA Medical Center and Cedar Sinai Medical Center. The brokers also confirmed that it was likely that medical office rates would likely continue to rise even after the Ordinance adoption, and that there would be a significant amount of converted space (See City Council Staff Report, 5-10-2022). The proposed Ordinance also allow construction of new medical office buildings, which would permit additional floor area above these calculations, in addition to required infrastructure, utility, and City services usage. This meets the definition of a Project under CEQA, because it is an “activity which may cause either a direct physical change in the environment, reasonably foreseeable indirect physical change in the environment . . . .” (Public Resources Code § 21065.)
B. The Medical Use Regulations Ordinance Does Not Qualify for a Class 5 CEQA Exemption for Minor Alterations to Land Use Limitations.

The Minor Alterations (Class 5) exemption, PRC section 15305, "consists of minor alterations in land use limitations in areas with an average slope of less than 20%, which do not result in any changes in land use or density, including but not limited to:(a) Minor lot line adjustments, side yard, and set back variances not resulting in the creation of any new parcel; (b) Issuance of minor encroachment permits; (c) Reversion to acreage in accordance with the Subdivision Map Act." (CEQA Guidelines, Cal. Code Regs. Tit. 14, § 15305) The exemption, on its face, specifically does not apply to "any changes in land use or density." This clearly does not apply to the Medical Use Regulations Ordinance, which will adopt a Text Amendment to allow a change of use from commercial office to medical office for 5.4 million square feet of floor area in the commercial zones of the City.

In 2011, the City Council adopted an ordinance prohibiting new medical office uses in Beverly Hills, and permitting existing legal medical office uses to be grandfathered. (Ordinance No. 11-O-2602) This decision was based on findings, adopted by the City Council, that medical uses were proliferating throughout office buildings, and forcing out companies seeking prime Beverly Hills office space. This Ordinance is still in effect. In 2020, in direct response to the Covid-19 pandemic, the City Council adopted and extended temporary regulations that would allow filling existing unleased office space with medical tenants to support the building owners at a time when many business workers did not come to the office and did not renew leases. (Ordinance No. 20-O-2826, 21-O-2852) (the "Urgency Ordinance"). The Urgency Ordinance Mayor Bosse
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expires on its own terms in November 2022, and cannot be renewed; therefore, the 2011 Ordinance prohibiting medical office use is in effect.

The City adopted the Urgency Ordinance in reliance on the Minor Alterations (Class 5) exemption, because it was contemplated that only a minimum amount of commercial floor area would convert to medical office use under the Urgency Ordinance in the maximum 2-year timeframe. The City Staff Report states that 63,175 square feet of floor area was approved or pending approval for conversion to medical office under the Urgency Ordinance. (City Council Staff Report, 5-10-2022) Now, the City proposes to permit a change of use of 5.4 million square feet of floor area to medical office use, that would otherwise be prohibited under the Code, and to permit additional floor area in new buildings.

The proposed ordinance would directly change land uses—these changes are, in fact, the central purpose of the ordinance—and increase density. Each of these changes, standing alone, forecloses the use of a Class 5 categorical exemption, according to the plain language of the regulations. (CEQA Guidelines § 15305.) As described above, permanent medical office uses established after adoption of the 2011 Ordinance, and outside of specific exceptions not relevant here, are prohibited. The proposed ordinance would change that, allowing significant and effectively unlimited expansion of a use that is currently prohibited. Further, the proposed ordinance would increase the permitted density or intensity of those uses: medical office uses, where currently permitted, are required to provide parking at a rate of one vehicle space per 200 s.f.; the proposed ordinance would require, for new buildings, parking at a rate of one vehicle space per 350 s.f., allowing a 75 percent increase in medical office space for a given floor area.

The only Court of Appeal case squarely addressing application of a Class 5 exemption in an analogous circumstance has affirmed the exemption cannot support changes in land use regulations that alter density. People for Proper Planning v. City of Palm Springs (unpublished at 202 Cal.Rptr.3d 528 (2016)), addressed the attempted use of a Class 5 exemption for a City’s general plan amendment that eliminated minimum density requirements for all residential land use categories. (202 Cal.Rptr.3d at 534.) The Court found, among other things, that the permitted reduction in density on its face—even if the amendment did not alter stated land use ranges provided as a guideline in the General Plan, and even if the City as a matter of practice never viewed the minimum densities as mandatory—foreclosed the use of a Class 5 exemption. (202 Cal.Rptr.3d at 534-35.) The Court also found that the potential reduction in housing from minimum required densities would have significant environmental effects related to housing. Looking to the General Plan EIR the City certified when it originally adopted the minimum densities, the Court determined the City may not meet the units anticipated in its share of regional housing needs, and may result in low-density development on parcels originally intended for medium- and highdensity development, reducing the potential for affordable housing and the diversity in housing in general. (202 Cal.Rptr.3d at 535.)
Here, just as in People for Proper Planning, the proposed ordinance would alter the densities of medical office uses permitted in the City. First, the ordinance would permit Mayor Bosse
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substantially greater—and effectively unlimited—floor area devoted to the use City-wide. And the ordinance also would permit a greater density of medical offices uses within an existing building for a given amount of floor area, by virtue of the reduced parking area the ordinance proposes for conversion to medical office uses in existing buildings.

The proposed ordinance bears another resemblance to the legislation in People for Proper Planning. As described above, the prior environmental document associated with establishment of the existing land use regulations in Palm Springs provided substantial evidence of significant environmental effects in the absence of that regulation. Here, the City identified a range of potential environmental effects in its 2011 ordinance instituting the prohibition on new office uses.

Just as the Court in People for Proper Planning, and perhaps more directly, the 2011 findings represent substantial evidence of the significant environmental effects that could reasonably result from the proposed ordinance.

Aside from disqualifying factors inherent to the Class 5 exemption, other factors in section 15302.1 of the CEQA Guidelines also foreclose the use of this exemption. These include sensitive locations, where designated and mapped by the local agency (subd. (a)); the “reasonable possibility” of a significant environmental effect due to unusual circumstances (subd. (b)); or significant cumulative impacts of similar projects over time (subd. (c)). Here, the City’s General Plan Safety Element (Fig. 4, Inundation Hazard Map) identifies and maps areas of flooding that would occur if nearby reservoirs suffer a failure: these areas represent a substantial portion of the City. Figures 7 (Fault Map) and 8 (Landslide and Liquefaction Zones Map) of the Safety Element precisely locate other areas of particular hazard in the City, and some of these are further refined in maps of Alquist-Priolo districts. New office buildings could be constructed, or existing office buildings could be converted to medical office, in any of these areas, permitting a greater intensity of use for the same permitted floor area and increasing the potential for loss of life and injury.

