When San Diego Councilmember Lorie Zapf is this excited about a policy proposal, we all should be very concerned. Zapf was clearly chagrined last Thursday, when the committee she chairs, the council’s Smart Growth and Land Use Committee (SG&LU), voted 3-1 to slow the roll of a so-called compromise deal on funding affordable housing.
The deal stemmed from the council’s decision in March to rescind its own law, an ordinance that cranked up a fee that developers of commercial property pay to help finance the creation of new affordable housing. The idea behind the fee is that commercial development results in a certain number of low-wage jobs, and the fee helps pay for housing for those workers so they can live in the city where they work.
In 2009, the city auditor discovered that the city hadn’t been following a law that requires the fee to be adjusted annually based on changing economic conditions. So, after more than four years of work, the council raised the fee dramatically to help make up for lost money. But a group of real-estate developers and business interests calling themselves the Jobs Coalition mounted a successful drive to put a referendum on the ballot that would’ve repealed the fee increase, and the council capitulated and sacked its own law.
The San Diego Housing Commission, which was behind the bold increase, then held a series of negotiations with the Jobs Coalition, and the result was the proposal that Zapf is so excited about. The new proposal would double the fee effective next Jan. 1 (the rescinded law would have increased it by 500 percent). In exchange, the Jobs Coalition extracted a list of regulatory reforms that it believes will make developing affordable and market-rate housing easier, faster and cheaper. Developers of warehouses, manufacturing plants, nonprofit hospitals and research-and-development complexes would be exempt from the fee increase.
Boy, do we appreciate Andrea Tevlin right now. During last week’s SG&LU Committee meeting, Tevlin, the council’s independent budget analyst, rained on the parade of developers who said that, while the compromise isn’t perfect—they want no fee increase at all—it’s a deal well worth supporting. Tevlin doesn’t like the agreement for three main reasons: The fee increase would sunset after just three years if the regulatory reforms aren’t fully realized by then, the desired reforms aren’t clearly articulated and there’s no automatic annual fee adjustment required.
Tevlin, who noted that she didn’t support the rescinded ordinance, either, because the fee increase was too big, said she much preferred a proposal that failed in 2011 on a 4-4 council vote, which would have raised the fee 20 percent for five straight years and then adjusted it annually thereafter based on market conditions. She said a better alternative to this new proposal, in the long run, would be to not raise the fee at all initially but index it so it adjusts annually. However, she pitched her own better idea: Raise the fee 25 percent for four straight years, add an automatic annual adjustment, better define the regulatory reforms and give the city five years rather than three to reach them.
The council should seriously consider Tevlin’s reasonable alternative.
First of all, doubling the fee, which the compromise would do, sounds like a lot, but it would result in a figure that’s about half of what it would have been by now if they city followed the law. So, already, the developers are getting a great deal. But the worst part is that the council can pass all these regulatory concessions that cut costs for developers and a new council in 2017 could simply let the fee revert back to its lowest-ever level if they deem that the reforms aren’t satisfactory based on the vague language in this deal.
At the risk of sounding too conspiratorial, the Jobs Coalition could be proposing a classic bait-and-switch. Right now, there are six Democrats on the City Council who want more money for affordable housing. If Republican Chris Cate beats Democrat Carol Kim in the November District 6 election, that drops to five Democrats in 2015. There’s serious concern among Democrats that District 1 could switch to the Republicans in 2016, when Councilmember Sherri Lightner is termed out, which means the fee-hating Republicans could have a 5-4 advantage and a Republican mayor in 2017, when the council would be debating whether to make the slightly higher fee permanent.
At best, this deal is too small a step in the right direction. At worst, it’s a giant leap in the wrong direction.
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