CITY OF SAN MATEO
City Council Special Meeting
March 21, 2022
5:30 PM
COUNCIL MEMBERS
Rick Bonilla, Mayor
Diane Papan, Deputy Mayor
Joe Goethals
Amourence Lee
Eric Rodriguez
AGENDA
DUE TO THE STATE OF CALIFORNIA’S DECLARATION OF EMERGENCY – THIS MEETING IS BEING HELD PURSUANT TO AUTHORIZATION FROM GOVERNMENT CODE 54943(b)(3) / AB 361 (2021) – CITY COUNCIL AND COMMISSION MEETINGS ARE NO LONGER OPEN TO IN-PERSON ATTENDANCE.
ANYONE CAN WATCH AND PROVIDE COMMENTS REMOTELY IN THE WAYS DESCRIBED AT THE END OF THE AGENDA.
To join via Zoom – click here: March 21, 2022 Zoom Meeting To join via telephone: (408) 638-0968
Conference ID: 823 4338 6612 Passcode: 304973
CALL TO ORDER
Roll Call
CLOSED SESSION
The public will have an opportunity to comment before the consideration of these items. Following the meeting a report of action from Closed Session will be provided if required.
1. Conference with Legal Counsel – Existing Litigation, Workers’ Compensation (Paragraph (1) of subdivision (d) of Government Code Section 54956.9 Name of Case: Shanna Hughes
STUDY SESSION
The public will have an opportunity to comment during the consideration of these items.
2. 400 East 5th Avenue Parking Garage – Determination of Name Provide direction to staff for the name of the new parking garage that is being constructed in Downtown San Mateo at 400 East 5th Avenue.
3. Commercial Vacancy – Policy Review
Receive an update on the status of vacancy rates in Downtown San Mateo and provide direction to staff regarding policy options to discourage long-term commercial vacancies.
ADJOURNMENT
------------------------------------------------------------------------------------------------------------------------------------------ AGENDAS: Agendas and material are posted on the City’s website on the Friday preceding each Council Meeting and can be viewed on the City's website at www.cityofsanmateo.org . Any supplemental material distributed to the Council after the posting of the agenda will be made part of the official record.
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WATCHING A MEETING ON TV: City Council meetings are broadcast live on Comcast/channel 27, Wave/channel 26, or AT&T/channel 99.
For transmission problems during the broadcast, please call (650) 522-7099.
For all other broadcast comments, call (650) 522-7040, Monday-Friday, 8 a.m. - 5 p.m.
WATCHING A MEETING ON A COMPUTER: There are three ways to stream. 1) Public Meeting Portal www.cityofsanmateo.org/publicmeetings 2) City YouTube channel and stream it on YouTube: http://youtube.com/CityofSanMateo 3) Watch TV live stream: https://www.cityofsanmateo.org/193/Channel-San-Mateo-Live-Stream PUBLIC COMMENTS – Can be received in the following ways (Time limits will apply) :
Prior to the meeting in writing: Send comments to: [email protected] until 4 p.m. the day of the meeting.
During the meeting by computer: Click the link at the top of the agenda and you’ll be added to the meeting. All attendees are muted by default.
When the item of interest is open for consideration, select the “Raise Your Hand” icon and you will be called on at the appropriate time.
During the meeting by telephone: Call (408) 638-0968 and enter the conference ID found at the top of the meeting agenda. When the item of interest is open for consideration, select *9 to raise your hand. When called upon, press *6 to unmute, state your name and provide your comments.
ACCESSIBILITY: In compliance with the Americans with Disabilities Act, those with disabilities requiring special accommodations to participate in this meeting may contact the City Clerk’s Office at (650) 522-7040 or [email protected]. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. 2 of 8
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Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 2 Section Name: STUDY SESSION File ID: 22-5893 TO: City Council
FROM: Drew Corbett, City Manager
PREPARED BY: City Manager's Office
MEETING DATE: March 21, 2022
SUBJECT:
400 East 5th Avenue Parking Garage – Determination of Name RECOMMENDATION:
Provide direction to staff for the name of the new parking garage that is being constructed in Downtown San Mateo at 400 East 5th Avenue.
