Academy of Art Settles with City of San Francisco in $60 Million Zoning Dispute

San Francisco Planning Director John Rahaim and City Attorney Dennis Herrera announcing a settlement worth $60 million with the Academy of Art University (Photo: Cy Musiker/KQED)

San Francisco’s Academy of Art University, one of the nation’s largest for-profit art schools, has reached a settlement with the city valued at $60 million. The settlement, announced Monday, addresses more than a decade’s worth of zoning disputes.

The settlement resolves around a lawsuit filed by the San Francisco City Attorney’s office in May. The suit claimed that the college had repeatedly “thumbed its nose,” in city attorney Dennis Herrera's words, at complaints from the city about its conversion of tourist hotels and residential buildings into dorms and classrooms.

The school is owned by president Elisa Stephens and her family, who are worth hundreds of millions of dollars and control swathes of real estate in downtown San Francisco. "No matter how wealthy or politically connected you may be, the same rules apply to everyone," Herrera said at a press conference announcing the settlement of the suit.

The school will pay San Francisco $20 million in fines and fees, and spend an estimated $40 million converting two buildings into 160 units of affordable housing, mostly for seniors. The settlement specifies that the academy will lease the buildings to a non-profit developer for 66 years.

Zane Gresham and James Brosnahan (l-r) senior counsels at Morrison Foerster
Zane Gresham and James Brosnahan (l-r) senior counsels at Morrison Foerster. (Photo: Cy Musiker/KQED)

Herrera said he was pleased that $7 million would go to San Francisco’s Small Sites Program. The program provides city loans to groups like housing nonprofits to buy rent-controlled apartment buildings serving low-income tenants.

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The deal also requires Academy of Art to move the routes of its fleet of buses off busy streets, and provide all its students and staff with free public transportation passes.

At a meeting with reporters following Herrera's news conference, the school’s attorney, James Brosnahan of Morrison Foerster, said the institution has been negotiating in good faith with the city since December 2015 to resolve the zoning disputes.

“We would have settled on these terms without the city attorney doing the hoop de doo,” Brosnahan said. “But that’s okay, we’re friends with the city attorney, and if he wants to take credit for something that would have happened anyway, that’s not a problem.”

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