MAUREEN CAVANAUGH: Our top story on Midday Edition, the San Diego City Council has approved a compromise on the linkage fee that is charged to commercial developers. The fee helps pay for construction of affordable housing. Earlier this year, the Council battled with business interests led by the regional Chamber of Commerce over increase in the fee. A signature gathering drive was launched to stop the fivefold increase approved by the city Council. But instead of the proposal landing on the ballot or being dropped entirely, the Council joined in effort to find a compromise between business and affordable housing advocates. Now that the agreement to double the fee has been approved, the question remains: is it enough to provide affordable housing in San Diego? I would like to welcome my guests, Bruce Reznik and Matt Adams. Welcome to the show. Bruce, give me a brief description of what the linkage fee is, and why it is tied to the creation of affordable housing. BRUCE REZNIK: The linkage fee is a the that is put on new development in San Diego. It has been around since 1990. My organization, the housing Federation was created around the creation of the linkage fee and how that created the trust fund. The concept is to force developers to internalize impacts that they have. So, you build a developer downtown that is great, let's say a hotel, you will need a lot of low-wage workers and we need to be able to provide housing for them nearby, or else we are forcing them out. That has all sorts of environmental, community, health, and education impacts. It is a concept of forcing developers that benefit from development, which again we all agree is great and needed to drive the economy, but forcing them to pay a fair share towards affordable housing. MAUREEN CAVANAUGH: Trying to house workers that presumably will be brought in by this commercial development being built? BRUCE REZNIK: Exactly, that is why the fee was originally called a linkage fee, for that connection. It got changed to the workforce housing offset fee to get the connotation of the workforce. There is a study done every few years, called a nexus study. Basically making that connection that these developments create a need for jobs which creates a need for housing. Is important to get not only developers to pay, everyone needs to pay a share, but to get developers to pay a level of that as well. MAUREEN CAVANAUGH: A move by the Council earlier this year would only bring the feedback up to the 1990 level, but the building industry fought that. Remind us why San Diego developers box at the fee, the fivefold increase, but it came up to the same level that builders were paying 20 years ago. MATT ADAMS: That is incorrect, it would have been a fivefold fee that would have far exceeded the 1990 level. In fact, the compromise voted on yesterday will return the fee to the original 1990 level. Our strong opposition, along with the chamber of commerce and a host of members of the jobs coalition was because of that excessive five-to-nine fold increase, and a fee on job creators at a time when we were just coming out of what is considered the Great Recession. MAUREEN CAVANAUGH: Bruce, wasn't it bringing it up to the 1990 level when it was cut in half? BRUCE REZNIK: It's somewhat a semantics argument. The fee was adopted in 1990. There was supposed to be increase every year based on inflation going up slowly over time. That never really happened. 1996, the fee got cut in half. The fivefold increase or five fold to nine fold increase was indicated to go back to the 1990 level and do away with the fact it had been how do 1996 and to account for all of the costs that should have to can place. What happened was, this is one of the unfortunate parts of the deal, and we are supportive of the deal overall and we think it is a good deal that was reached. But they did away with the annual cost indexing. One of the unfortunate things, if that had been happening all along these slow increases in the is this community and developers could have absorbed it better. I think when you don't do that and all of a sudden you get hit with a five to nine, the community gets a little challenged. MATT ADAMS: It's also the business community in general. Everyone was going to be touched by this significant fee increase. We are very pleased with compromise that was ultimately reached and adopted yesterday by the San Diego city Council, which does result in a doubling of the fee. MAUREEN CAVANAUGH: It goes from $1.06 per foot to about $2.12 per square foot for developers. Is that correct? MATT ADAMS: It depends on different building types, but yes, more or less. MAUREEN CAVANAUGH: There are exceptions. Council President Todd Gloria said that this compromise that was reached and was written into law yesterday was very much like the measure that failed back in 2011. A measure that was opposed by business and building industry. Why, therefore, first, do you agree with that? And why would you be supporting this if it is so much like what failed in 2011? MATT ADAMS: I wouldn't say it was equal to the debate we had in 2011. We are trying to get beyond arguing over a number and trying to address the real issue. That is, how do we fund our affordable housing needs in the city of San Diego? We are going to have a serious discussion on this issue, and we have to have a serious discussion on the solution. Arguing over a fee that everyone acknowledges is a drop in the bucket to the financial needs. That is not a serious discussion of the