Excerpted from San Francisco Planning and Urban Research Association Newsletter, Report 403
The nation's and Bay Area's economies are evolving rapidly. New industries continue to evolve in sectors that may be as hard to imagine as the Internet was only a decade ago. Accommodating new businesses that don't fit our conventional vision of "office" or "laboratory" or "manufacturing" is a challenge for San Francisco. The city is currently handicapped by antiquated land use categories, many of which were drafted decades ago, that don't appropriately address the issues raised by these new uses, as well as obsolete "ndustrial" use zoning in large areas of the city. The southeast quadrant of the city, in particular, has underutilized land that has promise to accommodate both business growth and the city's housing needs, but the challenge of planning for change is barely underway, and we may miss our current opportunity to plan for rational growth before the next wave hits.
The city's effort to accommodate new uses and re-plan large areas of the city is complicated by the city's political environment, in which change of any sort is often opposed, and economic development is frequently seen only a means of gentrification. The irony of the anti-gentrification model is that it can result in locking up large areas for dying "old economy" uses (e.g., printing companies and clothing sweat shops) rather than allowing new uses, which can offer better opportunities for a broad spectrum of residents.
The Information Technology (IT) and biotech sectors are not well described in current zoning language. While other Bay Area cities also have zoning that fails specifically to address IT and biotech uses, they nonetheless have been better able to accommodate these new uses under broad "light industrial" and "research and development" categories. In San Francisco, however, flexible zoning is complicated by the constraint of the Proposition M cap on office construction and the politics that surround this growth control measure, first enacted in 1986. The question of how much "office use" a particular business includes has become an all important litmus test. It is in this context that this article explores how the city has tried so far to address IT and biotech uses, and provides some suggestions for further action.
IT, including companies variously described as "multimedia," "Internet," and "dot-com," grew from essentially nothing in the early 1990s to become a major force in San Francisco's economy. In the last year, the IT sector experienced a severe contraction, but it will certainly still play a major role in San Francisco s evolving economy. Modern biotech also has become a major sector in the Bay Area only since the mid-1980s. San Francisco currently is not a major player in the biotech sector, while nearby South San Francisco and Emeryville are major biotech centers. UCSF's presence in the city provides a natural magnet to attract biotech companies. Virtually all of the provisions of the Planning Code which have been considered to address these new industries were adopted long before the rise of IT and biotech. IT, "multimedia," "Internet Technology," etc. are not defined or specifically dealt with under the code.
From approximately 1997 through 2000, the city accommodated much of the explosive growth of IT by Zoning Administrator ("ZA") determinations that such uses were "business services" or light industrial rather than office. Some viewed these determinations as evasions of Prop. M and the office growth cap, or as violations of office restrictions in some South of Market districts. Others saw it as a reasonable distinction between these new uses and traditional office uses. This profound difference of opinion led to Propositions K and L on the November 2000 ballot. While both growth control measures failed, the ZA decided that IT uses generally would be considered "office" in the future. The status of "business service" properties remains ambiguous, and the resolution of this controversial issue provides little satisfaction to neighborhoods, property owners or businesses.
Until recently, the city had not confronted how to apply the current code to biotech uses. However, in response to Catellus' plans for a biotech building at Mission Bay, Planning Department Director Gerald Green issued a letter addressing to what extent a biotech building would be subject to the office allocation process. In general, Green recognized that laboratories and lab-related workstations would not be considered office uses; however, various executive and administrative functions of biotech companies (e.g., personnel, accounting, sales, etc.) would be considered office uses, and "science support or science administration" space could be subject to the office allocation process if it exceeded 25,000 square feet. However, it is not yet clear how and when biotech space requires an office allocation, and the concern is that another cycle of lawsuits and initiatives could erupt. More importantly, it is questionable whether applying office rules to functions of biotech companies makes any sense from a policy perspective.
RATIONALIZING THE CITY'S RULES
FOR "IT" AND BIOTECH USES
The severe contraction of the city's IT sector and the general economic slowdown, with accompanying high office vacancy rates in the city, have shifted the focus away from how to deal with IT and biotech uses. However, it is predictable that the economy will recover and the space demands of these uses again will increase. Rather than waiting for the next crisis, the city can and should use the current respite to begin to fashion comprehensive, intelligent and clear rules for these sectors. In doing so, the city would do well to consider the following:
- Sufficient space should be available for IT and biotech uses to allow a critical mass for the long-term survival and growth of these sectors.
- Generally, IT and much of biotech are low impact "good neighbors" from both planning and environmental standpoints. A mix of some uses, to include housing, may make sense in many areas.
- The city should move quickly to resolve the status of buildings which were legally built or converted for IT uses but are currently severely underutilized, and yet legally constrained in many cases from conversion to other viable new uses. New and existing IT uses should be able to lease space for similar uses without the delay and uncertainty that results from current policy.
- A process should be developed for excess "business services" space to be legally used for a broader category of uses, including housing where appropriate. Leaving spaces unoccupied and their sponsors at financial peril serves no legitimate social purpose. (Converting to full "office" status may be an option for some, but is constrained by use rules - "office" is not permitted in some Mixed Use districts - and there are likely to be constraints on the amount of "office space" available for approval for several years).
- The city should revise the Planning Code and General Plan specifically to address IT and biotech uses, including emerging sectors which may become important in the future. The city should not be unduly constrained by past disputes (e.g., whether space is or isn't "office" under some 1985 definitions), but rather look at the characteristics of these uses and their impacts, and why they might or might not be appropriate in different zones. The new rules should be drafted with an eye toward administrative simplicity, predictability and enforceability. The rules should incorporate performance criteria flexible enough to address new uses.
- The city should evaluate IT and biotech from a broad policy perspective. Prop. M should not be allowed to distort the process. If substantial portions of IT and biotech activities might arguably be "office" under the Prop. M office definition, policymakers should adopt different rules, even if this means amending Prop. M. The city's long-term health, including employment opportunities for many of the city's current disadvantaged residents and revenues to support important social programs, depend on a healthy city economy. Undue restrictions on the biotech and IT sectors serve no legitimate purpose.
- Beyond land use reforms, the city should develop educational and training programs that will provide the greatest opportunities for disenfranchised San Francisco workers to be re-deployed into IT and biotech.
Timothy Tosta and Steve Atkinson are attorneys at the law firm of Steefel, Levitt & Weiss.