Further, the higher rents possible with medical office uses1 would reasonably and foreseeably incentivize development of more and more intensively used commercial floor area, leading to a range of cumulative impacts associated with development of a succession of similar uses: these could foreseeably include, but would not be limited to, construction-related effects, such as air pollutant and noise emissions; and operational effects such as vehicle miles travelled, greenhouse gas emissions, water and energy consumption, and the demand for new or upgraded water and energy infrastructure.

C. The Medical Use Regulations Ordinance Does Not Qualify For a Common Sense CEQA Exemption.

The Common Sense exemption, PRC Sections 15061(b)(3), permits an exemption where "it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment." As stated above, the Staff Report makes only the following finding for the common sense exemption: "Since the project is not related to any specific

1 Refer to our prior correspondence to the City Council, dated September 12, 2022.

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development proposal and do not enable any physical changes in the environment, there is no possibility that it may have a significant effect on the environment." (Staff Report, 9-12-2022) As stated above, the Medical Use Regulations Ordinance will authorize the conversion of 5.4 million square feet of commercial office space to medical office space, and will allow additional medical office use construction that is not currently permitted under the Code. There are numerous specific potential environmental impacts that will result from the approval of the Ordinance.

Medical office use has different parking and vehicle trip generation and length characteristics than commercial office uses, as stated in the June 9, 2022 Staff Report to the Planning Commission (Appx. G) and in the 2011 ordinance that established the current medical office use regulations. However, despite the City’s knowledge or reasonable belief that the Medical Use Regulations Ordinance would substantially increase the amount of that use, the City did not conduct any study to evaluate the associated impacts. In addition, medical office uses, and the associated surgical facilities the Medical Use Regulations Ordinance would permit, have distinct operations that include increased quantities of hazardous materials and hazardous (including biohazardous and acutely hazardous) waste; generate greater demand for utilities, such as energy and water; and produce greater emissions of greenhouse gases and potentially hazardous air pollutants. For example, the U.S.

Environmental Protection Agency (the “U.S. EPA”) estimates that hospitals and other healthcare facilities use about seven percent of all water use in commercial and institutional facilities.2 As the EPA describes, “medical and laboratory facilities have special operations and equipment. These systems can consume a significant amount of water through water purification, sterilization, photographic and X-ray processes, and vacuum systems.” Other equipment cited by EPA to use a significant percentage of water includes steam sterilizers, reverse osmosis systems, and other laboratory and medical equipment.3 Additionally, according to a published 2016 study4, the healthcare sector in the U.S. accounts for an estimated eight percent of greenhouse gas emissions, with those and other air emissions (particulate matter and other substances) directly and indirectly estimated to account for 470,000 disability-adjusted life years (“DALYs”) lost from pollution-related disease, or 405,000 DALYs “when adjusted for recent shifts in power generation sector emissions.” Thus, the potential public health impacts from medical facilities is significant, and higher than general commercial office uses.
2 U.S. EPA, 2012. Saving Water in Hospitals, publication no. EPA-832-F-12-032. Available at:
https://www.epa.gov/sites/default/files/2017-01/documents/ws-commercial-factsheethospitals.pdf. 3 U.S. EPA, 2012. WaterSense at Work: Best Management Practices for Commercial and Institutional Facilities, publication no. EPA 832-F-12-034; § 7.1. Available at:
https://www.epa.gov/sites/default/files/2017-02/documents/watersense-at-work_final_508c3.pdf. 4 Eckelman, Matthew and Jodi Sherman. 2016. Environmental Impacts of the U.S. Health Care System and Effects on Public Health. University of Alabama at Birmingham, Ed. Available at:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4900601/pdf/pone.0157014.pdf.

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The project may also have other potential significant impacts under the categories set forth in Appendix G of the CEQA Guidelines. These may include, but would not be limited to, aesthetics, cultural resources, land use, public services, and cumulative and growth-inducing impacts. All of these require some evaluation under CEQA, and as articulated in Davidon Homes, supra, and Muzzy Ranch, supra, an initial study would provide the bare minimum necessary analysis.

The so-called “common sense exemption” under CEQA, set forth in CEQA Guidelines § 15061(b)(3), may only be employed where it is certain that there is no possibility the project may cause significant environmental impacts. Importantly, the decision to proceed under CEQA Guidelines § 15061(b)(3) must be supported by substantial record evidence. The agency relying upon the exemption bears the burden of proving its applicability. See Davidon Homes v. City of San Jose, 54 Cal. App. 4th 106 (1997), Muzzy Ranch Co. v. Solano County Airport Land Use Com., 41 Cal. 4th 372, 385-86 (2007). In doing so, the agency must consider possible environmental effects of the project and it is an abuse of discretion if there is no basis in the record for its determination that the project was exempt from CEQA. Id.

The Court in Davidon discusses in detail an agency’s burden of proof for the Common Sense Exception, in contrast to other categorical exemptions identified in the CEQA Guidelines, and determined that because the common sense exemption is simply a proclamation by a public entity that a project will have no environmental impacts, this necessarily dictates a much higher burden. Davidon, 54 Cal. App. 4th at 116
"In the case of the common sense exemption [], the agency’s exemption determination is not supported by an implied finding by the Resources Agency that the project will not have a significant environmental impact. Without the benefit of such an implied finding, the agency must itself provide the support for its decision before the burden shifts to the challenger. Imposing the burden on members of the public in the first instance to prove a possibility for substantial adverse environmental impact would frustrate CEQA’s fundamental purpose of ensuring that government officials 'make decisions with environmental consequences in mind.' " Davidon, 54 Cal. App. 4th at 116 (citing Bozung v. Local Agency Formation Com., 13 Cal. 3d 263, 283 (1975).)
The Supreme Court has emphasized that the “duty to provide such factual support ‘is all the more important where the record shows, as it does here, that opponents of the project have raised arguments regarding possible significant environmental impacts.’” (See Muzzy Ranch, 241 Cal.App.4th at 386; Dunn-Edwards Corp. v. Bay Area Air Quality Mgmt. Dist., 9 Cal. App. 4th 644, 645 (1992) (agency cannot rely on absence of supporting data, because it cannot say with certainty that there is no possibility of significant environmental effect). “If legitimate questions can be raised about whether the project might have a significant impact and there is any dispute about the possibility of such an impact, the agency cannot find with certainty that a project is exempt.” Myers v. Board of Supervisors, 58 Cal. App. 3d 413, 425 (1976) (common sense Mayor Bosse
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exemption “reserved for those ‘obviously exempt’ projects, ‘where its absolute and precise language clearly applies’”).

