The Mason, a Fifth Avenue affordable housing project. Photo credit: sdhc.org

A proposed compromise to a controversial increase of a commercial construction fee that pays for affordable housing projects in San Diego will be presented Thursday at a special meeting of the City Council’s Smart Growth and Land Use Committee.

The proposed deal was brokered last month by a business group and the San Diego Housing Commission, which administrates the city’s affordable housing programs.

Last year, the City Council on a pair of party-line 5-4 votes, agreed to return the so-called “linkage fee” to its original level of 1.5 percent of construction costs. It had been halved to 0.75 percent in 1996 as an economic stimulus and was supposed to be reviewed annually, but wasn’t.

Business groups fought the increase because the fee hike for some types of development were set to go up far more than just double — in some cases it would have been more than 700 percent. They argued that the burden would prevent companies from moving to San Diego and keep businesses in town from expanding.

The council repealed its action when presented with petition signatures that could have forced a public vote.

At the time, the council challenged business leaders to negotiate a deal with the Housing Commission. What’s being presented Thursday is the result.

Under the proposed deal, the fee would double as originally intended, but there would not be even higher increases for certain types of development, said Craig Benedetto, who leads a group called the Jobs Coalition.

He said manufacturing, warehouse and nonprofit hospital facilities would be exempted.

The increase would last only until Jan. 1, 2018, and could not be reconsidered by the City Council unless certain milestones were met, according to a memorandum of understanding signed by Benedetto and Rick Gentry, president and CEO of the Housing Commission.

Among the many other provisions in the MOU, the city’s independent budget analyst would be required to study other funding sources for affordable housing; city staff would be directed to find vacant or under-utilized city property that could be used for affordable housing; and assessments on development would be deferred until construction is completed.

A spokeswoman for City Council President Todd Gloria said that while he favors compromise on contentious issues, he hopes some aspects of the agreement will be clarified at the committee meeting. Gloria supported the original City Council actions.

The city’s Independent Budget Analyst’s Office, which opposed the nature of last year’s hike, opined that the compromise appears to be deficient, providing 14 units of affordable housing annually for three years. The production could be lessened by the exemptions and fee deferrals, according to its report.

The milestones the city would have to meet to continue the fee after three years are undefined and “create greater uncertainty” for the future of housing impact fees, according to the IBA.

The IBA said the Council could remove the three-year sunset provision and add automatic fee adjustments, increase the sunset period from three to five years and clearly define the milestones, or increase the fees by 25 percent a year to reach the eventual doubling.

— City News Service

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