BACKGROUND:
On August 17, 2020, the City Council approved a Disposition, Development and Loan Agreement (DDLA), with MP Downtown San Mateo Associates, L.P., a subsidiary of Mid Pen Housing (Mid Pen), for the development of Kiku Crossing, an affordable housing project with 225 family rental units and a new public parking garage at the City-owned parking lots at 480 East 4th Avenue and 400 East 5th Avenue.
The existing Downtown parking garages are named based on their location or adjacencies. The names include the Main Street Garage, Transit Center, Central Garage, Tennis Court Garage, and 2nd and El Camino Garage. During the entitlement process, staff proposed naming the new garage the 5th Avenue garage since the sole ingress and egress is off of 5th Avenue between Claremont and Railroad Avenues. Members of the Central Neighborhood Association objected to the name of the new garage due to concerns that it would increase traffic on 5th Avenue.
Given that the garage is currently under construction and is anticipated to be completed by April 2023, the City needs to decide upon a name for the garage so that the appropriate signage can be ordered and installed. With the precedent in mind for how other Downtown garages have been named, staff compiled the following list of suggested names for Council consideration:
South-East Garage
Railroad Avenue Garage
5th and Railroad Garage
Kiku Garage
Other names may also be considered as part of the study session discussion.
BUDGET IMPACT:
Determining the name for the garage will have no impact on the project budget. The City has committed $5 million of parking in-lieu funds for the construction of parking garage, which are already appropriated for this purpose in the City’s Capital Improvement Plan.
ENVIRONMENTAL DETERMINATION:
The City evaluated the environmental impacts and adopted a Mitigated Negative Declaration for the development of the 3 of 8
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parking garage and associated residential project on August 17, 2020. The determination of the name of the garage is within the scope of, and is implementing, the approved project. None of the conditions requiring additional environmental analysis are present and therefore the City is relying on the Mitigated Negative Declaration that was previously adopted for this project. (CEQA Guidelines Section 15162.)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
None
STAFF CONTACT
Kathy Kleinbaum, Assistant City Manager
[email protected]
(650) 522-7153
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CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 3 Section Name: STUDY SESSION File ID: 22-5823 TO: City Council
FROM: Drew Corbett, City Manager
PREPARED BY: City Manager's Office
MEETING DATE: March 21, 2022
SUBJECT:
Commercial Vacancy – Policy Review
RECOMMENDATION:
Receive an update on the status of vacancy rates in Downtown San Mateo and provide direction to staff regarding policy options to discourage long-term commercial vacancies.
BACKGROUND:
At the October 18, 2021, City Council meeting, Council received a report on Downtown retail vacancies. After the report, Council directed staff to look at ways to encourage the leasing or activation of long-term, ground floor vacant retail sites.
This report provides an update on the vacancy rate in the Downtown and provides an analysis of policy options to discourage commercial vacancies for Council review and consideration.
Downtown Vacancy Rate
Business activity in Downtown San Mateo has remained resilient over the past 22 months, especially in light of the continued impact of the pandemic. In September 2021, staff canvassed the Downtown core (the blocks between Baldwin and 5th Avenue, and El Camino Real and Railroad Avenue) to identify vacant ground-floor storefronts. Staff updated the Downtown vacancy survey in February 2022.
The results of updated canvassing found that there were 29 vacant retail store fronts in the core area out of a total of 275 ground floor retail spaces. Of these vacancies (shown in the table below), staff found that 20 are actively looking for a tenant, 6 are being held vacant due to anticipated redevelopment and 2 are being held off the market due to the condition of the site or at the behest of the property owner. Additionally, there is 1 site that has a new tenant identified but has not yet begun their tenant improvements.
February 2022 September 2021
Type of Vacancy
Number of
Storefronts Percent
Number of
Storefronts Percent
Actively Looking for
Tenant 20 7% 18 7%
New Tenant Identified 1 0.4% 6 2%
Held for Redevelopment 6 2% 6 2%
Off Market 2 1% 2 1%
Total 29 10% 32 12%
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Removing the properties that are actually leased to a new tenant but still appear to be vacant, the vacancy rate in the Downtown increased slightly from 9.45% to 10.1%.
