Development Impact Fees: Saving San Francisco

by Ken Werner, Trinity Plaza Tenants Association (TPTA) on July 19, 2005

“We’re losing our neighborhoods, and we’re losing the soul of some of our lower-income neighborhoods just through gentrification and displacement.” (Sup. Chris Daly, Budget & Finance Committee hearing of July 7, 2005) That’s the heart of the war we’ve been fighting that’s focused on the “redevelopment” of the South of Market neighborhood.
Development impact fees, particularly for Rincon Hill, have been under intense discussion since the Planning Commission hearing of April 21, 2005 when Marshall Foster of the Planning Department claimed that $11/square foot would more than meet the needs of mitigating the construction of million-dollar and multi-million-dollar condos.

In early May, Sup. Daly submitted a memo to the Planning Commission that his office would be proposing a South of Market Community Stabilization Fund in the range of $13 to $17 per square foot over and above the $11/square foot infrastructure assessment.

Yet at successive hearings before the Planning Commission and supervisorial committee hearings, Foster continually repeated the $11 figure completely ignoring Sup. Daly’s suggested fund. Foster was recently joined by Planning’s David Alumbaugh at the Budget & Finance Committee hearing on July 7 parroting Foster’s impact figure but adding $3/square foot for a “Citywide” impact fee.

In the middle of May, Mayor Newsom’s commissioned study with Economic & Planning Systems (the EPS Study) showed that developers could profitably accommodate $74/square foot in development impact fees, but the study has received little reference from Planning and the developers the department appears to represent.

Even though the EPS Study showed that developers would still profit from development impact fees as high as $74/square foot, Newsom recently proposed the $11/square foot infrastructure fee and added $6/square foot for his Office of Economic and Workforce Development and to send nickels and dimes into the South of Market community with a $3/square foot impact fee.

Sup. Daly has now set the South of Market Community Stabilization Fund at $17/square foot in an amendment to the whole to be discussed at today’s Budget & Finance hearing.
Rather than discussing Sup. Daly’s proposal, let’s look closely at the proposal espoused by Newsom, Foster, Alumbaugh, and the wealthy developers.

Foster claims that only the square footage of occupied space will be taxed leaving common areas such as hallways, lobbies, elevators, and fitness centers as nontaxable. This “business as usual” approach will also exclude the land that doesn’t have a building on it, that is, “nonoccupied space,” meaning that there will be prime real estate downtown that would become nontaxable, permanently!

If it reads like it, if it sounds like it, if it smells like it, let’s call it what it is — a tax break for the wealthy developers. And this is what the mayor and his underlings at Planning propose for the city.

Quoting Sup. Daly, “It feels like developers are seemingly teaming up with the administration, are trying to get one over on us.”

Remember, the wealthy developers have already received huge tax cuts from George Bush’s $87-billion personal income tax cut, which has now been extended by the right-wing, extremist Congress to the year 2010. These wealthy developers have also received a huge tax cut in the form of a $220-billion corporate income tax giveaway. Finally, if any of these wealthy developers have formed an overseas holding company, they will also receive a windfall tax break of a 29.75% tax write-off by George Bush through his American Jobs Creation Act, a misnomer.

All this at the expense of the true working class, the nonincome, very-low-income, and low-income residents of our city.

And it’s “business as usual” because the developers now claim if development impact fees are assessed at $28/square foot — which Sup. Daly has stated is the bottom line considering the EPS Study — then the developers will walk away and not build at all, meaning affordable housing will also not be constructed.
It’s the same fear game these greedy extremists have been playing for too many years. Give us the tax break or we won’t play ball.

Then there are those who would knowingly lie when promoting the Rincon Hill Plan, like Kate White of the Housing Action Coalition:

“The plan will bring about 2,200 units of new housing without displacing a single existing unit in the Rincon Hill Plan area.”
I think Ms. White forgot about the evictions at The Men’s Place that occurred at the end of June.

Or there’s Steve Vettle of Rincon Ventures (425 First Street proposed development) who claims “I just don’t think a case has been made that there are negative impacts that will fall on South of Market from this development.”

Mr. Vettle apparently has forgotten, or perhaps has never learned, that with the development of high-priced condos comes an increase in land value that spills over to surrounding areas, which in turn drives up land values of those adjacent areas. Or perhaps Mr. Vettle forgot that his representative, Marshall Foster, pointed that out in one of the Planning Commission hearings. As intelligent people know, an increase in land value translates to a decrease in the ability to create affordable housing.

I could argue that the developers can build their condos in Sonoma County and we will find alternative methods of financing affordable housing in the city, which can include progressive measures like a vehicle license fee in the city whereby a portion of the proceeds would be allocated for affordable housing.
We could also actively pursue a downtown transit assessment district and partially allocate some of the revenue for affordable housing.

There are a number of other progressive taxation methods we could pursue and allocate a portion of the proceeds to an affordable housing fund.

Then there’s an affordable housing bond measure employing tax increment financing.

But I’m not going to pursue this reasoning right now. Instead, I offer an alternative for development impact fees. Instead of Sup. Daly’s $28/square foot offer, let’s pursue a level proven by the EPS Study to be feasible, say $65/square foot. Of this, $11 would be allocated for infrastructure, $40 would fund the South of Market Community Stabilization Fund, and the balance would be geared toward job creation, schools, parks, SOMA-based arts programs, and affordable housing outside District 6.
Additionally, we need to pursue higher inclusionary rates over what currently exists.

The City of London has set the benchmark at 50% affordable housing in its developments. Our supervisors need to address this issue immediately. We do not need million-dollar and multi-million-dollar condos. We need affordable rental housing ranging from 0% to 40% AMI.

I’ve got the bat. Now … who wants to play?

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