CITY HALL — Commercial developers will have to pay an affordable housing linkage fee and a parks impact fee thanks to a set of ordinances approved by council.
Housing developers will also have to pay the parks impact fee.
The affordable housing linkage fee ordinance passed on a 6 to 1 vote with Councilmember Kevin McKeown arguing that the fees suggested by city officials were not high enough. The parks impact fee ordinance passed unanimously.
Consultants hired by City Hall analyzed the impacts of development and, considering a number of factors, proposed the rates to be charged to developers of various types of projects.
Consultants determined the "maximum allowable fee" for each type of project and then determined what percentage of that fee would be financially feasible for a developer. Consultants suggested that 4.5 percent would be best and city officials rounded that up to 5 percent.
Under those rates, a developer would pay $11.21 per square foot of office or $3.07 per square foot of hotel built. There are eight different categories for the affordable housing linkage fees.
The Planning Commission agreed with the assessment made by city officials but the Housing Commission suggested rates at 18 to 20 percent of the maximum allowable fee.
McKeown argued that council should follow the Housing Commission's lead by approving fees at 20 percent of maximum allowable. This would raise office fees to over $45 per square foot and hotels to over $12 per square foot.
"I would like to see a higher yield from commercial projects that get built," McKeown said, "and if that means that fewer commercial projects get built or if they take longer because we have to wait for a developer who is better capitalized or, frankly, who has a better, more profitable project, I don't think the residents of the city would be terribly dismayed if there were less commercial development as a result."
The other members disagreed for a variety of reasons.
These fees only apply to smaller developments — ones that fall below the height and density levels that would trigger council approval.
Councilmember Ted Winterer noted that, while he is in support of raising more cash for affordable housing projects, he fears that if fees were too high, it would unintentionally incentivize developers to shoot for larger projects.
Councilmember Tony Vazquez noted that the issue will come back before council as they build the new Zoning Code.
Councilmember Gleam Davis said that the increased fees could lead to less money for affordable housing.
"If nothing gets built then we get zero," she said. "To me that's the worst possible situation to be in."
McKeown — who then suggested that they compromise by setting the fees at 10 percent of the maximum allowable rate — pointed out that if fees are doubled, they could lose half the projects and still break even.
Vazquez offered up the 10 percent fee as a motion, which McKeown seconded, but it failed in a 2 to 5 vote.
Since the dissolution of the redevelopment agency in 2012, it's been a struggle to fund affordable housing. Council put forward Measure H and Measure HH, which, if approved by voters in November, will raise the fees charged when a property sells for more than a million dollars. That cash would go toward affordable housing.
Neither the measures nor the linkage fees are expected to, alone, alleviate the need for affordable housing funding.
"While we do think it's important to have this measure in place to mitigate it," Director of Housing and Economic Development Andy Agle said of the linkage fee, "this would be one small piece like we stitch together the other sources of funding for affordable housing."
Council passed the parks impact fee as well.
"By examining projected development and determining the associated growth in residents, workers and hotel guests, the study concluded that the projected increase in development would result in a 9.1 percent … increase in demand for parks and recreation facilities," city officials said in their report.
That kind of increase would cost $126 million according to the study.
For parks and recreation fees, office space (including creative office) developers will pay $2.31 per square foot while medical office and hospital developers will pay $1.27. Hotel developers will pay $3.11 per square foot.
Residential developers will have to pay into the parks and recreation funds, dropping $7,636 for single-family homes and $4,138 per studio and one bedroom unit. They'll pay $6,665 per multi-family units of two bedrooms or more.
dave@www.smdp.com
