A proposed Transportation Sustainability Fee on new development could help San Francisco generate more than $400 million for transit spending over the next 30 years, but some small business owners are worried about the increased costs. (Michael Ares/Special to S.F. Examiner)

A proposed Transportation Sustainability Fee on new development could help San Francisco generate more than $400 million for transit spending over the next 30 years, but some small business owners are worried about the increased costs. (Michael Ares/Special to S.F. Examiner)

Small businesses could be burdened with transit fee

If a 4,000-square-foot restaurant wants to expand to 8,000 square feet, a newly proposed city fee for transit funding could add an additional $16,000 onto the project costs.

That’s just one example of how a proposed Transportation Sustainability Fee would impact small businesses under San Francisco’s effort to have development generate more than $400 million for transit spending during the next 30 years.

The Small Business Commission was largely supportive of the proposed Transportation Sustainability Fee during a meeting this week.

But some expressed concerns for some of the ways that would trigger the fee. A small business that expands beyond 5,000 square feet would have to pay the fee on the expansion square footage.

Paul Tour-Sarkissian, a Small Business Commissioner, is worried the “5,000 [-square-foot] threshold can capture a lot of small businesses.” The commission voted to recommend possibly increasing the threshold. Tour-Sarkissian suggested excluding storage space from the calculation.

The fees are also triggered for new development in excess of 800 square feet, which raised another concern for the commission: Pop-up retail boxes like The Yard at Mission Rock or Proxy on lots vacated from the Central Freeway teardown could be hampered by the fees.

The proposed impact fee would be assessed on both residential and retail development. The current transit impact fee, which dates back to the 1980s, doesn’t include residential development, but it would change to include developments of 21 units or more.

The proposal treats currently planned developments in different ways, depending on how far along they are in the approval process. Projects already approved, but where work has yet to begin, would pay the existing fees. Residential projects with pending applications would pay 50 percent of the proposed new fees, and nonresidential projects with pending applications would pay the existing fees.

The current transit impact fee only applies to nonresidential development and construction of production, distribution or repair space (PDR). Those fees are set at between $13.87 to $14.59 per gross square foot for nonresidential and $7.46 per gross square foot for PDR.

Under the proposed new fees, residential development would have to start paying into transit needs. The fee would be $7.74 per gross square foot for residential development. Nonresidential development would increase to a flat $18.04, and PDR would increase slightly to $7.61.

The fees can be triggered in cases where there is a change in space usage in excess of 5,000 square feet, such as from PDR to a restaurant.

Samantha Higgins, of the Golden Gate Restaurant Association, thought these fees would limit opportunities for business owners, noting in such a case it would cost “almost $100,000.”
“I would assume that a restaurant would find somewhere else to go so it would keep places vacant,” she said.

The number of impact fees on development has increased over the years. Combined with the economic turnaround, fee revenues have soared. 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 Planning Commission is expected to discuss in September the proposal, which was introduced by Mayor Ed Lee along with Supervisors Scott Wiener and London Breed. Ultimately it would require approval by the Board of Supervisors.Board of SupervisorsGolden Gate Restaurant AssociationhousingPlanningPlanning DepartmentrentrestaurantsSan FranciscoScott WienerSmall Business Commission

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