Regulating Non-Chartered Financial Institutions; Amending BMC Titles 23F and 23E

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1 Office of the City Manager CONSENT CALENDAR June 23, 2015 To: From: Honorable Mayor and Members of the City Council Christine Daniel, City Manager Submitted by: Eric Angstadt, Director, Planning & Development Subject: Regulating Non-Chartered Financial Institutions; Amending BMC Titles 23F and 23E RECOMMENDATION Adopt first reading of an Ordinance amending Berkeley Municipal Code (BMC) Sections 23F , 23E , 23E , 23E , 23E , 23E , 23E , 23E , 23E , 23E , 23E E , 23E , 23E , 23E , 23E , 23E , 23E , 23E , and adding section 23E , to define and regulate Non-Chartered Financial Institutions (NCFIs). SUMMARY The Planning Commission has responded to the Council referral regarding the control of check cashing stores through the Zoning Ordinance. The response is a set of draft Zoning Ordinance amendments that redefine and separate the business types, restrict their presence in Berkeley to a limited set of districts and to a total of four such institutions citywide, set a requirement for distance between the businesses, and establish a high level of discretionary review. The Commission considered a number of options and reviewed ordinances from several other jurisdictions in coming to its recommendations. FISCAL IMPACTS OF RECOMMENDATION None. CURRENT SITUATION AND ITS EFFECTS Check Cashing Stores as currently defined in the Zoning Ordinance are allowed in most commercial districts in Berkeley. There are a total of four institutions offering check cashing, payday loan, auto loan and other products in the City. These uses are currently classified as Financial Services, Retail in the Zoning Ordinance, with establishment of new check cashing businesses requiring discretionary review. While these businesses are commonly referred to as check cashing stores, they often offer a range of loan products, including payday loans and car title loans Milvia Street, Berkeley, CA Tel: (510) TDD: (510) Fax: (510) manager@cityofberkeley.info Website:

2 Regulating Non-Chartered Financial Institutions; Amending BMC Titles 23F and 23E CONSENT CALENDAR June 23, 2015 At the State level, payday lending, check cashing and automobile equity loans are regulated by the California Department of Business Oversight (DBO). The Federal Consumer Financial Protection Bureau (CFPB) is considering national level rules on these types of businesses. These restrictions would focus on required verification of income and ability to repay a loan. However, without existing rules that adequately protect consumers, many local jurisdictions have sought to restrict check cashing and payday lending establishments through their zoning ordinances. The City Council referral dated April 30, 2013 (Attachment 2) directs that the Commission consider restricting the proliferation of new check cashing stores in Berkeley through the Zoning Ordinance. A review of the literature shows a diversity of opinions regarding non-banking services such as check cashing, payday and auto equity loans. Some resources suggest that these businesses perform a necessary service where typical banking services are not available to low income residents. Others suggest that the business practices and products trap low income residents in high cost loans, with dire outcomes. The primary concerns raised about these businesses include: The cost of loans, with interest rates and fees that typically reach annual percentage rates of % or more, which can result in consumers becoming trapped in a cycle of debt and a debt obligation well beyond the principal of the initial loan. The creation of an inequitable two-tiered financial system that severely disadvantages low-income communities and communities of color that disproportionately rely on NCFIs when traditional banking services are inaccessible. The lack of transparency of the loan businesses compared to banking industry standards, often affecting consumers ability to understand the potential outcomes and pitfalls of the loans. The proliferation of these companies and products with unclear regulation and oversight from government agencies. Locations of NCFIs in Berkeley Staff found that the four existing NCFIs are located in census tracts with median household incomes that are low income (below 80 percent of the Area Median Income), though none are in the City s lowest income tracts. Three businesses were originally licensed by the California Department of Business Oversight in December 2004, while another was licensed in 2013, suggesting that NCFIs are not likely to locate in Berkeley in large numbers. While they are not clustered, three of the four are current NCFIs are located along San Pablo Avenue, suggesting that they are more likely to locate along major transit corridors. See the map (Attachment 3) for Berkeley locations. Page 2

