SF sees significant increase in revenue from developer impact fees

As San Francisco real estate prices have soared like high-rises sprouting across the cityscape, so has the revenue from fees associated with the booming development, a city controller's report shows.

The new report, which illustrates varying development-impact fees and the revenue generated for city coffers, found that the revenue has more than doubled in the previous two fiscal years. In fiscal year 2013-14 developers paid $96.1 million in combined impact fees, compared with $46 million in the previous fiscal year. In fiscal year 2011-12 impact fees netted just $12.3 million.

The City has required developers to pay impact fees per project as a way to address the impacts of development on infrastructure like roadways, parks and transit, as well as neighborhoods facing challenges of rising rents and evictions.

The report comes as The City is undergoing significant population growth, coupled with a rise in rents and home costs, displacement and neighborhood change. As city officials look to address these pressures, impact fees may get another look.

The City has instituted nine impact fees to pay for citywide needs such as the construction of below-market-rate housing, Muni, child care, street trees, bicycle parking, and water and wastewater infrastructure. And there are seven neighborhoods requiring various development fees of their own, including projects in Rincon Hill, Market-Octavia and the eastern neighborhoods.

An innovative South of Market stabilization fund was created in 2005 to protect the community from the impacts of Rincon Hill development. Controversial at the time, the fund allowed developers to exceed existing height limits — which resulted in two Rincon Hill towers in excess of 500 feet — in exchange for paying a fee. That fee has increased to $13.29 per gross square foot today. Recently $400,000 from the fund was allocated to help the nonprofit anti-violence group United Playaz purchase a building.

Additionally, Muni has received revenue from the Transit Impact Development Fee — established in 1981 and initially imposed on nonresidential development in the downtown area — which expanded citywide in 2004. Muni has received $143.4 million from the fee, which is currently at $12.06 per gross square foot, including last fiscal year's $12.6 million. Fee revenues for Muni were $7.9 million in 2001.

Another example of a fee fight came in 2012, when Supervisor Scott Wiener unsuccessfully proposed eliminating the transit impact fee exemption for nonprofit development, which includes construction of universities and hospitals. It was estimated that Muni would have received an additional $6 million annually.

There are two impact fees on development for the creation of below-market housing: a job housing-linkage fee for the construction of commercial space like hotels and entertainment, and the inclusionary-housing fee for residential developments that choose not to build onsite or offsite below-market-rate units. Revenues from both go to the Mayor's Office of Housing, which uses the money to help finance below-market-rate housing projects and fund housing-related programs.

Last fiscal year, the inclusionary housing fee, part of the affordable-housing requirements adopted in 2005, generated $29.9 million. The fee is based on 20 percent of the total units and unit type, such as $191,349 for a studio or $407,890 for a four-bedroom. The fee's previous high was in fiscal year 2007-08 when $50.6 million was generated, followed by two years of no revenues during the economic downturn.

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