In these circumstances, the City cannot negate the possibility that the impacts raised during the comment period are potentially significant, let alone allow the decision-makers to find with a certainty that there will be no environmental impacts. (See Davidon, 54 Cal.App.4th at 114.) The City fails to acknowledge the environmental impacts that will arise from the Ordinance, and cannot meet its burden of proving that there is no possibility of significant environmental impacts here.

Indeed, the City failed to even conduct the necessary studies that would have analyzed whether or not such environmental impacts exist, such that there is no substantial record evidence supporting the Notice of Exemption based upon CEQA Guidelines § 15061(b)(3).

D. The City Abused Its Discretion and Failed to Proceed in a Manner Required by Law; The City Must Prepare and Initial Study and Fully Evaluate the Potentially Significant Impacts
The City Council Staff Report states that the Project complies with the common sense exemption, because it is not related to any specific development proposal, and does not enable any physical changes to the environment, there is not possibility that it may have a significant effect on the environment. In addition, the City Council Staff Report, states that the project reflects minor changes in land use limitations, and does not result in changes to land use or density. (City Council Staff Report, 9-12-2022) As set forth above, the Medical Use Regulations Ordinance does not qualify for a Common Sense or Minor Alterations exemption under CEQA, and therefore, must be evaluated with an Initial Study and Environmental Impact Report for a project that has a potential for a significant impact under CEQA.

As stated above, under CEQA, a "project" includes "an activity which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and which is any of the following: (a) An activity directly undertaken by any public agency. . . ." (PRC § 21065) The implementing CEQA Guidelines clarifies that a "'[p]roject' means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment." (CEQA Guidelines, § 15378(a).) "An activity directly undertaken by any public agency," such as "the adoption and amendment of local General Plans or elements thereof," may be a "project." (CEQA Guidelines, § 15378(a)(1); PRC § 21065) "'Project' is given a broad interpretation in order to maximize protection of the environment." ( McQueen v. Board of Directors (1988) 202 Cal.App.3d 1136, 1143)
Here, the adoption of the Medical Use Regulations Ordinance, which includes a Zone Text Amendment to permit a widespread change of use from commercial office to medical office in the commercial zones qualifies as a "project" under CEQA. The Ordinance permits a change of use that will directly result in a physical change to specific buildings, infrastructure, utilities and other aspects, in addition to potential physical change to retail, restaurant and other commercial uses.

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CEQA Guidelines provides that "Where a physical change is caused by economic or social effects of a project, the physical change may be regarded as a significant effect in the same manner as any other physical change resulting from the project." (CEQA Guidelines § 15064.(e), PRC § 21080(e)(2), § 21082.2(c) )
As such, the City was required to prepare an Initial Study to evaluate the potential environmental impacts of the Ordinance. A lead agency considering a nonexempt project generally must "conduct an initial study to determine if the project may have a significant effect on the environment" unless the lead agency "can determine that an EIR will clearly be required for the project. . . ." (CEQA Guidelines, § 15063(a).) The initial study as a standardized document "is largely a creature of the Guidelines . . ." and "CEQA refers to [an initial study] only glancingly (e.g. PRC 21080(c)(2); Gentry v. City of Murrieta (1995) 36 Cal.App.4th 1359, 1376.) "When the informational requirements of CEQA are not complied with, an agency has failed to proceed in 'a manner required by law' and has therefore abused its discretion (PRC § 21168.5, § 21105(a); County of Amador v. El Dorado County Water Agency, 75 Cal.App.4th 931, 946; Environmental Planning Information Council v. County of El Dorado (1982) 131 Cal.App.3d 350, 355; Save Our Peninsula Committee v. Monterey County Bd. of Supervisors (2001) 87 Cal.App.4th, 99, 118) Because the City failed to consider the whole of the project and prepare an Initial Study to evaluate the potentially substantial impacts of the change of use to medical office, the City failed to proceed in a manner required by law. A prejudicial abuse of discretion may be found "regardless of whether a different outcome would have resulted if the public agency had complied with those provisions." (PRC § 21005(a)) "The failure to comply with the law subverts the purposes of CEQA if it omits material necessary to informed decision making and informed public participation." ( County of Amador v. El Dorado County Water Agency (1999) 76 Cal.App.4th 931, 946.) "'CEQA places the burden of environmental investigation on government rather than the public.'" ( Gentry v. City of Murrieta (1995) 36 Cal.App.4th 1359, 1376-1379) The CEQA Guidelines provide:
"If the agency determines that there is substantial evidence that any aspect of the project, either individually or cumulatively, may cause a significant effect on the environment, regardless of whether the overall effect of the project is adverse or beneficial, the lead agency shall do one of the following:
(A) Prepare an EIR or
(B) Use a previously prepared EIR which the lead agency determines would adequately analyze the project at hand, or
(C) Determine, pursuant to a program EIR, tiering, or another appropriate process, which of a project's effects were adequately examined by an earlier EIR or negative declaration. . . . The lead agency shall then ascertain which effects, if Mayor Bosse
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any, should be analyzed in a later EIR or negative declaration." (CEQA Guidelines, § 15063(b)(1))
"The lead agency shall prepare a negative declaration if there is no substantial evidence that the project or any of its aspects may cause a significant effect on the environment." (CEQA Guidelines, § 15063(b)(2)) Once a lead agency has identified a significant effect, a primary purpose of an initial study is to enable the lead agency "to modify a project, mitigating adverse impacts before an EIR is prepared, thereby enabling the project to qualify for a negative declaration."
Therefore, the City must prepare an initial study to evaluate the proposed Medical Use Regulations Ordinance, prepare the required studies, and determine whether there is a potential significant impact requiring preparation of an Environmental Impact Report. The City's failure to do so is a violation of CEQA, an abuse of discretion, and a failure to proceed in a matter required by law.