3 Regulating Non-Chartered Financial Institutions; Amending BMC Titles 23F and 23E CONSENT CALENDAR June 23, 2015 Overview of the Council Referral The referral directed the Planning Commission to consider the following regulatory approaches: 1. Amending the definition of Financial Services, Retail in the Zoning Ordinance (23F ) by striking references to check cashing stores and also establishing a new definition and use category in the ordinance for check cashing stores/payday lenders. 2. Prohibiting new check cashing stores in all commercial zones or increasing the level of discretion required for zoning permits for new check cashing stores to a Use Permit/Public Hearing in all commercial zones. 3. Adopting an ordinance model similar to the City of San Jose s, that identifies a maximum cap of payday lending establishments and requires distance buffers between them. The San Jose ordinance establishes a buffer of 1,320 feet from a parcel with another payday lending business, as well as 1,320 feet from the boundary of a very low income census tract (with a median household income that is 50% or less than the Area Median Income), as identified by the most recently available American Community Survey data. BACKGROUND The Planning Commission s review and analysis of the issues and possible resolutions identified in the referral suggested a more comprehensive recommendation, intended to more clearly define and control all similar types of businesses across a range of financial products. The Planning Commission considered the Council referral over four meetings in 2014 and 2015, materials from which are available in Attachments 4 and 5. Commission Considerations The Commission decided that amendments to the Zoning Ordinance should take into account all non-chartered businesses that offer a range of financial products, not just check cashing stores. The recommendations identify NCFIs to include the range of similar financial businesses that negatively impact communities. The new definition leaves open the opportunity to identify new business models, not yet developed, to be considered of similar type if appropriate. At a Public Hearing on April 15, 2015 the Commission considered draft Zoning Ordinance language to define Non-Chartered Financial Institutions (NCFIs); amend Financial Services, Retail, and establish recommended regulations for NCFIs. The Draft Zoning Ordinance language (Attachment 1) includes the following components: 1. Amendments to Section 23F Definitions to add Non-Chartered Financial Institution and change the definition of Financial Services, Retail (Sections 1 and 2). Page 3

4 Regulating Non-Chartered Financial Institutions; Amending BMC Titles 23F and 23E CONSENT CALENDAR June 23, Addition of Section 23E to Chapter 23E.16, Special Use Standards, that establishes broad rules for Non-Chartered Financial Institutions throughout the City (Section 3). 3. Changes to the.030 and.060 sections ( Uses Permitted and Use Limitations ) of each commercial district chapter in Sub-Title 23E, Provisions Applicable in All Non-Residential Districts, to specify the rules related to NCFIs for each district (Sections 4 through 21). Definition: The recommended definition for Non-Chartered Financial Institutions is based on San Mateo County s zoning ordinance. The term Non-Chartered Financial Institutions was intentionally chosen as a broad term that can be used flexibly enough to remain relevant to any changes in the business models employed or products offered by NCFIs. This approach is intended to prevent confusion that other cities have experienced when trying to classify similar business types. Further discussion of the options for definitions that the Commission considered can be found in the attached December 3, 2014 staff report. In addition to the April 15 motions to approve the draft zoning language, on February 18, the Commission also made the following motion recommending that regulations for NCFIs should not apply to retail sellers who provide check cashing as a service that is incidental to their main business (two such businesses currently operate in Berkeley). This motion clarifies the definition of NCFIs. Motion/Second/Carried (Pollack/Matthews) to approve staff s recommendation to exclude retail sellers who provide check cashing as a service that is incidental to its main business from the draft definition of Non-Chartered Financial Institutions that will be discussed at an upcoming public hearing. Ayes: Eric Panzer (substitute for Karen Chapple), Deborah Matthews, Tracy Davis, Stephen Murphy, Jim Novosel, Harry Pollack, Elizabeth Lam, Gene Poschman & Patrick Sheahan (substitute for Benjamen Bartlett). Noes: None. Abstain: None. Absent: None. ( ) The draft zoning language was approved by the Planning Commission on April 15, 2015 with the following motions (PC minutes, Attachment 6): Motion/Second/Carried (Poschman/ Novosel) to support the staff report recommendations regarding changes to the definitions of Financial Services, retail and the addition of Non-Chartered Financial Institutions to the Zoning Code. Ayes: Stephen Murphy, Deborah Matthews, Harry Pollack, Gene Poschman, Elizabeth Lam, Benjamen Bartlett, Karen Chapple, & Tracy Davis. Noes: None. Abstain: None ( ). Page 4

5 Regulating Non-Chartered Financial Institutions; Amending BMC Titles 23F and 23E CONSENT CALENDAR June 23, 2015 Motion/Second/Carried (Matthews / Lam) to recommend a numerical cap of 4 NCFIs allowed in the City. Ayes: Stephen Murphy, Deborah Matthews, Harry Pollack, Gene Poschman, Elizabeth Lam, Benjamen Bartlett, Karen Chapple, & Tracy Davis. Noes: None. Abstain: None ( ). Motion/Second/Carried (Novosel / Davis) to recommend the limitation of NCFIs as a permitted use to Avenue Commercial districts only. Ayes: Stephen Murphy, Deborah Matthews, Harry Pollack, Gene Poschman, Elizabeth Lam, Benjamen Bartlett, Karen Chapple, & Tracy Davis. Noes: None. Abstain: None. ( ). Motion/Second/Carried (Novosel / Matthews) to recommend the implementation of a quarter-mile distance requirement (buffer) between NCFIs. Ayes: Stephen Murphy, Deborah Matthews, Harry Pollack, Elizabeth Lam, Benjamen Bartlett, Karen Chapple, & Tracy Davis. Noes: Gene Poschman. Abstain: None. Absent: None ( ). ENVIRONMENTAL SUSTAINABILITY The regulation of Non-Chartered Financial Institutions does not have a direct affect on environmental sustainability or the City s intent to reduce its carbon footprint. CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) The proposed changes would be exempt from the California Environmental Quality Act, pursuant to Guideline Section 15061(b)(3), because the proposed regulations are controls that reflect community concerns and not an environmental impact as described by CEQA. The proposed amendments would not have a significant effect on the environment because the type of Commercial use is already allowed in the City Commercial Districts and the proposed regulations would not measurably or environmentally affect that current allowance and required project specific analyses. RATIONALE FOR RECOMMENDATION The draft Zoning Ordinance changes respond to the Council referral by limiting the number of NCFIs in Berkeley to four, while creating more clear definition and regulation, so that similar businesses will be extremely limited in locations and regulated at a high level. ALTERNATIVE ACTIONS CONSIDERED The Commission considered a wide range of options, including a citywide prohibition of NCFIs, modifications to the proposed definition, different zoning district applicability and distance requirements between NCFIs. CONTACT PERSON Alex Amoroso, Principal Planner, Planning & Development, Page 5