solution. That is what we want to have, that is what we attempted to do in this discussion to expand the dialogue beyond the number, to the impediments and the creation of affordable housing, so we could address the issue once and for all. MAUREEN CAVANAUGH: And for the Housing Federation side, you were opposed to a previous version of this plan. What changed so you were able to support it? BRUCE REZNIK: There was one big change. In the original compromise, the increase or the doubling of the fee back to the 1990 levels, which would bring in one $.6 million a year. It's not huge, but it is meaningful to those who need housing. That would have sunsetted in three years. We would have brought in four to $5 million, but the exemptions for businesses currently exempted from the fee, that would have lasted. There was some language that if you met certain criteria, and the city agreed to certain things, it would in a few years. But the business community needs certainty. We looked at it and said we do not know that the sunsetting is going to go into place. We would raise $5 million-$6 million, but if you're looking 15 to 20 years out, we could actually raise less money. For us, getting rid of the sunset with the leadership some of the council members, getting rid of that was really important so we could look and say over 20 years instead of taking even, we brought in $20 million-$30 million. With important for that, it is a drop in the bucket, but it gets leverage without resources. There are often times federal and state money goes on spent because we do not have a local match. Getting that local source because we look for many sources, getting that was important. I have to credit the folks at the chamber and BIA. Rather than being contentious, I think it is important to have us all moving forward. MAUREEN CAVANAUGH: That is an interesting point. This they compromised plan. I'm interested in what you compromised on. What did the building industry give up, or acquiesce to, in this plan that you do not like? MATT ADAMS: It's first a significant increase in fee on business expansion in San Diego. We have a focus on retention and attraction and expansion of businesses in San Diego. But it is difficult for that to happen when you are raising fees against the very people you're trying to attract. We did compromise on the sunset provision. The sunset provision was put in place primarily to keep everyone at the table over the course of three years, to try to expand the dialogue to more substantive solutions to the affordable housing situation. The city of San Diego declares a housing state of emergency every few weeks. It is not an emergency of this current city councils doing, I want to preface with that. As a matter of fact, should give props to the existing Council for wanting to address this issue in some manner, we are very appreciative of that and forward to continue dialogue. But the sunset was to keep everyone at the table so we could do those things cost we do not get distracted by other issues. The next thing you know we do not have time to address reforms, but the fee stays in place and we have only increase the fee and have not made real progress. MAUREEN CAVANAUGH: I will testing more about what progress has been made in making those changes that you would like to see that will increase the chances for affordable housing in San Diego. Bruce, I want to hear though what housing advocates in the Housing Federation compromised on this agreement. BRUCE REZNIK: We would like to see more money because it gets leverage. We recognize that. The biggest one and the hardest for me was when I mentioned was doing away with the annual cost indexing. In reality, we had not done that in the city for the last 20 years. In some regards, we are losing nothing. On the other hand it is important, because you are accounting for increases. I'm worried we will end up in the same situation a few years down the line if we had just been raising incrementally it had would have been good and now we have to crate in other large increase. In the end, doing away with the sunset and being able to point and say $30 million more over the next 20 years going to affordable housing that can be leveraged 5 to 6 fold, it was worth it for us and something we were happy with. MAUREEN CAVANAUGH: You both mentioned that this is a drop in the bucket, that the amount of money raised by the higher fee is not going to solve the San Diego affordable housing problem. Bruce, can you talk about San Diego's current need for affordable housing? BRUCE REZNIK: We are in a crisis, as Matt mentioned. The city Council declares it on pretty much a monthly basis. In the city of San Diego we have 45,000 families, working families, veterans, and seniors and veterans on the waiting list. It's estimated in the report we did with the housing partnership that countywide we are 127,000 affordable housing units short. It hits everyone in the pocketbook. In the city itself there are 45,000 families on the waiting list for affordable housing. They can sit on the list for three years, five years, 10 years. MAUREEN CAVANAUGH: How many units will the increased fee pay for? BRUCE REZNIK: It is not a lot, we are talking about every year, 2230 extra units. It is not a major amount. It is very meaningful for those folks, but we recognize that we are not going to solve this. We have gotten into our own infrastructure deficit that we will not solve with any place. Will get $45 million here things to Speaker Atkins, and pro tem