South City adopts commercial linkage fees

Officials expect the fees over the next couple years could generate between $5 million to $15 million, which will flow into a fund designed to facilitate construction of more affordable housing opportunities.

Councilman Pradeep Gupta said he appreciated the fees as another tool for officials seeking to offset the skyrocketing cost of living plaguing so many in South City.

“It won’t in my mind solve the problem, but it is a step in the right direction,” he said.

Under the decision, builders will be required to pay $5 per square foot of new hotel space; $2.50 for restaurant or retail square footage and $15 for the same amount of office, medical or research and development space. Exemptions will be available for public services such as schools, churches or other nonprofits deemed suitable by officials. Discounts or waivers may also be available to builders willing to make separate financial contributions, pay prevailing wage or offer other conciliations.

The issue of exemptions did raise the eyebrows of some councilmembers, who critiqued a proposal to waive the fee for those seeking to build new retail space downtown.

Vice Mayor Karyl Matsumoto said she believed the downtown exemption was unfair to those elsewhere in the city, and councilman Mark Addiego shared a similar perspective.

Alex Greenwood, Economic and Community Development director, said officials sought the downtown waiver as a means of fostering further growth in the central shopping district which is amidst a revitalization period.

He characterized the rebirth of downtown as a fantastic success, but also noted the region is only a few years beyond the time when it was a much less attractive destination.

While Greenwood suggested the downtown exemption would be aligned with other efforts designed to catalyze business growth, councilmembers ultimately agreed the relief should be granted on a case-by-case basis.

Concerns over hampering business were also cited by city officials when justifying the rate levels proposed, claiming the right balance must be struck in identifying a fee which will raise adequate revenue while not dissuading development interest.

Nell Selander, Economic and Community Development deputy director, said the rates are competitive with other nearby cities. For context, developers in Redwood City are required to pay $5 per square foot of hotel, retail and restaurant space and $20 for the same amount of office or research and development space. In Foster City, it is $12.50 for hotel square footage, $6.25 for a square foot of retail and restaurant space and $27.50 for office or research and development space. Menlo Park charges no additional fee for hotel, restaurant or retail space and $16.90 per square foot of office or research and development space.

Despite the effort to identify the correct fee amount, Addiego said he believes the rates could have been pushed higher, especially considering the city’s reputation as a global hub of the booming biotechnology industry.

“I’m a little disappointed in the number,” he said. “I don’t think we think highly enough of ourselves.”

Officials noted though the rates can be adjusted in future years following their establishment.

Revenue generated could be allocated toward helping build affordable housing, or preserve existing units, with assistance from the city’s affordable housing fund. It can also be used to acquire land where affordable projects might be built by nonprofit partners, or provide a source of loan financing.

With an understanding the fees will not be a silver bullet for fixing the city’s affordability problems, Gupta said he believed the initiative is worth adopting.

“I fully support linkage fees and I think this is a good starting point,” he said.

In other business, officials discussed the amended flood plain maps to be implemented by the Federal Emergency Management Agency. Under the FEMA proposal, 187 new commercial and residential parcels on the east side of Highway 101 would be mandated to hold flood insurance, while another 854 parcels currently in the plain would be removed.

The boundaries are determined by revisions from the federal agency initiated in 2012 according to coastal hazard analyses. City officials fought the proposal, but were overruled, and the new maps are expected to be implemented next year.

Councilmembers said they will defend residents’ best interest throughout the process, which is expected to take the next step forward when federal officials host a discussion of the issue later this year.

Also at the meeting, City Manager Mike Futrell said Genentech offered a $1 million incentive if the construction firm rebuilding the bridge along South Airport Boulevard at North Access Road just north of Interstate 380 finishes early.

The bridge closed in May for emergency repairs and was projected to be completed in November. Officials suggested work is ahead of schedule and may be done sooner than initially expected.

Futrell said city officials tried to make a similar bonus available when the project started, but the offer was rejected by Caltrans, leading to the local biotech titan intervening.

austin@smdailyjournal.com

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