6 Regulating Non-Chartered Financial Institutions; Amending BMC Titles 23F and 23E CONSENT CALENDAR June 23, 2015 Attachments: 1: Ordinance 2: Council Referral, 4/30/2013 3: Berkeley NFCIs Location Map 4: Planning Commission Reports, 10/15/2014, 12/3/2014, 2/18/2015, 4/15/2015 5: Public Hearing Notice, 4/15/15 6: Planning Commission Minutes, 4/15/2015 Page 6

7 ORDINANCE NO. -N.S. AMENDING BERKELEY MUNICIPAL CODE CHAPTERS 23F.04, 23E.36, 23E.40, 23E.44, 23E.48, 23E.52, 23E.56, 23E.60, 23E.64, 23E.68, AND ADDING SECTION 23E , TO DEFINE AND REGULATE NON-CHARTERED FINANCIAL INSTITUTIONS BE IT ORDAINED by the Council of the City of Berkeley as follows: Section 1. That Berkeley Municipal Code Section 23F Definitions is amended to add the following definition: Non-Chartered Financial Institution: A use, other than State or Federally chartered bank, credit union, mortgage lender, savings and loan association or industrial loan company, that offers deferred deposit transaction services or check cashing services and loans for payment of a percentage fee. The term non-chartered financial institution shall include, but is not limited to deferred deposit transaction (payday loan) business that makes loans upon assignment of wages received, check cashing businesses that charge a percentage fee for cashing a check or negotiable instrument, and motor vehicle title lenders who offer short-term loan secured by the title to motor vehicles. The term Non-Chartered Financial Institution shall not include non-profit financial institutions or retail sellers engaged primarily in the business of selling consumer goods to retail buyers, that cash checks or issue money orders as a service to its customers that is incidental to its main purpose or business. Section 2. That Section 23F Definitions, Financial Services, Retail of the Berkeley Municipal Code is amended to read as follows: Financial Services, Retail: An office, open to the public, offering teller or counter financial services including either cash, checking and/or savings account transactions or some combination thereof, including, but not limited to, banks, Check Cashing Stores, savings and loans and credit unions offering such services at that location. Financial Services, Retail, shall not include Non-Chartered Financial Institutions. Section 3. That Section 23E is added to the Berkeley Municipal Code to read as follows: 23E Non-Chartered Financial Institutions

8 A. Non-Chartered Financial Institutions shall be permitted only within General Commercial (C-1), South Area Commercial (C-SA), Telegraph Avenue Commercial (C-T) and West Berkeley Commercial (C-W). B. No more than four (4) Non-Chartered Financial Institutions as defined in 23F shall be permitted in the City. C. Non-Chartered Financial Institutions may not be located within a radius of 1,320 feet of another Non-Chartered Financial Institution. Section 4. That Section 23E , Uses Permitted, Offices subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Table 23E Use and Required Permits Use Classification Special Requirements (if any) Offices Financial Services, Retail (Banks) AUP** Insurance Agents, Title Companies, Real Estate Agents, Travel Agents ZC* Medical Practitioners, including Holistic Health and Mental Health Practitioners ZC* Subject to parking requirements; see Table23E Non-Chartered Financial Institutions UP(PH) Subject to additional requirements; see Section 23E Other Professionals, and Government, Institutions, Utilities ZC* Section 5. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. No commercial use shall operate except between the hours of 7:00 a.m. and 12:00 midnight, except as authorized by an Administrative Use Permit, and in accordance with Section 23E B. Any use which is incidental to the primary use of a building or property shall be subject to the permit requirements identified in the Uses Incidental to a Permitted Use heading, in Table 23E Page 2 of 19

