CITY HALL — The City Council on Tuesday asked planners to take another look at a new fee intended to make it easier to get around Santa Monica after the business community showed up in force to protest the price tag.

The proposed fee would raise $60 million to pay for $134 million worth of infrastructure projects, like more bus lanes and possibly car-sharing programs, identified in the 2010 Land Use and Circulation Element, a document seven years in the making that will guide development from now to 2030.

That money will help offset the nearly 5,000 additional peak-hour trips expected to come from new development in that time.

The transportation impact fee would be assessed on new development, new construction, businesses that convert from one kind of use to another and formerly vacant properties.

Government buildings, affordable housing and religious institutions would be exempt.

The amount per square foot charged depends on the kind of business or development that takes place at the site. Retail, for instance, costs more than office space because it attracts more cars, and therefore causes more vehicle trips.

The categories are very broad, however, causing auto dealerships to fall under the same umbrella as a pharmacy.

As proposed, the fee is one of the highest in the region, falling slightly behind the Los Angeles coastal corridor to the south and a special planning area in Los Angeles called the Warner Center to the north.

Members of the business community feared that the high costs would force businesses out of Santa Monica and into the arms of less costly places.

“I think there’s some danger with the fees being too high,” said John Bohn, a local businessman. “I think it will cause low-margin businesses that may be very desirable from the standpoint of public service to locate in adjacent locations.”

There was also concern that the burden would fall disproportionately on small and local businesses which would have more difficulty fronting the cost of the fee than established companies with deep pockets.

For instance, if a property owner who was forced to pay the fee then tried to rent a location to a small business, the owner might have less money to pay for tenant improvements, forcing those costs on small businesses, said attorney Dale Goldsmith.

“Smaller, locally-based retailers and restaurants, many of which are startups, simply cannot afford these substantial upfront costs,” Goldsmith wrote in a letter to the council. “In this way the (fee) strongly favors well-capitalized national chains and big box retailers — precisely the kind of development LUCE discourages.”

Even large businesses would feel the pinch.

Mike Sullivan, the owner of several car dealerships in the area, is designing a building for his Toyota dealership at 16th Street and Santa Monica Boulevard.

The project, which would bring all of the cars indoors and dispose of a surface-level parking lot, would cost over $1 million more with the transportation impact fee.

Sullivan described it as a “deal killer.”

“Santa Monica has lost nine franchises in the last decade,” Sullivan said. “I would hope you guys would work with it.”

If approved, the transportation impact fee will join fees that support childcare, parks, housing and arts, according to the staff report. Speakers urged staff to conduct a study looking at what the added cost will do to local business, not just how to assess it.

“We are supportive of you continuing to look at this, but do another study on this and see what the fees amount to and the impact on our businesses,” said Laurel Rosen, president of the Santa Monica Chamber of Commerce.

The concerns struck a chord with City Councilmember Bob Holbrook and Mayor Pro Tem Gleam Davis.

“I think we’re high, and we’re high enough to hurt our long-term viability,” Holbrook said.

Davis focused on the potential impacts on small and local businesses, asking if it would be possible to create a separate fee for them or allow them to pay less if they caused less traffic.

Such a rule would cause chaos for planners, said Jeffrey Tumlin, a consultant with the firm Nelson/Nygaard.

“It would go beyond an administrative headache, it would result in every project becoming a debate and a long process,” Tumlin said, pointing out that each developer could hire a transportation consultant to argue either side of a case.

Not all council members opposed the fee.

Councilmember Pam O’Connor argued in favor of keeping the fee relatively high to support other modes of transportation. Such a move would give the council the flexibility to lower it later, she said.

Even if the fee went forward as proposed Tuesday, it wouldn’t be enough to cover the full cost imposed on Santa Monica by coming development.

The full cost would be an “astronomical” amount to lay on development, and staff knocked down their share from 76 percent to 55 percent of the $134 million to give them breathing room, said City Manager Rod Gould.

“Staff fairly arbitrarily suggested reducing what new development would pay to the highest strata of what our sister cities are paying,” Gould said. “Not the middle, the highest.”

According to staff estimates, Santa Monica languishes under 60,000 trips during the peak afternoon hours every day. That contributes to the stifling traffic that many community members complain about, and was a main target of the LUCE.

Over the next several months, staff will go back and revisit many of the issues raised by the business community, including the special cases of existing car dealerships and an economic study to see how much of a fee the market can bear, Rolandson said.

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