Policy Options
Vacant storefronts are part of the normal lifecycle of a property as businesses close and spaces turn over. However, if Council finds the current level of vacancy to be unsatisfactory, Council may want to consider policies to discourage vacant properties. Staff has analyzed policies adopted by neighboring cities created as a means to incentivize the leasing of buildings, storefronts, homes and development of undeveloped/raw land.
Vacancy Tax
A vacancy tax can create a sense of urgency for property owners to lease, develop, or utilize unoccupied commercial and residential units. Vacancy taxes impose an annual levy for unoccupied properties on the property owners or lease holders when they have been vacant for a certain specified period of time. The cities of San Francisco and Oakland have recently passed vacancy taxes.
In March 2020, the City of San Francisco passed Proposition D, Commercial Vacancy Tax with 70% voter approval. As of January 1, 2022, property owners and lessees are subject to an annual tax for ground floor commercial space that have remained vacant for more than 182 days (six months). San Francisco’s Commercial Vacancy Tax rate is $250 per linear foot of store frontage the first year, doubles to $500 per linear foot the second year, and tops out at $1,000 per linear foot each year after. The levy applies to leased but vacant commercial space as well. In such cases, the tenant or lease holder would be responsible for the tax. Since the typical frontage for a commercial property serving a neighborhood is around 25 feet, a landlord or lessee of a vacant property would pay $6,250 in the first year, $12,500 in the second year, and $25,000 in the third year. Payment of the commercial vacancy tax begins in January 2023.
In November 2018, the City of Oakland passed Measure W, Vacant Property Tax with 70% voter approval. Since July 1, 2020, property owners have been subject to an annual tax on undeveloped parcels as well as vacant commercial and residential lots, if the parcel has been used for less than 50 days in a calendar year. Oakland’s Vacant Property Tax rate ranges from $3,000 to $6,000 per parcel depending on the property type. Parcels with commercial activity permitted, but remain vacant, are required to pay $3,000 annually. Vacant condominiums and townhouses are required to pay $3,000 per unit annually. Unoccupied residential and undeveloped/raw parcels are required to pay $6,000 annually. Oakland’s vacant property tax rate does not escalate with each additional year the parcel remains vacant. Non-profits, low income seniors, and property owners with hardships can file an exemption allowing the property owner relief from the tax. Oakland’s Vacant Property Tax ends December 31, 2039.
Property owners in the City of San Francisco and the City of Oakland have complained that the tax is unfriendly to businesses and unfairly penalizes the property owners for a weakened retail market that is out of their control.
Additionally, commercial retail brokers spoke out that the vacancy tax does not expedite the leasing of vacant property or lower landlord expectation of lease rates because there is a limited number of retail businesses seeking a brick and mortar location. This is because retailers have increased their sales online through Amazon, eBay, Shopify, Etsy, Ratuken as well as other e-commerce platforms. The COVID-19 pandemic has only expedited this shift to online shopping. As consumers felt more comfortable with online shopping, more businesses have continued to invest in their online retail store.
Consequently, there is less demand for retailers to have a brick and mortar location to sell their products.
San Francisco’s vacancy tax is in its first year of implementation and the City is still working throught its collection process.
When the property owners in Oakland received notification of their vacancy tax bill, property owners flooded City Council meeting in protest due to lack of financial means to pay for the vacancy tax, confusion if the vacancy tax applies to their property, and objections from non-profits in the process of developing vacant land for low-income housing or other projects. The outrage from the property owners caused Oakland’s City Council to create an extensive list of exemptions that effectively reduced or eliminated the vacancy tax for over 60% of the property owners in Oakland. 6 of 8
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Before a vacant tax could be implemented, the City must draft a vacancy tax ordinance that must be put forth before voters for consideration. If the tax is structured as a special tax (meaning that the revenues are designated for a specific purpose or purposes), it must be approved by 2/3 of the voters. If the tax is structured as a general tax, it must be approved by a majority of the voters. If Council decides to pursue this option, a significant amount of groundwork to prepare the draft policy for a possible ballot measure would need to be completed. As a result, the earliest timing that this could be placed on a ballot would be November 2024.
