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San Diego City Council Votes To Increase “Linkage Fees” For Developers

SAN DIEGO — A controversial proposal to jack up the fees that the city of San Diego charges developers -- which go into a fund for affordable housing -- was tentatively passed Monday by the City Council on a 5-4 party line vote.

The levy -- called a "linkage fee'' -- was instituted in 1990 as a way for commercial developers to offset the impact of adding low-wage employees for their buildings in San Diego's high-cost and mostly built-out real estate market. It's similar to charging housing developers to offset resulting traffic increases.

The city initially charged 1.5 percent of the total building cost, but that was halved in 1996. The San Diego Housing Commission asked to restore the original formula, which would affect projects that haven't completed the city's approval process by the end of the fiscal year on June 30, 2014.

According to a report by the city's Independent Budget Analyst, that would result in hikes anywhere from 377 percent on developers of industrial and manufacturing projects to 744 percent for those who want to building warehouse or storage facilities.

The IBA report said the increases, which would be phased-in over two years, would amount to 402 percent for office developments, 418 percent for research and development projects, 639 percent on hotel construction and 675 percent on retail building.

The size of the jumps drew the ire of the area's business community and its supporters on the council.

Mike Niggli, president of the San Diego Regional Chamber of Commerce Board of Directors, said the increases would put the city at a "serious'' competitive disadvantage.

"Currently, this city is the only jurisdiction in the entire county charging this fee,'' Niggli said. "Likewise, our competitor regions across the United States that are trying to attract businesses from California don't charge this fee.''

He said the fee hike would make it easier for other regions to get local companies to move away.

Other opponents said companies that want to build in California are already facing steeper storm water fees and energy costs.

Supporters, however, noted that San Diego was found to be the nation's second-least affordable housing market in the U.S. in a study released last month.

"We have an economy today where a third of our families can't pay their basic bills, can't make ends meet, where half of our families can't afford to live in their homes,'' said Richard Barrera, who heads the San Diego and Imperial Counties Labor Council. "What you are doing today is you're taking a critical, necessary step is to grow an economy that works for all of us.''

Councilwomen Marti Emerald and Sherri Lightner, who voted for the increase, said the lack of affordable housing is preventing companies from moving to San Diego.

The municipal code calls for the fee to be adjusted annually, but that hasn't happened since the 1996 halving.

The city's affordable housing fund has been buffeted by the end of the redevelopment system in California, which required a certain percent of revenues to be set aside for affordable housing projects, along with state and federal budget cuts.

Housing Commission staff said the increases should result in $8-10 million in additional revenue earmarked for affordable housing. Companies that bring primarily well-paid jobs to San Diego would be eligible to apply for exemptions, according to the staff report.

Because the council modified some language in the commission's proposal, it will have to return for two additional votes in the next few months.

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