Steinberg. We have cap and trade revenue sets. That will bring in statewide hundred million dollars to $200 million a year for affordable housing we had the voters pass proposition 41. We are working with BIA and the chamber and other funding sources and info structure box. It is no silver bullet, it is a lot of small things put together. MAUREEN CAVANAUGH: What kind of ideas came up in this discussion about being able to find a new way, a better way to fund affordable housing, or find affordable housing here in San Diego? MATT ADAMS: We want to examine broader based funding sources, such as a housing bond that could generate significant revenue over a short period of time, and you could go against them and generate more to generate the necessary funds to address the problem. Even at its peak, the linkage fee, the housing commission said it would equal about 100 additional units per year. As you can see, it was going to have a very modest effect on the 45,000 families that need it, but it was going to have a syndicate impact on the business community, because of the 5 to 10 fold increase in the fee. That is not a direction we should be going. We should be looking at housing bonds and other revenue sources. When the housing trust fund was created in 1990, there were multiple funding sources. The linkage fee was to be one of several funding components. One of them was the TOT. That was in for about a year, and then dismissed. Years ago, they added an impact fee on residential development, which today pays anywhere from $15-$20,000 for a new home created to the trust fund for affordable housing budget. Our concern is that you are singling out a single sector to try to solve a broad, societal problem. We have to expand it. If it is a serious societal issue, we will have to have a serious societal discussion to address it. MAUREEN CAVANAUGH: The idea of a housing bond for affordable housing in San Diego has been floated before, but it hasn't gone anywhere, has it? BRUCE REZNIK: Not yet and obviously doing that takes a lot of resources. But it's something we are interested in looking at, and there was a permanent funding source bill carried last year in the state legislature that were very involved with. SP 391, it did not make it out of the legislature, but as speaker Atkins has indicated, they decided to take a leadership role on a bill like that again. This is where Matt and I are in agreement, it will take a lot of areas coming together, federal, state and local. MAUREEN CAVANAUGH: A complex discussion. Thank you both for joining us.
The San Diego City Council gave final approval to a compromise plan for a fee increase on commercial construction to fund the city's affordable housing projects.
The deal, approved by an eight to one vote, should end a struggle between housing advocates and business leaders over the future of the fee, which was instituted in 1990. Six years later, the levy was halved as an economic stimulus.
Last year, the City Council approved restoring the charge to its original level, but as the city's independent budget analyst pointed out, the hike would have ranged from 300 percent to more than 700 percent on certain types of building projects.
Opponents collected enough petition signatures to get the council to rescind the increase, which led to the compromise passed today.
Provisions include returning the fee to its 1990 level, phased in over three years beginning on Jan. 1. It also includes exempting developers of manufacturing, warehouse and nonprofit hospital projects from paying the fee and maintaining current fee levels for research and development construction.
Two controversial points in earlier versions of the compromise, which include a sunset provision that would put the levy back to its 1996 level in three years, and a requirement for annual fee adjustments based on a construction cost index — are no longer being considered by the City Council.
The deal was hammered out by the San Diego Housing Commission, which runs the city's affordable housing programs, and the Jobs Coalition business group. Final details were ironed out by Councilwoman Myrtle Cole.
"At the end of the day, this ordinance will provide greater certainty for both our affordable housing advocates and developers," Cole said. "It will create a supply of affordable housing. It will improve business and development."
City officials concede that the amount of money to be raised by the fee is a drop in the bucket compared to the need in a city that has 47,000 families on waiting lists for housing assistance.
Cole and other participants in the negotiations said they hope work will now begin on more meaningful action to resolve the affordable housing problem.
Councilman Scott Sherman cast the single "no" vote. He said the panel should wait one year from the time the petition signatures were validated to address the issue again.
The council members also patched some loopholes in campaign financing laws.
According to the city's Ethics Commission, candidates in recent election cycles have made their campaign materials available online to outside committees to distribute on their behalf; this circumvents contribution limits. Also, committees have been making payments by credit, which allows them to avoid revealing identities of major donors until ads have been released.
The amendments that the council approved unanimously will clarify the types of committees that would have to report receiving campaign materials, and the manner in which credit could be extended.