9 C. Any activity or use which occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor, and Exterior Window Uses heading, in Table 23E D. Adult-oriented Businesses, Alcoholic Beverage Sales or Service Uses, Amusement Arcades, and Live/work Uses, and Non-Chartered Financial Institutions shall be subject to the requirements of Chapters 23E.16 and 23E.20, in addition to the requirements of this District. Section 6. That Section 23E , Uses Permitted, Offices subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Table 23E Use Offices Financial Services, Retail (Banks) Insurance Agents, Title Companies, Real Estate Agents, Travel Agents Non-Chartered Financial Institutions Medical Practitioners including Holistic Health and Mental Health Practitioners Other Professionals and Government, Institutions, Utilities Use and Required Permits Classification Special Requirements (if any) UP(PH) ZC* Prohibited AUP** AUP** When located on the ground floor adjacent to a street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Subject to additional parking requirements under Section 23E B When located on the ground floor adjacent to a street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Section 7. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. No Commercial Use shall operate except between the hours of 7:00 a.m. and 11:00 p.m., unless a Use Permit is obtained and is in accordance with Section 23E B. Any Use which is incidental to the primary use of a building or property shall be subject to the permit requirements identified in the Uses Incidental to a Permitted Use heading in Table 23E Page 3 of 19

10 1. Any activity or Use which occurs outside of a building shall be subject to the Permit requirements identified in the Parking, Outdoor and Exterior Window Uses heading in Table 23E C. Adult-oriented Businesses and Amusement Device Arcades, are not permitted, as the entire District is within the location limitations of Sections 23E and 23E Non-Chartered Financial Institutions are not permitted in this District. Alcoholic Beverage Sales or Service Uses and Live/Work Uses shall be subject to the requirements of Section 23E and Chapter 23E.20, in addition to the requirements of this District. Section 8. That Section 23E , Uses Permitted, Offices subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Use Offices Financial Services, Retail (Banks) Insurance Agents, Title Companies, Real Estate Agents, Travel Agents Table 23E Use and Required Permits Classification Special Requirements (if any) UP(PH) ZC* Also subject to numerical limitations listed in Table 23E When located on the ground floor adjacent to a street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Medical Practitioners Prohibited Including Holistic Health and Mental Health Practitioners Non-Chartered Financial Institutions Other Professionals and Government, Institutions, Utilities Prohibited AUP** When located on the ground floor adjacent to a street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Section 9. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. No Commercial Use shall operate except between the hours of 7:00 a.m. and 11:00 p.m., unless a Use Permit is obtained and is in accordance with Section 23E B. Any Use which is incidental to the primary use of a building or property shall be subject to the permit requirements identified in the Uses Incidental to a Permitted Use heading, in Table 23E , except as below: Page 4 of 19

11 1. Any food service use shall subject to the limitations in Table 23E and shall not be considered as an Incidental Use for this District. C. Any activity or Use which occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor and Exterior Window Uses heading in Table 23E D. Adult-oriented Businesses, and Amusement Device Arcades, and Non-Chartered Financial Institutions are not permitted in this District. Alcoholic Beverage Sales or Service Uses and Live/Work Uses shall be subject to the requirements of Chapters 23E.16 and 23E.20, in addition to the requirements of this District and below: 1. On-premises service or consumption of alcoholic beverages shall be permitted only as incidental consumption with meals in food service establishments. Section 10. That Section 23E , Uses Permitted, Offices subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Use Offices Financial Services, Retail (Banks) Insurance Agents, Title Companies, Real Estate Agents, Travel Agents Table 23E Use and Required Permits Classification Special Requirements (if any) UP(PH) ZC* When located on the ground floor adjacent to street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Medical Practitioners UP(PH) Including Holistic Health and Mental Health Practitioners. Subject to parking requirements; see Table 23E Non-Chartered Financial Institutions Other Professionals and Government, Institutions, Utilities Prohibited AUP** When located on the ground floor adjacent to street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Section 11. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. No commercial use shall operate except between the hours of 7:00 a.m. and 11:00 p.m., unless a Use Permit is obtained and is in accordance with Section 23E Page 5 of 19

12 B. Any use which is incidental to the primary use of a building or property shall be subject to the Permit requirements identified in the Uses Incidental to a Permitted Use heading in Table 23E C. Any activity or Use which occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor and Exterior Window Uses heading in Table 23E D. Adult-oriented Businesses are not permitted, as the entire District is within the location limitations of Section 23E Amusement Arcades and Non-Chartered Financial Institutions are not permitted in this District. Alcoholic Beverage Sales/Service and Live/Work uses shall be subject to the requirements of Section 23E and Chapter 23E.20, in addition to the following requirements of this District: 1. No on-premise service and consumption of distilled alcoholic beverages shall be allowed except in full service restaurants and subject to obtaining a Use Permit; 2. Food Service Establishments shall have no live entertainment other than unamplified background music, unless a Use Permit is obtained. Section 12. That Section 23E , Uses Permitted, Offices subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Use Offices Check Cashing Stores Table 23E Use and Required Permits Classification Special Requirements (if any) UP(PH) Financial Services, Retail (Banks) ZC* Not including Check Cashing stores Insurance Agents, Title Companies, Real Estate Agents, Travel Agents Medical Practitioners, including Holistic Health and Mental Health Practitioners ZC* ZC* Subject to parking requirements; see Table 23E Non-Chartered Financial Institutions UP(PH) Subject to additional requirements; see Section 23E Other Professionals and Government, Institutions, Utilities ZC* Section 13. That Section 23E of the Berkeley Municipal Code is amended to read as follows: Page 6 of 19