II. The City Failed to Provide Proper Notice of the Hearings in Violation of Due Process Beverly Hills Triangle Medical Plaza, LLC only submitted comments on the proposed Medical Use Regulations Ordinance one day prior to the first City Council hearing, because it was unaware of the City's consideration of revisions to the permanent medical office prohibition until publication of the City Council agenda on September 8, 2022. Other owners of commercial office buildings, including medical office buildings, were similarly unaware of this pending action. In fact, even the City's "Medical Use" web page makes no reference at all to the proposed changes; it only identifies the existing provisions prohibiting new medical uses without a Medical Use Overlay Zone, and describes Fire Prevention and Health Department review, but does not mention the proposed changes to the code. (see
https://www.beverlyhills.org/departments/communitydevelopment/developmentservices/planrevi ew/commercial/medicaluse/)
The City Council first directed the City staff to prepare changes to the permanent ordinance at its Study Session on May 10, 2022, but no public notice was provided of this item, and the topic of the item was "Request for Direction on Medical Conversion Urgency Ordinance," which specifically identified it as applying only to the Urgency Ordinance during Covid-19 that was set to expire in November 2022. At the Planning Commission Study Session on June 9, 2022, Consent Item 5 was identified "a study session to discuss the medical regulations that would replace the Medical Conversion Urgency Ordinance . . . that is currently in effect and will expire in November." Again, there was no public notice of this study session, and the name clearly identifies consideration of a temporary urgency ordinance, and not new medical office uses to alter the current code.

The first time that the public was provided any notice of this matter at all was in the July 8, 2022 (Beverly Hills Courier) and July 14, 2022 (The Beverly Hills Weekly) newspaper postings, Mayor Bosse
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and the July 21, 2022 agenda posting for the July 28, 2022 Planning Commission hearing. (See Planning Commission Staff Report, 7/28/2022, p. 4) As stated, no notice was provided via posting on any property or website, mailing to tenants or property owners, or change to the City's "Medical Use" website. Therefore, for long time Beverly Hills office owners who missed the newspaper notice, there was no other way to know that the City was considering a Citywide change with drastic impacts. Even if a property owner had seen the newspaper notice, there was only a total of two months between the initial newspaper notice, the Planning Commission hearing, and the final City Council hearing on the matter. The City staff implies that the public and property owners were very engaged in this process over several years; however, many office owners did not engage in the Urgency Ordinance that provided limited temporary Covid-19 relief. The City Staff Report states, "Throughout the process of creating and extending the urgency ordinance, there have been a number of comments provided to the City Council, a vast majority of which were in support of the urgency ordinance and/or in support of the extension of the urgency ordinance." (Planning Commission Staff Report 7-28-2022, p. 4) However, support for a temporary ordinance to provide very limited relief to landlords with vacant office spaces for a 2 year period during Covid-19, is very different in scope and does not provide support for a complete overhall to the Code to allow unlimited medical office use and conversion.

The City has contact information for each of the property owners with commercial office buildings within the commercial zones in Beverly Hills, who are directly impacted by the proposed Ordinance. The City could have sent direct mailed notices to inform them of the hearings on the Medical Use Regulations Ordinance. The City claims individual notices were not required because it is a "Citywide" ordinance; however, this is not accurate. The Ordinance only impacts specific commercial zones in the City. Therefore, the City staff had the obligation to provide actual mailed notice to property owners in the specific commercial zones in the City identified in the proposed Ordinance. The City's failure to do so violates the City's notice provisions and State and Federal due process.

III. Conclusion
Therefore, we request that the City deny the proposed Medical Use Regulations Ordinance, because it will destroy the business, retail and restaurant community in Business Triangle in Beverly Hills. If the City Council decides to move forward with considering the change of use to Mayor Bosse
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include medical office, we demand that the City prepare parking impact, traffic impact, noise, air quality, hazards, and all other studies necessary to fully comply with CEQA.

Sincerely,
BENJAMIN M. REZNIK of
Jeffer Mangels Butler & Mitchell LLP
BMR
Encl. Exhibit A – Letter from JMBM to City Council, dated September 11, 2022 Exhibit B – City Council Staff Report, dated May 10, 2022 Exhibit C – City Council Staff Report, dated September 12, 2022 Exhibit D – City Council Staff Report, dated November 12, 2020 cc: Timothea Tway ([email protected])
Chloe Chen ([email protected])
Ryan Gohlich ([email protected])
Larry Wiener, City Attorney ([email protected])
David Snow, City Attorney's office ([email protected])

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A Limited Liability Law Partnership Including Corporations / Los Angeles • San Francisco • Orange County Benjamin M. Reznik
[email protected]
1900 Avenue of the Stars, 7th Floor
Los Angeles, California 90067-4308
(310) 203-8080 (310) 203-0567 Fax
www.jmbm.com

September 12, 2022

BY EMAIL
Mayor Bosse and Members of the Beverly Hills City Council Beverly Hills City Hall
455 N. Rexford Dr.

Beverly Hills, CA 90210
E-Mail: [email protected]
Re: Medical Use Regulations Ordinance
Hearing Date: September 12, 2022 Item E-1
Dear Honorable Mayor Bosse and Members of the Beverly Hills City Council:

Our firm represents Beverly Hills Triangle Medical Plaza, LLC, and we oppose the adoption of the proposed Medical Use Regulations Ordinance, as written. The city has failed to legally evaluate the environmental impacts of the proposed medical uses and the significant change it will have to the vitality of retail, restaurant and office uses in the City. Numerous large corporations that were considering leasing in Beverly Hills elected to relocate their headquarters to Culver City and other surrounding cities due to the business and development friendly atmosphere there at a great loss to Beverly Hills tax revenue and prestige. As set forth below, the proposed Medical Use Regulations ordinance will be a nail in the coffin for future office and commercial growth in the City and will turn the Business Triangle into a large medical office complex.
2011 Medical Office Prohibition. In 2011, the City Council adopted an ordinance prohibiting new medical office uses in Beverly Hills, and permitting existing legal medical office uses to be grandfathered. (Ordinance No. 11-O-2602) This decision was based on findings, adopted by the City Council, that medical uses were proliferating throughout office buildings, and forcing out companies seeking prime Beverly Hills office space. While medical uses can co-exist with other office tenants, the office tenants cannot co-exist with medical uses. The medical uses have much larger parking and valet demand, have much shorter office visits, and remove the professional business atmosphere by filling hallways and lobbies with medical patients. Once a certain number of medical tenants fill a building, it is likely the business office tenants will leave.

