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Proposed Linkage Fees Would Double Levy

Affordable-housing advocates and the business community have worked out a compromise Version 2.0 of a controversial plan to boost so-called linkage fees geared toward commercial development projects in the city of San Diego.

At press time, the City Council’s Smart Growth and Land Use Committee was reviewing a revised measure — set for full City Council review by month’s end or early August — that would roughly double the fees currently paid on most kinds of commercial projects to support development of affordable workforce housing.

By contrast, a measure approved last year by the City Council would have raised the fees by 375 to 750 percent, depending on the type of project. The council repealed that measure in March, after local business opponents led by the Jobs Coalition gathered enough signatures to have it placed before voters. The Jobs Coalition includes the San Diego Regional Chamber of Commerce, the Building Owners and Managers Association, and several other businesses and groups involved in development and commercial real estate.

Meanwhile, as a condition of repealing the measure, the City Council called on housing advocates and fee-hike opponents to come together on a feasible compromise.

Representatives of both camps said the measure now before San Diego officials should address the fee issue, while spurring the city to investigate a wider array of long-term options for boosting the local supply of housing.

“We’ve gone about a quarter of a century with no real agreement on this, and we could go another quarter-century without everyone fully agreeing,” said Rick Gentry, president and CEO of the San Diego Housing Commission. “Both sides can find something not to like, but we can work with it.”

Restoring Original Fee Rate

The need for alternatives to support housing projects has been underscored by the loss of community redevelopment funds as a result of the state abolishing redevelopment agencies in 2012.

According to a Housing Commission staff report, the revised measure would increase the amount raised annually from linkage fees from the current $2.2 million, to an estimated $3.7 million. As with the earlier council-approved measure, proposed by the Housing Commission, the current version restores the linkage fee to its original 1.5 percent of overall project costs — the rate established in 1990 and cut in half in 1996.

The compromise plan exempts certain types of commercial projects from the increase, including industrial manufacturing and warehouse projects, research-and-development facilities and nonprofit hospitals.

The new measure would take effect in January 2015. Unlike with the prior version, however, the fee increase would “sunset” — essentially be terminated — in January 2018 unless the city achieves certain milestones related to affordable housing. Those milestones include city approval of programs to expedite affordable and sustainable housing projects; and regulatory reforms to streamline approvals and reduce the costs for commercial development and affordable homebuilding.

The latest measure calls for deferring certain fees, known as facilities benefit assessments, until developments receive final building inspections. It also calls for the city’s Independent Budget Analyst office to research and report on a wide array of revenue options for building homes in San Diego, including low-income and mid-income options.

Pressing for a Wider Discussion

The plan now before city officials was worked out over eight meetings involving four people — two each from the Housing Commission and the Jobs Coalition — between March 12 and June 9.

Craig Benedetto, a consultant with California Strategies LLC who represented the Jobs Coalition in the talks, said the compromise is not perfect but achieves the coalition’s goal of pressing for a wider discussion of options beyond developer fees.

That discussion is needed, he said, to address the region’s serious shortage of housing of all types, as local construction continues to lag far behind the demands of a growing population.

“We have an insufficient housing situation in the San Diego area, and it’s impacting the business climate,” Benedetto said.

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