City Attorney

Deputy City Attorney

DIRECT DIAL: (415) 554-4620

September 23, 2004

Rodrigo Santos, President, and
Members of the Building Inspection Commission
City and County of San Francisco
1660 Mission St., Sixth Floor
San Francisco, CA 94103

Re: Consolidated Appeals -80 Natoma Street; Myers Development
Co. v. City and County of San Francisco, S.F. Superior Court Action No. 504-378

Dear President Santos and Members of the Commission:

This Office represents the City in the above referenced lawsuit brought by Myers Development Company (MDC), the developer of the 80 Natoma Project, against the City. This letter concerns the appeals by MDC and TRANSDEF of DBI Director Frank Chiu's suspension of the building permit for MDC's project.

MDC's appeal charges that Director Chiu's suspension of MDC's 2003 site permit was improper. MDC's lawsuit against the City claims that the Director's suspension of the permit was a pretext to delay construction of the 80 Natoma Project so that the City and the Transbay Joint Powers Authority (TJPA) could acquire 80 Natoma for the Transbay Terminal Project. There is no merit to MDC's claim. At the time the Director suspended MDC's permit, the Director had before him credible evidence that (1) the permit had expired due to the owner's failure to timely proceed with construction, and (2) there was new geotechnical information regarding the engineering of the proposed 80 Natoma Project that suggested the settlement of the proposed 50-story tower would be substantially greater than DBI had been led to believe when it initially approved the permit, settlement that could lead to catastrophic consequences. Under Building Code Sections 102, 104.2.1, 106.4.5 and caselaw, the Director was fully authorized to suspend the permit for a reasonable period in order to investigate these alleged defects. Indeed, the Director would have been remiss in his duties if he allowed the 80 Natoma Project to proceed without a thorough investigation of the questions surrounding the permit.

Following an investigation, Acting Director Jim Hutchinson has concluded that MDC's 2003 permit has not expired and that the 2003 permit superseded the earlier permits. But because MDC has proposed a significant alteration of the foundation to allow colocation of the 80 Natoma Project with the Transbay Terminal, the issue of the safety of the design that is the subject of the appeal has essentially been tabled. Substantial safety issues remain, however, that have not been resolved with regard to that design.

The Commission is also considering TRANSDEF's appeal in which it requests that the Commission continue the suspension of MDC's 2003 permit, or revoke the permit entirely, because Proposition H prohibits the City from taking any action that would interfere with the Transbay Terminal Project. This Commission reviews the appeals of the suspension of MDC's permit in its regulatory capacity. The Transbay Terminal Project is a public project. To implement the Transbay Terminal Project as required by Proposition H, the City acts in its proprietary capacity. In many situations similar to the instant case, this Office has consistently advised all City commissions, departments. and officials that were the City to use its regulatory authority to interfere with the development, use, financing, or sale of private property for the purpose of advancing a proprietary interest of the City, there is a significant risk that the City could be subject to suit by the property owner for damages for a regulatory taking under Article 1, Section 19 of the California Constitution, as interpreted by the Supreme Court in Klopping v. City of Whittier (1972) 8 Cal.3d 39 and related cases. Under this established line of case law, the property owner could seek damages not only for the diminution in the value of the property, but also additional damages incurred as a result of any improper interference, as well as attorneys' fees and costs. The City could face this risk of damages regardless of whether the property owner has vested rights to complete construction of a particular development.

Moreover, whenever possible, courts will interpret a statute in such a way as to avoid constitutional infirmity. (Alameida v. State Personnel Bd. (2004) 120 Cal. App. -4th 46, 56; People v. Vasquez (2004) 118 Cal. App.4th 501, 506.) If there were a potential application of Proposition H that could be unconstitutional, such as a regulatory taking as described above, then a court would likely construe the measure to avoid that application. Accordingly, and consistent again with advice this Office has given in similar situations, while Proposition H clearly prohibits the City from taking any action in its proprietary capacity that would interfere with the Transbay Terminal Project, a court may conclude that Proposition H's ban does not extend so far as to limit the City's actions when acting solely in its regulatory capacity for a private development project.

Very truly yours,

City Attorney

Deputy City Attorney

Catharine Barnes (Attorney for BIC)
Michael Coffino (Attorney for MDC)
Alice S. Y. Barkley (Attorney for TRANSDEF)
David Skinner (Attorney for TJPA)