Vacancy Registration Program
In May 2018, the San Jose City Council approved a Neglected, Vacant, or Abandoned Building and Storefront Mandatory Registration program. As a registration program, as opposed to a tax, this program did not require voter approval and was adopted by the City Council. Property owners must register buildings or storefronts in the Downtown that have been vacant for more than 30 days. The registration fee is $220 per quarter and is billed quarterly. In addition to the registration fee, property owners are also subject to a $660 per quarter per vacant building monitoring fee. Thus, a storefront that has been vacant for a year would pay $880 in registration fees and $2,640 in monitoring fees for a total of $3,520 in annual fees. Additionally, property owners are subject to any code violations found by a Code Enforcement inspector while monitoring the property. Property owners actively leasing storefronts represented by commercial brokers or with “for lease” signs on the properties and buildings or have tenants actively going through the permit process are exempted from the vacancy registration and vacancy monitoring fees. San Jose’s Neglected, Vacant, or Abandoned Building and Storefront Mandatory Registration program is managed by the City’s Code Enforcement Division. With the fees collected, Code Enforcement maintains the vacancy registry, manages communication with property owners, conducts proactive and complaint-based inspections of properties, administers registration fees and fines, and oversees the program’s appeals hearing process.
18 months after implementation of the vacancy registration program, the City of San Jose reviewed the Neglected, Vacant, or Abandoned Building and Storefront Mandatory Registration program in June 2020 and declined to expand the program City-wide. At the time of the review, there were 22 active vacant registries. San Jose city staff did not find the program to be a significant catalyst in tenanting long-term vacant storefronts in prominent locations in the Downtown.
However, staff did find that the frequent monitoring of vacant sites and buildings deterred urban blight, crime, and decay in a more proactive, comprehensive, and timely manner. When the City of San Jose created its vacancy registration program, the City added a full-time code enforcement position to implement the program. Similarly, it is likely the City would need to increase Code Enforcement staffing levels in order to successfully implement this program. If Council is interested in the creation of a vacancy registry and monitoring program, staff would draft an ordinance for City Council approval, and the ordinance would be effective 30 days after Council approval.
Allowing for Pop-Up Retail
At the October 2021 Study Session, the question was raised about whether any existing City policies discourage or prohibit the ability of property owners to allow for pop-up retail in vacant storefronts. Pop-up retail is a retail store that is opened for a brief period, generally less than 6 months, to take advantage of a hot trend or a temporary, seasonal demand. Often the demand for the products sold at pop-up retailer is short-lived, such as pop-up stores that sell holiday crafts and items.
The Halloween Spirit chain store is an example of a retailer that has an on-line retail site and opens pop-up stores in vacant storefronts for a few months leading up to Halloween.
After reviewing the Municipal Code, staff concluded that the City does not have any policies in place that limit or prohibit pop-up retailers from occupying existing commercial spaces. As long as the pop-up retailer does not require the construction of tenant improvements, the business owner only needs a City business tax license, as the use is allowed under current zoning. If the pop-up retailer wants signage or functional changes to the space, it would require building review as well as additional permits. Depending on the business, the pop-up store would still be required to have other County or State permits as required by law.
A concern some property owners may have that prevents them from seeking pop-up uses is difficulty leasing a vacant property to a larger, or longer-term tenant, if the pop-up user refuses to vacate the property when their short-term lease 7 of 8
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ends. However, some property owners may desire the aesthetic value a bustling pop-up business can bring to the vacant site and the ability to show off the vacant space to potential long-term retailers. Given that pop-up retail leases are a direct transaction on the private market between tenants and property owners, the City cannot play any direct role in creating pop-up retail in vacant commercial spaces. That said, when and if any pop-up retailers contact the City in search of spaces, staff will refer them to known vacant locations that may suit their needs.
BUDGET IMPACT:
The implementation of a vacancy tax and/or vacancy registry would result in additional costs to the City for implementation and oversite of the programs, which may be partially or fully covered by the fees generated by the programs. In addition, a vacancy tax would require voter approval and therefore would require a funding allocation to cover the ballot costs. A full analysis of the costs of implementing either program has not been completed at this time.
ENVIRONMENTAL DETERMINATION:
In accordance with Public Resources Code Section 21065, this review of policy options is not a project subject to CEQA, because the City Council is not taking action at this time.
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
None.
STAFF CONTACT
Jennifer Chen, Economic Development Manager
[email protected]
(650) 522-7009
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