13 23E Use Limitations A. No commercial use shall operate except between the following hours of the specified days: 7:00 a.m. to 12:00 midnight weekdays (Sunday through Thursday); 7:00 a.m. to 2:00 a.m. weekend days (Friday and Saturday); and in accordance with Section23E , provided, however, that the hours may be extended to other times subject to obtaining a Use Permit. B. Any use which is incidental to the primary use of a building or property shall be subject to the permit requirements identified in the Uses Incidental to a Permitted Use heading in Table 23E C. Any activity or use which occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor and Exterior Window Uses heading in Table 23E D. Adult-oriented Businesses are prohibited. Alcoholic Beverage Sales or Service Uses, Amusement Arcades, and Live/Work Uses, and Non-Chartered Financial Institutions shall be subject to the requirements of Chapters 23E.16 and 23E.20 and the following requirement: 1. The sale and service of distilled alcoholic beverages (hard liquor) is prohibited along Adeline Street, south of Ashby Avenue, except that such service may be allowed subject to obtaining a Use Permit for full service restaurants when such service is incidental to meals. E. New or relocated automobile or motorcycle sales uses with outdoor activities, including but not limited to storage and display of vehicle inventory, shall be limited to the Dealership Overlay Area, which includes all lots with a frontage on Adeline Street, Shattuck Avenue or Ashby Avenue between Dwight Way and the south side of Alcatraz Street, with the exceptions of the Ashby BART Station block and all lots confronting this block and lots with frontage exclusively on Shattuck Avenue south of Ashby Avenue. Section 14. That Section 23E , Uses Permitted, Offices subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended as follows: Offices Table 23E Use and Required Permits Use Classification Special Requirements (if any) Financial Services, Retail (Banks) Insurance Agents, Title Companies, Real Estate Agents, Travel Agents AUP* ZC Subject to restrictions above the ground floor except on Bancroft Way; see Section23E When located on the ground floor adjacent to street frontage, storefront windows required to include a window display or to be Page 7 of 19

14 Table 23E Use and Required Permits Use Classification Special Requirements (if any) Medical Practitioners, including Holistic Health and Mental Health Practitioners Non-Chartered Financial Institutions AUP* UP(PH) transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area. Subject to restrictions above the ground floor except on Bancroft Way; see Section23E C. When located on the ground floor adjacent to street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area. Subject to additional requirements; see Section 23E Other Professionals and Government, Institutions, Utilities AUP* Subject to restrictions above the ground floor except on Bancroft Way; see Section23E C. When located on the ground floor adjacent to street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area. Section 15. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. Notwithstanding the provisions related to extending the hours of operation of an existing commercial use subject to a Use Permit or AUP in Chapter 23B.56, Section 23E , and/or any Conditions of Approval in a Permit, commercial uses between Bancroft Way and the north side of Dwight Way may operate 24 hours per day, seven days per week; provided, that any use with alcohol sales or service shall conform with subdivision B of this Section. 1. After January 1, 2016, the Planning Commission shall review the allowable operating hours north of Dwight Way. 2. Commercial uses located between the south side of Dwight Way and Parker Street may operate from 7:00 a.m. to 12:00 a.m. seven days per week, unless later hours are specified by an Administrative Use Permit under Section 23E C. B. An establishment that sells alcohol for off-site consumption may not stay open past midnight unless its ABC license requires sales of alcohol for off-site consumption to cease by midnight; provided, that the ZAB may approve a Use Permit to stay open later if the ABC license does not contain such a condition, if it makes the findings in Section 23E C. Page 8 of 19

15 C. On-premises service and consumption of distilled alcoholic beverages shall be permitted in full service restaurants only. D. Any use which is incidental to the primary use of a building or property shall be subject to the permit requirements identified in the Uses Incidental to a Permitted Use heading under Section 23E , except as below: 1. All food service uses shall be subject to the limitations of Section 23E and none shall be considered as an Incidental Use for this District. E. Any activity or use which occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor and Exterior Window Uses heading in Table 23E F. Adult-oriented Businesses and Amusement Arcades are prohibited. G. Live/Work Uses are subject to additional requirements under Chapter 23E.20. H. Non-Chartered Financial Institutions are subject to additional requirements under Chapter 23E Section 16. That Section 23E , Uses Permitted, Offices subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Table 23E Use Offices Financial Services, Retail (Banks) Insurance Agents, Title Companies, Real Estate Agents, Travel Agents Medical Practitioners, including Holistic Health & Mental Health Practitioners Non-Chartered Financial Institutions Other Professionals, and Government, Institutions, Utilities Use and Required Permits Classification Special Requirements (if any) UP(PH) ZC* UP(PH) Prohibited AUP** When located on the ground floor adjacent to a street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Subject to parking requirements; see Section23E When located on the ground floor adjacent to a street frontage, storefront windows required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area Page 9 of 19

