Court denies South City tax district

Attorney Ben Reznik, who represents the company owning two large office buildings included in the small district boundaries crafted by city officials, lauded the court’s ruling.

“The reason we thought it was unfair is that they were basically dragging an existing property owner who has had property there for 25 years into a community facilities district so they could force our client to pay some of the taxes to defray their cost,” Reznik said of city officials.

The court’s decision Friday, March 8, found South San Francisco officials overstepped their authority in attempting to establish the narrow district boundaries which would have only included Kashiwa Fudosoan America’s property, city land and an area targeted for a massive commercial building proposed by Oyster Point Development.

South San Francisco officials are now faced with a decision to appeal to a higher court or identify another funding mechanism for a portion of the nearly $70 million worth of work.

For his part, City Attorney Jason Rosenberg said city officials disagree with the court’s findings and are planning their next steps over whether to challenge the ruling.

“The city respectfully disagrees with the judge’s ruling and is currently considering its options, including appeal,” said Rosenberg, who opted not to offer more details on the city’s position.

City officials voted last year with Oyster Point Development to form a supermajority of landowners in favor of the district, overriding Kashiwa Fudosan America’s opposition as the third landowner.

Under terms of the proposed tax, the developer would have been required to pay 7 cents per square foot of property owned while the infrastructure work goes on and an additional 32 cents per square foot in perpetuity. The city was expected to largely exempt itself from paying the tax, while Kashiwa Fudosan America was offered to pay a reduced rate.

The court though found the city was not qualified to coordinate such an effort, due partially to concerns associated with including land in the district which is regulated by the San Francisco Bay Conservation and Development Commission.

The court also found that the city was not a qualified landowner, for the purposes of voting in the special election required to form the district. City officials had planned to pay a small portion of the tax required by the facilities district once a hotel was built on the property, but a majority of the tax burden would be shouldered by the two other landowners.

With a disagreement regarding the city’s authority, the court ultimately determined insufficient votes existed to require the district’s establishment.

For his part, Reznick said Kishiwa Fudosan America is satisfied with the outcome of the court case.

“They are very, very pleased because the alternative means our client would have been on the hook for paying taxes forever and ever without getting any benefit out of it and that would have reduced the value of their property,” he said.

Furthermore, Reznick said he considered the district’s proposed formation an especially egregious attempt at government overreach, which essentially would have rigged the system to require his client to pay an estimated additional $200,000 in taxes.

“I’ve been doing land use zoning work in California for 41 years, and I found this a very arrogant approach,” said Reznick.

austin@smdailyjournal.com

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