This was the reason for the adoption of the ordinance limiting medical office in 2011. 2020 Urgency Ordinance. In 2020, in direct response to the Covid-19 pandemic, the City Council adopted and extended temporary regulations that would allow filling existing unleased office space with medical tenants to support the building owners at a time when many

EXHIBIT A
Beverly Hills City Council
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business workers did not come to the office and did not renew leases. (Ordinance No. 20-O-2826, 21-O-2852) (the "Urgency Ordinance"). This was a temporary action responding to the immediate pandemic needs, and so did not fully evaluate the environmental impact and business and tax impact for a longstanding change of use. Cities are now experiencing a return to the office, and office rents are increasing, as companies create a new paradigm for office work. While some large technology companies have permanent remote work policies, the vast majority of companies plan to return to the office and the market is responding. (see https://www.hollywoodreporter.com/lifestyle/real-estate/los-angeles-real-estate-market1235156655/) Proposed Permanent Ordinance. For the Medical Use Regulations Ordinance, approved by the Planning Commission (Resolution No. 1996), the City does not evaluate or consider the staggering impact on the Beverly Hills office, retail, restaurant and business community. As stated in the staff report, "potentially up to 90% of any given commercial building may be converted to medical space, since every floor of a commercial building except the ground floor may now be converted, which is a significant increase in allowable medical space in the City." (Staff Report, page 3) While tourists account for some spending in the Business Triangle, most of the retail and restaurant establishments rely on the business community for lunches, meetings and events. As the office space is converted to medical use and the businesses continue their migration to other cities, the retail and restaurants will suffer significant financial losses. In addition, the ordinance permits that any new building may be medical office use. Due to the high demand for medical office space, especially in Beverly Hills near Cedar Sinai Medical Center, it is highly likely that new office buildings would be filled with medical use. In addition, because medical office leases typically bring higher rents than business office, the City Council will incentivize landlords and brokers to focus on replacing professional office use with medical office use.

Failure to Comply with CEQA. The proposed ordinance violates the California Environmental Quality Act (PRC § 21000 et seq.) ("CEQA") as it fails to evaluate the environmental impact of the change of use at all. The staff report recommends finding the ordinance categorically exempt from CEQA pursuant to Sections 15061(b)(3) (common sense exemption) and 15305 (minor alterations in land use limitations not resulting in change in land use or density), "because it can be seen with certainty that there is no possibility that a change to the regulations related to medical uses would have a significant effect on the environment." The Staff report makes only the following findings: "Since the project is not related to any specific development proposal and do not enable any physical changes in the environment, there is no possibility that it may have a significant effect on the environment. In addition, the project reflects minor changes in land use limitations, and do not result in changes to land use or density." This conclusory statement does not provide any evidence or findings to support a CEQA exemption under either the Common Sense exemption or Minor Alterations exemption.

The proposed Ordinance would approve permitting new medical office use in up to 90% of the space in existing commercial office buildings (Staff Report, page 3), where it was previously prohibited, and in any new office building, where it was previously prohibited. When Beverly Hills City Council
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evaluating under CEQA, the use baseline is not the permitted uses in the temporary Urgency Ordinance, which did not provide CEQA review and expires in November 2022. (See Ord. 11-O2602). CEQA requires an evaluation of the change of use from the existing underlying provisions prohibiting medical office use, if the Ordinance is not adopted. Therefore, the proposed Ordinance specifically relates to a change of use from commercial office to medical office use throughout the commercial zones in the City.

The Minor Alterations exemption, PRC section 15305, permits a Class 5 exemption for minor alterations in land use limitations that do not result in a change in land use or density.

This clearly does not apply to the Ordinance. The sole purpose of the Ordinance is to permit a change of use from general commercial office to medical office use in up to 90% of the floor area of all existing office buildings, and 100% of all new office buildings in specific commercial zones.

This use was previously prohibited in existing and new office buildings, and will have potentially significant impacts on the environment. Medical office use has very different use characteristics than standard office buildings, including, as stated, different parking usage requirements, valet staffing and retrieval standards, office density, employment estimates, frequency of visitors, and other standards responding to patient needs. The fact that the City is reducing the medical office parking standards from one space to 200 square feet to one space per 350 square feet does not mean that the medical office use does not have significantly different parking impacts. The City implemented the change in the Urgency Ordinance to allow an easier temporary conversion from standard commercial office during Covid-19, but the City did not evaluate the actual parking required for medical office through a parking study. Therefore, the Ordinance clearly does not comply with the Class 5 exemption requirements, because it does result in a change in land use and density.

The Common Sense exemption, PRC Sections 15061(b)(3), permits an exemption where "it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment." In the Ordinance evaluation, the City can quantify the specific impact of the project. The City knows all of the existing medical office buildings that have been registered through the Medical Office Registration program, and the floor area for the remaining commercial office buildings in the commercial zones. Therefore, the City can calculate the exact amount of floor area that the Ordinance will permit to change use, which is up to 90 percent. It can also estimate the floor area of new medical office buildings in commercial zones. Medical office use has different parking and VMT traffic calculation criteria than commercial office use; however, the City did not conduct either a parking impact or traffic impact study to evaluate the environmental impact to determine if it is significant. Therefore, the Ordinance clearly does not comply with the Common Sense exemption, and the City must prepare a full environmental assessment, and potentially an environmental impact report, prior to adopting any ordinance supporting a significant change of use. The project may also have other potential significant impacts set forth in the CEQA environmental checklist, including but not limited to, aesthetics, air quality, cultural resources, hazards, land use, noise, public services, utilities, energy, greenhouse gas emissions, and Beverly Hills City Council
September 12, 2022

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cumulative and growth inducing impacts that require further evaluation under CEQA. These impacts would be based on the results of a CEQA assessment and traffic impact study.

Therefore, we request that the City deny the proposed Medical Use Regulations Ordinance, because it will destroy the business, retail and restaurant community in Business Triangle in Beverly Hills. If the City Council decides to move forward with considering the change of use to include medical office, we demand that the City prepare parking impact, traffic impact, and all other studies necessary to fully comply with CEQA.

