City development impact, FBA fees on the increase

June 18, 2014


Major increases are set to take place for both development impact fees and facilities benefit assessments (FBA) throughout the city of San Diego.

The development in any area determines an impact fee for a project.

The fee is then used to provide financing for road improvements, fire stations, libraries, parks and other facilities in a community.

FBA fees, used for similar facilities, are governed by the number of planned projects within a community, and how they collectively impact the area. A calculation is then made to determine a project's fair share of the impacts.

Developer and FBA fees are not to be confused with a proposed linkage fee hike the San Diego Council has debated, approved, reconsidered and rejected last March, and is expected to re-examine in late July.

That fee assesses commercial development to bankroll affordable housing.

FBAs have come under fire because builders feel they may already be excessive, and that some are climbing.

"Another problem is even if you have a project that is in process [of being developed], you will have to pay the higher fee unless you are ready to pull permits," said Matt Adams, Building Industry Association of San Diego County vice president.

In the College area, the per-unit residential development fee is projected to rise from $2,586 per unit more than five times to $13,756 on July 1.

The story is similar for the Center City neighborhoods of City Heights, Normal Heights, Kensington-Talmadge; and the Eastern Area neighborhoods of El Cerrito Heights, Rolando, Rolando Park, Redwood Village, Oak Park and Webster.

These areas will see the residential developer fee leap more than four-fold from $2,545 to $11,925 per unit.

"When you have a five- or six-fold increase in the developer fees, that really reflects negatively on the viability of a project," Adams said.

As high as these development impact fees are, they didn't quite hit Tierrasanta's $15,290 residential impact fee that will climb to $15,954 on July 1.

Barrio Logan's $12,507 residential impact fee, which will also be implemented on July 1, is high -- something Adams said could discourage development of parks, fire stations or other facilities in a poor community.

In terms of nonresidential development fees, developers in Barrio Logan will be assessed $145 per average daily trip, plus $502 for every 1,000 square feet of nonresidential construction on July 1.

Sherm Harmer, a long-time developer and Urban Housing Partners president, said it makes little sense to increase fees at this time.

"We're almost at a 40-year low in terms of residential construction," Harmer said. "There were 21 condominium projects under construction seven years ago in downtown San Diego and today there are none."

Increase proponents such as Councilwoman Marti Emerald argue that because developer fees in places such as City Heights have not been raised for many years, the exponential increases are justified.

As high as developer impact fees are, FBA fees in the city's newer communities are much higher.

"The FBA fees are more than $100,000 in some communities in the North City," Adams said.

Commercial development fees are often much higher than that. The FBA charge for a commercial acre in Pacific Highlands Ranch between Rancho Penasquitos and Carmel Valley will be $392,691 come July 1. The fee now is $377,588.

The FBA charge for a residential unit in Pardee Homes' Pacific Highlands Ranch is increasing, $46,800 to $48,672 on July 1.

Beth Fischer, Pardee division president, said her firm is lucky in that residential FBA fees are only about half what they were prior to 2009, because those fees were "front-loaded" when the infrastructure was developed for Pacific Highlands Ranch earlier in the last decade.

Fischer said the FBA funds are being used to develop the Solana Ranch Park at the property and were also used to develop a new fire station.

While Pardee pays less for residential, Gary Levitt -- president of Sea Breeze Properties, who is planning a major mixed-use development in Torrey Highlands -- will be paying more.

On July 1, to get their permits for a single family homes, developers in Torrey Highlands will be assessed $103,052 in facilities benefit assessments, up from $99,088 at present.

The multifamily FBA fee will be raised from $69,364 to $72,139.

The FBA charges for commercial acres in Torrey Highlands are also on the rise. The assessments are climbing from $177,368 to $184,463 per acre on July 1.

If an industrial developer wished to develop in Torrey Highlands, the charge would be $597,501 per industrial acre today, and $621,404 on July 1.

Levitt said early developers of Torrey Highlands had it much better. "Their fees never went up," he added.

Levitt's property is entitled for a 250,000-square-foot shopping center, 242 apartments and a self-storage property just northwest of Rancho Penasquitos, although he said he plans to make some changes.