Fee shift aims to boost building 

Altering how fees are paid for private developments would help rebuild the economy in San Francisco.

As The City struggles to climb out of the recession, Mayor Gavin Newsom has proposed a plan to encourage private development by reducing how much developers would pay upfront in city fees. Instead, developers would pay The City’s fees, like for below market rate units or “impact” fees, after the development is complete or sold.

By providing an upfront city-fee break for private development, San Francisco’s economy would experience $250 million more in spending every year, the creation of 330 jobs and up to 80 new housing units annually, according to economic analysis released Monday.

Members of the San Francisco Building and Construction Trades Council and developers praised the proposal during Monday’s Board of Supervisors Land Use and Economic Development Committee hearing on the legislation. They called on the board to approve the fee deferral plan in short order.

“San Francisco has seen a dramatic decline in residential development activity over the past year,” said Michael Yarne, Newsom’s development adviser. “The number of permits being issued has plummeted.”

Yarne said deferring upfront costs would result in private developments occurring sooner, which will not only generate jobs but also fill city coffers with payroll, property and other tax revenue it would otherwise not see.

Concerns were raised that the plan would delay construction of valuable infrastructure to go along with the housing units and it would push off the creation of desperately needed affordable housing.

The legislation would offer developers the option of reducing their affordable-housing requirement by 33 percent in exchange for accepting a transfer fee on their property. 

The 33 percent reduction proposal “is a very conservative policy that will generate more fee revenue for The City over the long term — assuming that it will be attractive to developers,” said Ted Egan, the City Controller’s Office economist who drafted the economic analysis report.

The transfer fee would require all future sellers of the property to pay an additional 1 percent of the sales value to fund The City’s affordable-housing efforts. Another piece of legislation would allow developers to defer other fee payments until new buildings are occupied.

The legislation is expected to undergo a second hearing before the committee April 5. The full board would have to approve the legislation for the upfront fee break to go into effect.


Rebuilding the economy

Two pieces of legislation by Mayor Gavin Newsom aim to alter how development fees are paid to help stimulate construction.

75-80: Housing units per year that could be built

$250 million: Expansion of The City’s economy

330: Average jobs created each year

$101 million: Average annual increase in construction spending

Source: City Controller’s Office

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