Sincerely,
BENJAMIN M. REZNIK of
Jeffer Mangels Butler & Mitchell LLP
BMR
cc: Timothea Tway ([email protected])
Chloe Chen ([email protected])
Ryan Gohlich ([email protected])

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.

EXHIBIT B
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.

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.

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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.

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:

Meeting Date: May 10, 2022

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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

AGENDA REPORT
Meeting Date: September 12, 2022
Item Number:

To: Honorable Mayor & City Council
From: Timothea Tway, AICP, City Planner
Chloe Chen, Associate Planner
Subject: AN ORDINANCE OF THE CITY OF BEVERLY HILLS TO AMEND

BEVERLY HILLS MUNICIPAL CODE SECTIONS RELATED TO

MEDICAL USE REGULATIONS APPLICABLE TO CERTAIN

COMMERCIAL ZONES IN THE CITY
Attachments: 1. Draft Ordinance

2. Draft Redline Ordinance

3. Planning Commission Resolution No. 1996

4. Ordinance No. 20-O-2826

5. Ordinance No. 20-O-2831

6. Ordinance No. 21-O-2852

7. Public Comment

RECOMMENDATION
Pursuant to the Planning Commission’s review and recommendations, staff recommends the City Council move to waive the full reading of the ordinance and introduce and read by title only the ordinance entitled “AN ORDINANCE OF THE CITY

OF BEVERLY HILLS TO AMEND BEVERLY HILLS MUNICIPAL CODE SECTIONS

RELATED TO MEDICAL USE REGULATIONS APPLICABLE TO CERTAIN COMMERCIAL ZONES IN THE CITY”. The draft ordinance as recommended by the Planning Commission is included in Attachment 1.

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 was 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, the City Council recently 

EXHIBIT C
Meeting Date: September 12, 2022

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directed staff to work with the Planning Commission to develop permanent regulations to replace those in the urgency ordinance that will become effective before the urgency ordinance expires. At the June 9, 2022 Planning Commission study session, the Commission discussed the regulations and provided direction to staff regarding a draft ordinance to amend the City’s medical regulations and replace the urgency ordinance.

On July 28, 2022, the Planning Commission reviewed a draft ordinance to amend medical use regulations, and adopted Planning Commission Resolution No. 1996 (Attachment 3) to recommend the ordinance for approval by the City Council. The draft ordinance is being presented at this time for the City Council’s review and first reading.

DISCUSSION
Background and Previous Discussions
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. In addition, the City faced an increase in vacant commercial space, as the 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 slowdown. The urgency ordinance (Ordinance No. 20-O-2826, Attachment 4) adopted on November 17, 2020 took effect immediately and was in effect for an initial 45-day period, until January 1, 2021. This ordinance is also known as the “medical conversion urgency ordinance” as it allows the conversion of commercial space to medical space. On December 8, 2020, the City Council adopted Ordinance No. 20-O2831 (Attachment 5) 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 implementation of the ordinance and the amount of medical office conversions completed.

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 opted to extend the medical urgency ordinance for an additional one-year period, and to reassess before the extension expired to determine whether permanent changes to the City’s medical use regulations would be appropriate. At a subsequent City Council meeting on October 26, 2021, staff provided an update on the amount of commercial space that had been converted under the urgency ordinance since its adoption and general feedback on the conversion-related inquiries received by property owners, commercial brokers, and physicians. The City Council also 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 adopted Ordinance No. 21-O-2852 (Attachment 6), 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.

On May 10, 2022, staff presented the City Council with an update on the implementation of the medical conversion urgency ordinance, and requested direction regarding whether staff should start developing permanent regulations to replace the urgency ordinance.

Meeting Date: September 12, 2022

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The Council discussed the urgency ordinance regulations, and directed staff to work with the Planning Commission to develop permanent regulations that will replace the urgency ordinance, and become effective before the urgency ordinance expires on November 16, 2022. The Council generally expressed support for a draft ordinance that includes the majority of the same regulations as those in the urgency ordinance, while also expressing some interest in potential changes to the regulations.

On June 9, 2022, the Planning Commission held a study session to discuss the regulations that should be included in the permanent version of the urgency ordinance, based on the direction provided by the City Council. At this meeting, the Commission expressed support for the existing regulations in the urgency ordinance, and indicated support for some changes to the regulations. These changes included the removal of the requirement for a tenant lease and business tax license prior to conversion of space to medical, greater flexibility for medical uses on the ground floor and surgery uses by potentially relaxing the restrictions on such uses, and allowing new medical uses to be established in newly constructed buildings (rather than just allowing the conversion of existing commercial space to medical uses).

On July 28, 2022, the Planning Commission discussed this item once again, and reviewed the draft ordinance that was informed by the previous discussions of the City Council and Planning Commission. This draft ordinance more closely mirrored the regulations in the urgency ordinance, and included prohibitions on ground floor medical uses and limitations on surgery uses. Staff proposed that the Planning Commission deviate from several of the Commission’s previous recommendations regarding the regulations related to the ground floor and surgery center uses because, upon further review of the Council’s discussion, it was staff’s view that the Council wished to adopt a permanent ordinance that more closely resembles the urgency ordinance. In addition, staff discussed several concerns with the Planning Commission related to allowing ground floor medical uses and surgery uses. In this discussion, staff brought up that ground floor space should ideally be occupied by pedestrian friendly uses, and staff was concerned that a setback inside the ground floor space may not allow future pedestrian friendly commercial uses (e.g. restaurants and retail stores) to occupy the space as easily or without more significant renovations. In addition, staff noted that potentially up to 90% of any given commercial building may be converted to medical space, since every floor of a commercial building except the ground floor may now be converted, which is a significant increase in allowable medical space in the City. Regarding the issue of surgery center uses, staff brought up that this issue is tied closely to the City’s taxation structure, and could create a delay in adopting the ordinance if significant changes to the taxation regulations would need to be studied. As such, staff recommended that the Commission do not include changes to the regulations for ground floor and surgery center uses as compared to the regulations in the urgency ordinance.

The Commission deliberated, and supported the recommendation of the draft ordinance as presented, including the changes recommended by staff.

Meeting Date: September 12, 2022

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 New medical uses must provide parking at a rate of 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.

