San Diego Business Journal

City Council Gives Tentative Approval to Boost in Commercial Construction Fees

Wednesday, November 6, 2013

San Diego City Council has given preliminary approval to a hike in “linkage” fees, assessed on commercial construction projects, by five times or more, to fund affordable housing development in the city.

Council voted 5-4 to approve the measure, originally proposed by the San Diego Housing Commission, which was opposed by local business groups — a change in the proposal’s language means additional votes will be required to adopt the measure.

San Diego is among 60 California cities with the linkage fee, and the only one in San Diego County. The city in 1990 established the fee at 1.5 percent of construction costs on commercial projects, but the percentage was cut in half in 1996.

City Council approved restoring the original percentage, with the effect of increasing current linkage fees by five times or more. For instance, the per-square-foot fee would go from $1.06 to $5.32 for an office project; $0.64 to $4.73 for a hotel project; and from $0.64 to $3.05 for a manufacturing facility project.

The measure was opposed by the countywide Jobs Coalition, with about 50 members including local building industry associations, companies, the San Diego Regional Chamber of Commerce and other business advocacy groups.

In a statement following the council vote, coalition representatives said the group is weighing its options, including litigation or a possible voter referendum.

“We are disappointed that the City Council disregarded the concerns of jobs creators and their constituents by adopting this counter-productive tax increase on job creation,” said Chamber CEO Jerry Sanders and SDG&E President Mike Niggli, in the statement. “The best way to deal with issues like housing affordability is to strengthen San Diego’s economy, yet this action does the opposite.”

The Housing Commission, a nonprofit public agency that works with the city, said the measure was needed to develop affordable housing options for a growing workforce. Officials said the 1.5 percent fee would still be lower than those of many other California cities and those in other states that have commercial linkage fees.

— SDBJ Staff Report