16 Section 17. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. No Commercial use shall operate except between the hours of 7:00 a.m. and 11:00 p.m., unless a Variance is obtained and in accordance with Section 23E B. Any use which is incidental to the primary use of a building or property shall be subject to the permit requirements identified in the Uses Incidental to a Permitted Use heading under Table 23E , except that all food service uses shall be subject to the numerical limitations listed in Table 23E C. Any activity or use which occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor, and Exterior Window Uses heading under Table 23E D. Adult-oriented Businesses are not permitted, as the entire District is within the location limitations of Section 23E Amusement Arcades and Non-Chartered Financial Institutions are not permitted in this District. Live/Work Uses shall be subject to the requirements of Chapter 23E.20, in addition to the requirements of this District. Alcoholic Beverage Service uses, except as provided for below, are not permitted: 1. No on-premise service and consumption of distilled alcoholic beverages shall be allowed except in full service restaurants, and subject to obtaining a Use Permit. 2. Food Service Establishments shall have no live entertainment other than unamplified music, poetry reading, comedy or other quiet activities. Section 18. That Section 23E , Uses Permitted, Office Uses subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Table 23E Use Office Uses Use and Required Permits Permits Required to Establish, Expand or Change Use (sq. ft.) Office uses other than banks prohibited on ground floors in designated nodes. Under 3,000 3,000-5,000 5,000 or more Special Requirements (if any) Page 10 of 19

17 All Office Uses, except those specified below ZC AUP UP(PH) Business Support Services ZC AUP UP(PH) See definition in Sub-title F for permitted uses Financial Services, Retail (Banks) Medical Practitioners, including Holistic Health and Mental Health Practitioners ZC AUP AUP UP(PH) Subject to parking requirements under Section 23E F Non-Chartered Financial Institutions UP(PH) Subject to additional requirements; see Section 23E Section 19. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. No commercial use shall operate except between the hours of 7:00 a.m. and 11:00 p.m. unless a Use Permit is obtained; provided, however, if the use is located within a designated node, the use may operate between 6:00 a.m. and 7:00 a.m. and/or 11:00 p.m. and 12:00 midnight with a Zoning Certificate. B. Any activity or use which occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor and Exterior Window Uses heading under Table 23E C. For purposes of the Noise Ordinance, Chapter 13.40, the C-W District shall be considered a Commercial District. D. Adult-oriented Businesses, Alcoholic Beverage Sales or Service Uses, Amusement Arcades, and Live/Work Uses, and Non-Chartered Financial Institutions shall be subject to the requirements of Chapters 23E.16 and 23E.20, in addition to the requirements of this District. E. For changes of use on San Pablo Avenue: 1. On lots with frontage on San Pablo Avenue, a use classified in Table 23E as an Automobile or Other Vehicle-Oriented Use may only be established on a site which was legally used or approved for use as an Automobile or Other Vehicle Oriented Use as of March 1, 1997 (such sites are hereinafter designated as automotive sites). 2. On an automotive site, if the automotive use is discontinued for a period of two years or more, it may not be re-established. Section 20. That Section 23E , Uses Permitted, Offices Uses subsection of the Use and Required Permits table of the Berkeley Municipal Code is amended to read as follows: Page 11 of 19

18 Table 23E Offices Use and Required Permits Use Classification Special Requirements Financial Services, Retail (Banks) AUP Within the Arts District Overlay, see Under 7,500 s.f. ZC Section23E Within the A.D.O. Insurance Agents, Title Companies, Real Estate Agents, Travel Agents AUP ZC Subject to additional requirements; see Section23E E Within the A.D.O. AUP Within the Arts District Overlay, see Section23E Medical Practitioners ZC Including Holistic Health and Mental Health Practitioners Within the A.D.O. AUP Within the Arts District Overlay, see Section23E Non-Chartered Financial Institutions Other Professionals and Government, Institutions, Utilities Prohibited ZC Subject to additional requirements; see Section23E E Within the A.D.O. AUP Within the Arts District Overlay, see Section23E Section 21. That Section 23E of the Berkeley Municipal Code is amended to read as follows: 23E Use Limitations A. No commercial use shall operate except between the hours of 6:00 a.m. and 2:00 a.m. except as authorized by an Administrative Use Permit, and in accordance with Section 23E B. Any use that is incidental to the primary use of a building or property shall be subject to the permit requirements identified in the Uses Incidental to a Permitted Use heading in Table 23E C. Any activity or use that occurs outside of a building shall be subject to the permit requirements identified in the Parking, Outdoor, and Exterior Window Uses heading in Table 23E D. Adult-oriented Businesses, Alcoholic Beverage Sales or Service Uses, Amusement Arcades shall be subject to the requirements of Chapter 23E.16 in addition to the requirements of this Chapter. Page 12 of 19