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 included questions about whether the City Council would consider any permanent changes to the medical use regulations, and whether it would be 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). Most recently, at the May 10, 2022 City Council study session, several members of the public who work in the commercial real estate business provided comments supporting the development of permanent regulations to replace the urgency ordinance and effectively extend the period during which a property owner may convert commercial spaces into medical space. The members of the public also noted that they continued to observe a lower demand for traditional commercial offices, possibly as a result of the prevalence of telecommuting work during the COVID-19 pandemic, and the trend towards hybrid (a mix of in-office and telecommuting work) office work as the pandemic transitions into an endemic phase. At the June 9, 2022 Planning Commission study session, a member of the public provided a comment encouraging the Commission to remove the requirement to provide a tenant lease for the conversion process, and to consider the timing of the adoption of the permanent ordinance given the upcoming expiration date of the urgency ordinance, and that a potential lapse in the regulations could complicate ongoing tenant negotiations. At the July 28, 2022 Planning Commission meeting, a few members of the public expressed both support for the adoption of a permanent ordinance and changes to the draft ordinance to allow ground floor medical uses and more expanded surgery uses.

Regulations in the Draft Ordinance
The draft ordinance includes changes to existing regulations and new regulations related to medical uses, and reflects the direction provided by both the City Council and Planning Commission, as well as staff’s recommendations. In order to achieve the intent of the direction provided by the City Council and Planning Commission and ensure internal consistency throughout various code sections, the draft ordinance includes certain new provisions and amendments to the existing medical code sections. In addition, certain provisions have been removed because they have been made Meeting Date: September 12, 2022

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redundant by the medical conversion provisions. A redline version of the ordinance is included as Attachment 2 to clarify all of the changes that are proposed. The proposed changes and new provisions are summarized below and include explanations to clarify the intent or reason for each regulation. Please note that the code sections correspond to the proposed language in the draft ordinance, and not necessarily to the code sections as currently written in the BHMC.

BHMC §10-3-1620.1.A – Registered Medical Buildings
This section has been revised to clarify the rights and benefits given to registered medical buildings, and removes provisions of the code that are no longer applicable or may create confusion. Prior to the enactment of the urgency ordinance, the medical building registration program was the method by which legal nonconforming rights to medical space could be preserved (since medical uses were otherwise prohibited by Ordinance No. 11-O-2602). The primary benefits of the registration process were that it documented the amount of medical space allowed within a building in perpetuity, and allowed for the medical use to be relocated within the building, including to the ground floor (if located in the pedestrian oriented area), or re-established if it was discontinued for a period of time. In addition, there are no extra restrictions on registered medical uses, such as restrictions related to surgery center uses. Since the conversion option now allows new medical uses to be established, the language of this section has been simplified and cleaned up to specify the rights given to registered medical buildings. Subsection A.1. was previously codified as §10-3-1620.1.B, but continues to provide certain rights for registered medical buildings. In addition, Subsection A.2. was previously codified as §10-3-1620.1.D, but has been consolidated into the section regarding registered medical buildings, since it only applies to such types of buildings moving forward.

BHMC §10-3-1620.1.B – Medical Use Overlay Zone
This section has been added to clarify that medical uses may also be approved through the Medical Use Overlay Zone and Planned Development entitlement process. This provision was previously included in the section that discussed the rights preserved by the medical registration process, but has been separated out with more simplified language to provide greater clarity.

BHMC §10-3-1620.1.C – Legally Nonconforming Medical Uses Most of the language in this section remains unchanged, but a title has been added to the section to aid with the understanding and use of the code.

BHMC §10-3-1620.1.D
This section has moved from BHMC §10-3-1620.1.E.

BHMC §10-3-1620.1.E
This section relates to cosmetic spas and was previously BHMC §10-3-1620.1.F, and a title of the section has been added to aid with the understanding and use of the code.

BHMC §10-3-1620.1.F – Establishment of New Medical Uses This section includes the new provisions that allow the conversion of existing commercial spaces to medical uses, and the establishment of new medical uses in newly constructed buildings. The section is based on the provisions of the urgency ordinance, which were previously codified as BHMC §10-3-1620.1.G.

The section contains the conditions under which new medical uses (medical uses Meeting Date: September 12, 2022

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that were not previously registered or legally nonconforming) may be established.

Per the direction of the City Council and Planning Commission, several conditions from the urgency ordinance have been removed from the proposed regulations, including the requirement for a tenant lease and business tax license, since these were conditions designed to prevent speculative conversions of commercial space to medical during the time period that the urgency ordinance was in effect. These conditions are as follows:
1) a prohibition on locating medical uses on the ground floor; This prohibition intends to preserve the pedestrian atmosphere and ensure that medical uses do not create adverse impacts to the retail and business synergy of commercial areas. At the May 10, 2022 City Council study session, the Council directed staff to explore the idea of possibly allowing ground floor medical uses in certain areas, or allow them after a certain setback (e.g., 40 feet from the façade), but did not come to a definitive conclusion that such a regulation would be appropriate. In addition, several Councilmembers expressed a desire to ensure that commercial areas remain pedestrian oriented, and stated that the urgency ordinance prohibition on ground floor medical uses seemed to function well. At the June 9, 2022 Planning Commission study session, the Commission discussed possibly allowing ground floor medical uses with a required setback from the façade of the storefront. While several Commissioners expressed support for allowing ground floor medical uses with a setback, staff recommends that even with a setback, a large number of medical uses on the ground floor of commercial areas may change the look and feel of spaces that are traditionally utilized for retail or other commercial uses. In addition, staff is concerned that a setback of 40 feet may not provide enough space to be attractive to retail or other tenants, and may lead to vacant ground floor spaces, detracting from the vibrancy of the commercial areas of the city. For this reason, the current draft ordinance does not provide for the option for medical uses on the ground floor, even if located toward the rear of a building. 2) a provision that allows ambulatory surgical care in one (1) operating room that is a maximum of ten percent (10%) of the overall floor area of the suite.

This provision is consistent with staff’s implementation of the urgency ordinance because of the understanding that the restriction related to “specialty clinics” may have been too restrictive if strictly applied as written. This is because specialists often perform ancillary surgical activities in the course of providing regular medical care (e.g., 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, which has allowed greater flexibility and medical uses that are consistent with the City Council’s intent related to the urgency ordinance. Per the direction of the City Council and Planning Commission, this provision has been included formally in the draft ordinance, and a definition for “ambulatory surgical care” has been included to further clarify the types of surgery uses that should be permitted under this provision. Although the Planning Commission previously expressed interest in potentially allowing Meeting Date: September 12, 2022

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expanded surgery uses beyond the allowance included in the draft regulations, given that such a change is related to several other issues (such as the issue of how medical uses are taxed), staff recommended that the draft ordinance not include more permissive standards for surgical uses than what has been implemented through the urgency ordinance. In addition, since the draft ordinance will need to become effective before the urgency ordinance expires in November to ensure there is no lapse in regulations, staff recommended that the discussion of the taxation issue is continued at some point in the future to avoid a delay in adopting this ordinance.

