This Week In San Francisco Land Use – June 4, 2009

In this Update issue we will be reviewing the Planning Department’s latest Transit Center District Plan public presentation that focused on development fees, a new city-wide TIDF (Transit Impact Development Fee) study, intended to expand TIDF reach, as well as the Whole Foods project at Haight and Stanyan that just died because of the lengthy approval process and high development fees and exactions.

Planning Department Announces New Fee Proposal for Transit Center District Plan

On May 21, at a public presentation on the Transit Center District Plan (TCDP), the Planning Department announced an ambitious fee proposal intended to generate funds for the new Transbay Terminal and other public improvements in this proposed downtown district. The TCDP is an area plan for the vicinity of the new Transbay Terminal that includes height increases for several development sites. The fees and taxes would be levied exclusively on new developments. The three-tier fee proposal includes a new development fee, a new Mello-Roos district and a new transfer tax.

The development fee has several components. It would consist of a $5/gsf fee on every square foot of new development, a $25/gsf fee for every square foot above a 9:1 floor area ratio (FAR), and another $5/gsf fee for every square foot above a 20:1 FAR. The proposal would also require developers to purchase TDRs for each square foot between a 6:1 and a 9:1 FAR. FAR limits on properties in the district would be eliminated, and it is likely that the TDR program would also have to be modified, as the last cycle proved that the current supply of TDR has been virtually exhausted.

The Plan would also create a Mello-Roos district that would levy a special .35% property tax on new developments within the Transit Center District. This would be bring the total property tax rate for newly developed properties to 1.45%. It is expected that the City will require individual developers to “opt-in” to the Mello-Roos District as a condition of project approval.

Finally, the Plan would establish a transfer tax, referred to as a “benefit covenant,” applicable to newly developed properties within the district. The tax would be the equivalent of 1% of property value, and it would apply to individual condominium transfers as well as commercial building transfers.

The Department foresees as much as $700-$850 million in new revenue generated by the proposed fees. At the meeting, the Planning Department also announced the expected schedule of the Transit Center District Plan, with the Plan to be published by the end of this month, a draft Environmental Impact Report (EIR) to be published in by the end of 2009, a final EIR to be published by mid-2010, and adoption hearings to begin shortly thereafter.

City Moves To Expand Existing Transit Fee, Creat New Transportation Mitigation Fee

A major overhaul is underway that could change how the City analyzes traffic generated by development projects, and in turn how traffic and transit fees are calculated. In April 2008, the Board of Supervisors enacted Section 326.8 of the Planning Code, which calls for the creation of a task force begin the process of recalculating and expanding the current Transportation Impact Development Fee (TIDF). Concurrently, the Planning Department has been working on an overhaul of how it studies traffic impacts of proposed developments. This process has included the consideration of a new city-wide Auto Trip Mitigation Fee (ATMF), with the purpose of mitigating transportation-related environmental impacts of new developments. This past Tuesday, the MTA approved a consultant contract for preparation of a nexus study to justify these fees.

Right now the TIDF is $8-$10/gsf fee on all new non-residential development anywhere in the city. The new/revised fee, called the Comprehensive TIDF, would expand the fee to apply to residential development.

The ATMF is proposed to apply to all new development and transportation projects throughout the city. It will not be calculated on a square foot basis, but rather on the number of automobile trips generated (ATG) by the proposed development. The Planning Department is proposing to measure a project’s impact through increased automobile usage by the ATG as opposed to preparing a traffic study for each project and using intersection “level of service” as a measure of traffic impacts. The elimination of individual project traffic studies would be relief to the development community. Project traffic studies are expensive but more importantly can slow a project’s entitlement process to a crawl. A new trip focused system of calculating impacts would streamline the process and allow for the City to collect transit fees from projects that generate the most traffic. If adopted, these new methodologies and fee structures would have a significant effect on the development community.


Whole Foods in the Haight Cancelled: An Example of the “Impact” of Impact Fees?

And to close out our fee-themed update this week is a recent example of what fees can do to a project that could have provided a grocery store and 62 residential units at the vacant grocery at the corner of Haight and Stanyan Streets. The developer of the proposed Whole Foods project in the Haight pulled the plug on the project last week, citing an unreasonably long entitlement process (32 months) and prohibitive development fees ($5-$6 million). According to an article in the San Francisco Business Times, the developer claims the commercial space would have been ready for Whole Foods to move in by now if the approval had come just a year earlier.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.