19 E. For new uses identified in Table 23E that are located on the ground floor adjacent to a street frontage, storefront windows are required to include a window display or to be transparent and provide pedestrian viewing a minimum of 10 feet into the storefront area. F. In new buildings constructed on Public Serving Frontages, as illustrated in Subtitle 23F and the Downtown Area Plan, entrances to individual dwelling units and to living quarters in Group Living Accommodations are prohibited on the street-facing side of the street-level floor. G. Non-Chartered Financial Institutions are not permitted in this District. Section 22. Copies of this Ordinance shall be posted for two days prior to adoption in the display case located near the walkway in front of Council Chambers, 2134 Martin Luther King Jr. Way. Within 15 days of adoption, copies of this Ordinance shall be filed at each branch of the Berkeley Public Library and the title shall be published in a newspaper of general circulation. Page 13 of 19

20 Attachment 2 - Council Referral Page 1 of 5 32 Jesse Arreguín Councilmember, District 4 CONSENT CALENDAR April 30, 2013 To: From: Subject: Honorable Mayor and Members of the City Council Councilmembers Arreguín, Anderson, and Moore Referral to City Manager: Restrictions on Check Cashing Stores RECOMMENDATION: Refer to the City Manager and Planning Commission the issue of amending the Zoning Ordinance to restrict new check cashing stores in Berkeley, and request that the City Manager bring back to Council regulations on new check cashing stores. In its analysis and development of options, staff should consider the following approaches: Amend the definition of Financial Services, Retail in the Zoning Ordinance (23F ) by striking references to check cashing stores. Additionally, staff should develop a new definition in the ordinance for check cashing stores/payday lenders, and establish a new use category. Additionally, staff should consider the following regulatory approaches: 1) prohibiting new check cashing stores in all commercial zones in Berkeley, or 2) increasing the level of discretion required for zoning permits for new check cashing stores to a Use Permit/Public Hearing in all commercial zones. Staff should also consider regulations most recently adopted by the City of San Jose and any other jurisdictions, specifically limiting payday lending establishments by setting: (1) a distance or separation requirement between payday lending businesses to prevent overconcentration in low-income communities, and (2) a distance requirement separating payday lending businesses from residential areas and other places (i.e., schools, parks, churches, adult uses, or liquor stores). Martin Luther King Jr. Civic Center Building 2180 Milvia Street, 5 th Floor, Berkeley, CA Tel: (510) Fax: (510) TDD: (510) jarreguin@cityofberkeley.info Web:

21 Attachment 2 - Council Referral Page 2 of 5 BACKGROUND: Payday loans, which are secured using a personal check, have short repayment periods and very high fees. Payday loan borrowers often cannot afford to open a checking account, or do not have sufficient resources to take out a line of credit or receive a bank loan, therefore they are forced to rely on short term loans. Payday loans encourage chronic, repeat borrowing because borrowers often lack sufficient income to both repay the loan and meet living expenses. An estimated 91% of payday loans are taken out by previous borrowers, showing the cyclical financial dependency. 1 These loans have a disproportionate impact on low-income borrowers and need more regulation. Payday lenders are disproportionately concentrated in predominately African-American and Latino neighborhoods. They are also more prevalent in communities where low- and very low-income families live. In California, nearly half of borrowers take out payday loans at least once a month, and more than one third have taken out loans from multiple payday lenders simultaneously. 2 Currently check cashing stores, which provide payday loans, money transfers, and allow customers to cash checks subject to a fee, are allowed in most commercial zones in Berkeley. In order to open a new check cashing store, the owner must apply for a zoning permit. Under the Zoning Ordinance check cashing stores are permitted under the Financial Services, Retail use category. Check cashing stores or other lending institutions are regulated differently in different zoning districts, however no district currently has an outright prohibition on new check cashing stores. According to the city Finance Department there are currently three check cashing stores in Berkeley. They are: California Check Cashing Stores, LLC 3276 Adeline St Check Center 2005 San Pablo Ave No Hassle Check Cashing Inc 2800 San Pablo Ave All three have zoning permits to operate at their locations. Since zoning permits ride with the land and not the particular business, if any of these stores closed a new check cashing store or bank could open at that location without requiring a new permit. Moreover, any new regulations would not apply to these businesses and would be prospective. Check cashing stores have significant negative impacts on distressed communities, by providing lending that includes excessive fees and creating a cycle of repeat borrowing for low-income residents who borrow to have enough money to cover basic living 1 Payday Lenders and Economically Distressed Communities: A Spatial Analysis of Financial Predation, page 2, Department of Sociology, The Colorado College, February Report on the Status of Payday Lending in California, page 4, Silicon Valley Community Foundation, October 2009

22 Attachment 2 - Council Referral Page 3 of 5 expenses and pay high check cashing fees. The excessive fees run strikingly as high as 400% when expressed as an annual percentage rate. 3 Additionally, there are secondary impacts associated with check cashing stores, which include noise, litter, and other problems. Other jurisdictions, including the City of San Jose, have adopted regulations to restrict the location and number of check cashing businesses. Given the negative impacts that these businesses have on our community, the City should join these other cities in adopting regulations to restrict new check cashing stores. FINANCIAL IMPLICATIONS: Staff time involved with analyzing regulatory approaches, including ordinances adopted in other cities, and developing options for Commission and Council discussion. CONTACT PERSON: Jesse Arreguin, Councilmember, District Attachments: 1. Definition of Financial Services, Retail from Zoning Ordinance 2. Spreadsheet outlining permitting requirements for Check Cashing stores in Berkeley 3 Payday Lenders and Economically Distressed Communities: A Spatial Analysis of Financial Predation, page 2, Department of Sociology, The Colorado College, February 2009

23 Attachment 2 - Council Referral Page 4 of 5 Attachment 1 Berkeley Municipal Code Section 23F Financial Services, Retail: An office, open to the public, offering teller or counter financial services including either cash, checking and/or savings account transactions or some combination thereof, including, but is not limited to, banks, check cashing stores, savings and loans and credit unions offering such services at that location.

