Insight

Council approves linkage fee plan

October 6, 2014

By DEAN CALBREATH, The Daily Transcript

The San Diego City Council on Monday overwhelmingly approved a draft ordinance that would gradually double the fee that commercial developers pay to support affordable housing, while including limitations and exemptions that developers had pressed for.

The Council voted 7-1 to raise the so-called "linkage fee" from an average of 0.75 percent of the cost of developing a commercial project to 1.5 percent, through a three-year phase-in scheduled to begin Jan. 1.

The proposal would return the linkage fee to the level where it was originally set in 1990, before being cut in half six years later.

Unlike an ordinance that the council passed last year, however, the fee will not be adjusted for inflation, meaning it will be based on estimates of what a project would have cost in 1990, rather than 2014 or beyond. In addition, factory, warehouse and non-profit hospital projects will be exempt. The fee will remain at its current 0.75 percent level for research and development sites.

"We understood that something needed to be done to address the shortage of quality affordable housing, and at the same time we were sensitive to business development," said Councilmember Myrtle Cole, who crafted the proposal.

The proposal will return to the council on Oct. 21, after the city attorney's office reviews it and crafts it into appropriate legal language. But given its near-unanimous support — including from Mayor Kevin Faulconer's office — it seems likely to move forward.

The only “no” vote came from City Councilmember Scott Sherman, who suggested that the council should have waited until next year before trying to replace its initial ordinance on the linkage fee, which was withdrawn in March after opponents launched a petition drive against it.

Cole's compromise put an end to a year's worth of squabbling between the City Council, affordable housing advocates and local businesses.

When the council voted late last year to raise the fee and adjust it for inflation, local businesses complained that the fee could jump five to nine times as high as its current level at some projects.

The San Diego Regional Chamber of Commerce formed a coalition with real estate and development groups to launch a petition drive to put the measure on the ballot.

After the ad hoc Jobs Coalition required the necessary amount of signatures, the council withdrew the ordinance and challenged critics to produce a counterproposal. But after six months of work, the critics failed to craft a feasible alternative, prompting Cole to hammer out a compromise.

Jerry Sanders, president and chief executive of the Regional Chamber, on Monday called Cole's compromise "a balanced proposal that addresses our concerns about the impact a large fee increase would have on job creation."

Representatives of the San Diego Building Industry Association, Taxpayers Association, Biocom and Connect went to City Hall to express their support for the compromise.

City Council President Todd Gloria said he was "elated" that the measure had passed. But he also suggested that if the businesses had been willing to compromise earlier, they might have been able to avoid their costly petition drive.

Cole's proposal, he said, was similar to one that the City Council had proposed in 2011 but that the business community had rejected, promising to come up with an alternative that never came to fruition.

"When the business community communicates clearly what they would like to see done, I don't remember a time when we have turned them down," Gloria said, noting that the Council is currently trying to streamline regulations in response to suggestions from developers.

Back to Cresa San Diego