City gives up affordable housing fees

But Mayor David Lim said he was shocked and opposed to “spot legislation” that would cater to just a handful of developers.

“I know this is strong language, but it’s basically kowtowing to developers. We’re going to lose $2.9 million to $3.9 million that we could use for affordable housing,” Lim said. “I think this is one of the worst decisions I’ve ever seen the council make.”

The council voted 4-1 last month to amend its ordinance and provide a 50 percent fee discount for five projects that initiated the planning process prior to the rule going into effect last year. The projects include the mixed-use Essex at Central Park residential building, Windy Hill Property Venture’s mixed-use commercial and micro-apartment project at 405 E. Fourth Ave., a Hampton Inn hotel proposed at 2940 S. Norfolk St., a recently approved remodel of a commercial property at 333 S. B St., and Franklin Templeton Investment’s campus extension.

Developers often cite the Bay Area’s extremely high cost of building and note additional fees could be prohibitive to ensuring a project pencils out.

City staff said they reached out to each of the developers when the fees were first proposed, but none responded with comments at the time. Eventually, at least one of the developers complained.

The council’s decision to provide a discount came after the city was approached by Franklin Templeton, a global investment firm in the midst of planning to construct the second phase of its headquarters campus at Bay Meadows. With certain entitlements already in hand, Franklin Templeton was surprised to find out nearly $6 million in new linkage fees would indeed apply to their expansion.

For months, the council met in closed session to discuss what some feared could turn into litigation. Lim noted representatives from Franklin Templeton lobbied each of the councilmembers and eventually the majority of the council opted to give a pass to five developers.

Councilman Joe Goethals defended the action noting the original ordinance was silent on projects already in the pipeline. Even with the recent changes providing a 50 percent discount, the city will still receive support for vital housing needs, he said.

“Those are all projects that had their applications in before we approved and in some cases long before we ever started talking about the commercial linkage fees. Each of them is paying a significant amount of money, millions of dollars into an affordable housing fund,” Goethals said. “It was really about fairness to our partners in the community.”

Goethals noted Franklin Templeton has supported a range of local nonprofits and it could still contribute up to $3 million in affordable housing linkage fees, or less if it opts to pay prevailing wages during construction, according to the city.

A Franklin Templeton spokesman noted the company has a long-standing presence in the community and it’s simply finishing its campus project that has been in the works for nearly two decades.

“As a result of the council’s recent decision, the company will be paying millions of dollars in fees that will support the affordable housing initiative. We have also been a longtime supporter of the San Mateo Community in many other ways, including Police Activities League, Samaritan House and the Main Library to name a few,” the company said in an email.

But Lim argued the developers had the opportunity to weigh in early on, with city staff going so far as to contact them each directly. Lim said providing discounts sets a bad precedent, particularly as he doubts a typical homeowner would be provided the same exemptions.

Councilwoman Maureen Freschet noted Lim was absent during a comprehensive study session during which the remaining councilmembers examined the history and complexity of this issue. Although they could have granted a full exemption, they decided it would be fair and equitable just to provide the discount.

“It is common practice to exempt applicants from fees resulting from legislation passed after their projects were already in the pipeline,” Freschet said in an email. “This decision serves the interests of the projects that were already budgeted and in the works, while recognizing how critically important our new commercial linkage fees are to generate revenue for affordable housing in our community.”

The fees were one of the few areas on which the council found unanimous common ground over how to address the regional housing crisis. The issue peaked after the council disputed over whether to implement tenant protections following the formation of a housing task force. Ultimately, the council agreed on linkage fees, which developers pay as a way to offset their impacts on affordable housing needs. San Mateo’s fees per square foot of net new development include $5 for retail space, $10 for hotels and $25 for offices.

When the council stalled on tenant protection measures, a heated battle ensued over a citizen-initiated ballot measure to institute rent control. It resulted in a divisive election wherein Measure Q ultimately failed. The council has since steered clear of taking further action over any type of tenant protections.

Lim said his colleagues’ decision to now essentially refund the fees was hypocritical as many hailed the ordinance as an agreeable way to support those facing displacement.

Compared to many neighboring jurisdictions, San Mateo has been progressive in looking for means to address the affordability crisis. It approved new housing developments, partnered with nonprofits to develop city-owned lots into low-income housing, and has inclusionary zoning ordinances requiring below-market-rate units be incorporated into new projects.

But like many others trying to balance the impacts of growth along the Peninsula, San Mateo has been under tougher public scrutiny. The city has had no shortage of housing proposals and residents frequently rise in opposition citing fears new developments will exacerbate parking and traffic woes.

Lim, is not running for re-election this November, said he fears the council’s recent action doesn’t bode well.

“This is just the latest and most shocking example of how we’ve basically just given in to developers and without thought for what’s best for the community,” Lim said. “As a citizen, I want to feel that my council is scrutinizing every decision and holding developers not to a higher standard, but the same standard we’ve held to our community.”

samantha@smdailyjournal.com

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Twitter: @samantha_weigel