24 Attachment 2 - Council Referral Page 5 of 5 Attachment 2 How Check Cashing Stores Are Regulated by Commercial District Except for C-SA District, check cashing is classified as Financial Services, Retail Zoning District Permit Required Special Conditions Retail not permitted in any residential district, so check cashing stores are R-Districts not allowed C-1 AUP C-N C-E C-NS Use Permit/Public Hearing Use Permit/Public Hearing Use Permit/Public Hearing C-SA C-T C-SO C-W C-DMU Use Permit/Public Hearing AUP Use Permit/Public Hearing AUP ZC/AUP Check Cashing Stores specifically defined and regulated separately from banks Under 7,500 s.f. = ZC; Over 7,500 s.f. = AUP; Within Addison District Overlay = AUP

25 Attachment 3 - Location Map Existing Non-Chartered Financial Institutions City of Berkeley $+ 5 Star Loans %, Check Center ² No Hassle Check Cashing Miles $+ %, %, $+ Legend Products Offered Auto Title Loans, Payday Loans, and Check Cashing Payday Loans and Check Cashing $+ Auto Title Loans Avenue Commercial Zoning District CA Check Cashing Stores

26 Item 10 October 15, 2014 Planning and Development Department Land Use Planning Division STAFF REPORT Introduction Background

27 Zoning District Permit Required Special Conditions

28 Discussion

29

30 Distance measure Ban from specific zones or areas Cap

31 Moratorium Increased level of discretion required for zoning permits for new check cashing stores Conclusion and Next Steps Attachments Additional Information

32

33 Item 10 December 3, 2014 STAFF REPORT Introduction Discussion

34 Check cashing business means an establishment that provides compensation for checks, warrants, drafts, money orders, or other commercial paper serving the same purpose. This classification also includes establishments offering deferred deposits, whereby the check casher refrains from depositing a personal check written by a customer until a specific date pursuant to a written agreement as provided in California Civil Code Section This classification does not include state or federally chartered banks, savings associations, credit unions, or industrial loan companies and retail sellers that cash checks or issue money orders incidental to the main business.

35 : A Non-Chartered Financial Institution is defined as a use, other than State or Federally chartered bank, credit union, mortgage lender, savings and loan association or industrial loan company, that offers deferred deposit transaction services or check cashing services and loans for payment of a percentage fee. The term non-chartered financial institution shall include, but is not limited to deferred deposit transaction (payday loan) business that makes loans upon assignment of wages received, check cashing businesses that charge a percentage fee for cashing a check or negotiable instrument, and motor vehicle title lenders who offer short-term loan secured by the title to motor vehicle. Nonprofit financial institutions are not encompassed by the term non-chartered financial institution.

36

37

38 Conclusion and Next Steps Attachments

39 Item 10 STAFF REPORT February 18, 2015

40 Incidental Use: A use of a lot and/or building that is secondary to the principal permitted use, but that by nature could be independent. An incidental use shall not exceed twenty-five percent (25%) of the floor area of the primary use, and if it consists of the commercial sales of a different line of products or services than the primary use, such incidental use may not generate gross receipts in excess of thirty-three percent (33%) of the gross receipts generated by the primary use. A person or entity that, for compensation, engages in whole or in part in the business of cashing checks, warrants, drafts, money orders, or other commercial paper serving the same purpose. A "check cashier" also includes the business of deferred deposits whereby the check cashier refrains from depositing a personal check written by a customer until a specific date pursuant to a written agreement as provided in Civil Code Section , as amended. "Check cashier" or "check cashing activity" also does not include a retail seller engaged primarily in the business of selling consumer goods, such as consumables to retail buyers, that cashes checks or issues money orders for a

41 minimum flat fee, not exceeding two (2) dollars, as a service to its customers that is incidental to its main purpose or business. "Check cashing activity" means the business of cashing checks, warrants, drafts, money orders, or other commercial paper serving the same purpose for compensation by any person or entity other than: (i) a state or federally chartered bank, savings association, credit union, industrial loan company, or (ii) a retail seller engaged primarily in the business of selling consumer goods, such as consumables to retail buyers that cashes checks or money orders for a minimum flat fee not exceeding two dollars ($2.00), as a service to its customers that is incidental to its main purpose or business, provided: (a) such retail seller does not cash more than one hundred (100) checks in any calendar month, or (b) such retail seller is located in an area zoned C-3 Central Commercial District or C-4 General Commercial District.