Building higher in downtown San Jose might come at a cost to developers—but it’ll provide a small boost to passengers bumped from airline flights due to tall cranes.
The San Jose City Council unanimously approved legislation Tuesday that will charge developers a fee if they use cranes taller than the city’s building height limit. Fees won’t be collected for the first six months of crane use to encourage developers to finish within that time frame. If cranes are still up after six months, developers then begin to pay into the fund.
Fees will have varying monthly rates depending on what part of the year cranes are used: From April to September, monthly rates range from $32,958 to $98,849 depending on the number of projects—the more projects, the smaller the fee. From October to March, fees range from $24,956 to $74,867.
According to city officials, the approved ordinance is the first of its kind in the nation.
“No one can say we don’t love our airlines. We’re doing our best, but we’re also building a city,” Mayor Sam Liccardo said. “Hopefully we can do both.”
Revenue from the developer fees will be used to help soften the blow for airlines forced to reduce passenger loads due to Federal Aviation Administration safety guidelines related to the building height limit. Money from the fund can be used by airlines to compensate passengers bumped from flights due to the requirements. Airlines can elect to use those funds to refund fares, pay for a hotel or both.
Some business leaders worry the new fee will hamper development due to already high building costs.
“It’s another fee for the high-rises that we worked so hard on setting the height limits downtown,” Scott Knies, director of the San Jose Downtown Association, told San José Spotlight. “All attempts were made to make it fair and have the least impact on potential airlines having to take passengers off flights and trying to accommodate the city having more density downtown.”
In 2019, the City Council approved taller building heights—up to 35 feet downtown and up to 150 feet in the Diridon Station Area—in an effort to generate more revenue through increased office and apartment space. But if raising building heights equates to cranes breaching the height limits, planes at nearby Mineta San Jose International Airport will be forced to fly with fewer passengers.
The council also approved revisions proposed by Liccardo and Councilmembers Magdalena Carrasco and Dev Davis to exempt projects in the pipeline from the crane fee, as well as projects that already have permits and begin construction within six months.
“I’m concerned about the amount of building that we’re likely to have,” Davis said. “I want people to go as high as they can because we get more units that way when they’re building housing and more tax revenue that way if they’re building commercial.”
Councilmember Raul Peralez shared concerns that the exemption will not incentivize developers to finish crane-related work within six months.
“I do feel we need to have some incentive to break ground and complete and to get their cranes out of the air as quickly as possible,” Peralez said.
A good compromise
Derrick Seaver, CEO of the San Jose Chamber of Commerce, told San José Spotlight he thinks the policy is a good compromise that ensures both developers and the airport are listened to.
“The ability to reduce the crane fee deposit to an acceptable level is certainly a major step in the right direction, which I think makes it a lot more palatable,” he said. “This entire issue around building heights has been a challenge for a number of years.”
A council committee in March recommended creating a fund to offset the estimated $2.8 million in combined annual losses for airlines.
“The city’s Crane Fee Program balances the city’s commitment for economic growth and partnership with the development community and our airport’s air carriers,” Keonnis Taylor, spokesperson for the airport, told San José Spotlight.
Developers will have to pay up to 75% of the costs related to air carrier weight penalties, plus a 15% city administrative fee before they receive a building permit. Charging monthly fees will be tied to how many months cranes operate above the city’s height limit. The tallest cranes will be reserved for construction in April through September due to the airport’s policies regarding South Flow, when bad weather or a shift in winds are less likely.
The plan might not sit well with passengers who might be bumped off planes due to flight weight restrictions.
“I feel badly for families who are taking their kids to Hawaii because it’s a crapshoot whether you’re going to be bumped or not,” Dan Connolly, chair of the Airport Commission, speaking on behalf of himself, told San José Spotlight. “Granted there’s only around 15% of the time that you have to fly in a southbound direction, but if that’s your family vacation and you’re bumped because of the restrictions, what is the city going to do to compensate that family? The city’s position is ‘nothing,’ other than what the airline gives them for having to change your flight.”