BHMC §10-3-1620.1.G – Review by the City Council
Per the direction of the City Council, this section has been added to require that the City Council review the implementation of the draft ordinance in approximately five years from the date of its adoption.

Change to the Definitions Section (BHMC §10-3-100)
A definition for “ambulatory surgical care” has been added to the code in order to clarify the types of surgical uses that are permitted on an ancillary basis within a new medical space.

Changes to the Permitted and Excluded Uses Sections (Various Sections) These changes have been included in order to bring the various commercial zone regulations into consistency with the medical use regulations section, by clarifying that medical uses are no longer prohibited, as long as they comply with the regulations of the medical use code sections.

Change to the Parking Requirement Table (BHMC §10-3-2730.B) The parking requirements for medical offices and medical laboratories has been updated to be consistent with the parking requirement in the urgency ordinance, of one parking space per 350 square feet of floor area.

Topics for Consideration
The City Council may wish to discuss the following topics as they relate to the proposed draft ordinance. This list of topics is not exhaustive, but is designed to highlight certain important discussion items for the Council, especially portions of the regulations that may not have been previously discussed.
 Medical uses in newly constructed buildings: The draft ordinance would allow new medical uses to be established within newly constructed commercial buildings. This is a slight change from the urgency ordinance, which only allowed the conversion of existing commercial spaces to medical uses. Staff recommends that this be permitted, given that medical uses could be established in a multi-step process in newly constructed buildings under the urgency ordinance. In addition, allowing new medical spaces in ground-up construction may encourage more state-of-the-art facilities to be established. The Council may wish to discuss if there should be any limitations applied to newly established medical uses in new construction.
 Ground floor prohibition: The draft ordinance maintains the prohibition on locating medical uses in ground floor spaces of buildings. However, at the July 28th Planning Commission hearing, members of the public expressed support for allowing ground floor medical uses under the draft ordinance. The Council may Meeting Date: September 12, 2022

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wish to discuss whether there is any instance, configuration, or location in which they might support ground floor medical uses.
 Surgery center prohibition: The draft ordinance also maintains the prohibition on surgery center uses, while allowing ancillary surgical uses within a medical suite.

At the July 28th Planning Commission meeting, members of the public expressed support for allowing more surgery uses, proposing that up to 50% of any individual suite be allowed for surgical uses. The Council may wish to discuss whether there is any interest in amending the allowable amount of floor area that surgical uses may occupy (currently set at one operating room that is no more than 10% of the overall floor area of the suite). If so, the Council may also discuss whether they wish to examine the taxation structure for medical uses in the future, and tentatively schedule this discussion for a future meeting.

ENVIRONMENTAL REVIEW
This project has been 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. Since the project is not related to any specific development proposal and do not enable any physical changes in the environment, there is no possibility that it may have a significant effect on the environment. In addition, the project reflects minor changes in land use limitations, and do not result in changes to land use or density. Accordingly, staff recommends that the City Council consider finding the project categorically exempt from CEQA pursuant to Sections 15061(b)(3) and 15305 of Title 14 of the California Code of Regulations because it can be seen with certainty that there is no possibility that a change to the regulations related to medical uses would have a significant effect on the environment.

FISCAL IMPACT
The adoption of the draft ordinance is not expected to have a direct fiscal impact on the City, and would not constitute a change to the City’s status quo since the urgency ordinance that has been in effect for the past couple of years contains many of the same regulations. While medical uses are taxed differently from other typical commercial uses, the long-term effects of allowing more medical uses in the City’s commercial zones is generally unknown. Modern medical uses may encompass several different uses within one office that are taxed under different categories, including retail sales. Thus, it is difficult to state that the change will be a net positive or net negative as far as tax revenues for the City overall.

Ryan Gohlich, AICP,
Director of Community Development
Approved By

AGENDA REPORT
Meeting Date: November 17, 2020
Item Number:

To: Honorable Mayor & City Council
From: Ryan Gohlich, AICP, City Planner / Assistant Director of Community Development
Timothea Tway, AICP, Principal Planner
Subject: 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
Attachments: 1. Urgency Ordinance

2. November 17, 2020 City Council Study Session Staff Report (No Attachments)

RECOMMENDATION
It is recommended the City Council adopt an urgency ordinance establishing emergency regulations related to medical uses in the City. These regulations would 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.

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 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 

EXHIBIT D
Meeting Date: November 17, 2020

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of commercial vacancies, medical uses may provide an increase in business tax revenue if they occupy such spaces.

INTRODUCTION
On September 15, 2020, staff presented information to the City Council about existing medical use regulations in the City. At this meeting, the City Council discussed a potential relaxation of the medical use ordinance regulations in order to help buffer 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. In addition, the City Council noted that the existing medical regulations may have created negative impacts for medical providers in the City, such as a de facto monopoly of medical space and artificially high rental rates due to the generally 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. This was presented at the Study Session on November 17, 2020 (report included as Attachment 2). Further, the City Council provided general direction regarding contents that should be incorporated into an urgency ordinance for consideration by the City Council, and decided 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 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 medical and not registered medical in order to provide flexibility for physicians as well as building owners at this time.
 Limit the provisions of the urgency ordinance to apply to primary care physicians and not 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
 Consider methods to track the medical uses permitted during the temporary period when the urgency ordinance is effective

DISCUSSION
Staff presented a discussion on existing medical regulations, previous City Council conversations, and recommended changes at the City Council study session on November 17, 2020 (Attachment 2). The recommended changes to the Beverly Hills Municipal Code included in Attachment 1 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 Meeting Date: November 17, 2020

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 Allowing new medical uses that meet certain criteria; currently, medical uses are permitted to occupy 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             - 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.

Susan Healy Keene
Director of Community Development
Approved By

Beverly Hills City CouncilSeptember 20, 2022

Beverly Hills City Council
September 20, 2022