If developers have one nemesis, it’s uncertainty, and San Jose lawmakers this week tried to battle that foe by capping some development fees.
The 8-3 vote Tuesday did not raise or lower fees for developers, but it froze infrastructure fees in most parts of the city and set a maximum for fee increases in the Diridon Station area through 2023. Councilmembers Sergio Jimenez, Maya Esparza and Johnny Khamis voted against the fee cap.
The decision Tuesday also set in motion a potential maximum rate for commercial development fees that help pay for affordable housing, known as commercial linkage fees. But some wondered whether the city was rushing to action on capping those fees before all the information was available.
City officials last year began studying how much to charge developers for commercial linkage fees and were scheduled to bring councilmembers a recommended rate in April, but the coronavirus pandemic delayed the matter. Now, a recommendation and vote is set for August.
But elected leaders also approved a maximum rate of $20 per square foot for commercial developments that will take effect in early September if the linkage fee recommendation doesn’t get a vote before then. Councilmember Raul Peralez, who recommended the rate cap, said he was trying to ensure there wouldn’t be additional delays.
“The delay doesn’t just impact the ability to set a fee and generate much-needed dollars for affordable housing,” Peralez said. “The delay actually impacts the opportunity for development in general.”
But the move was not popular with affordable housing and labor leaders.
The linkage fee cap seems arbitrary and could stunt discussions if the city doesn’t meet its August deadline, said Mathew Reed, affordable housing policy manager at the nonprofit Silicon Valley at Home.
“In general it created a premature discussion … ahead of the release of a long-awaited professional analysis that was supposed to be the foundation of that discussion,” he said.
The group, along with more than 30 community groups, sent a letter to councilmembers asking them to separate the conversation on the linkage fee and the infrastructure fee caps.
Tuesday’s vote was about creating certainty in fees for developers during an uncertain time as the economy slowly starts to reopen following a wide-reaching shelter-in-place order in effect since mid-March.
Before the pandemic, San Jose was working through 18 million square feet of office or research and development project proposals alongside 7,000 homes. Now about 6.5 million square feet of office or research and development projects and about 5,000 homes remain active in the pipeline, according to city documents.
Downtown San Jose has seen several false starts in development and the economic progress city leaders have long hoped for. The unprecedented economic upturn over the past decade seemed to bring renewed attention to the city.
And though the South Bay city has attracted interest from major developers in recent years, relatively few of the projects that were proposed had gotten underway before the COVID-19 shutdown.
Now elected leaders are hoping not to lose that attention as the economy stumbles through the pandemic.
“We need to provide certainty for any developer who’s considering moving forward — and let’s face it, very, very few will consider moving forward in this economy,” said San Jose Mayor Sam Liccardo. “So we’re talking about a very small number of projects.”
Contact Janice Bitters at [email protected] or follow @JaniceBitters on Twitter.