Rostra columnist Jim Sills posted a question on my recent post “Calling San Diego Taxpayers: Oppose the “Jobs Tax” asking San Diegans to oppose a proposal by the San Diego City Council to double linkage fees.
Sills had the courage (and the smarts) to ask an obvious question. What the heck is a “linkage fee”?
I called on Chris Cate, Vice President of the San Diego County Taxpayers Association to get a little schooling on this for Rostra readers. Cate was happy to oblige.
Hey, pipe down there, you in the back. Pay attention – this WILL be on the test!
Cate told me the City of San Diego charges a fee to non-residential building development on a per square foot basis. Revenue from this fee is called the Housing Impact Fee or “linkage fee.” It is used to finance the construction of affordable housing projects in San Diego. One of the reasons it isn’t too familiar to anyone: not a single other jurisdiction in the County of San Diego, including the County, levies a linkage fee. And only a few of the 18 competitor regions to San Diego as defined by the Economic Development Corporation charge this fee.
Cate said the fees are currently charged to various types of development at these rates:
- Office: $1.06/sq ft
- Hotel: $.64/sq ft
- R&D: $.80/sq ft
- Retail: $.64/sq ft
- Manufacturing: $.64/sq ft
- Warehouse: $.27/sq ft
The San Diego Housing Commission recommended to the City’s Land Use and Housing Committee that these fees be increased starting in July 2013, and automatically increase those fees by 20% each year until July 2017. In 2018, the increase to the fee will be tied to the Building Cost Index. Members of the Committee approved the recommendation, and it’s now on to the full San Diego City Council for a vote on Monday, July 11.
If approved on Monday, by 2017, the fees will double:
- Office: $2.12/sq ft
- Hotel: $1.28/sq ft
- R&D: $1.60/sq ft
- Retail: $1.28/sq ft
- Manufacturing: $1.28/sq ft
- Warehouse: $.54/sq ft
“While on the surface it may seem that the increase only amounts to pennies, for a potential project of 250,000 to 300,000 square feet, this increase amounts to hundreds of thousands of dollars in additional costs,” said Cate. “Neighboring cities, not to mention competing cities, do not charge this. Smart builders will instead locate projects in cities with a friendlier business climate adjacent to San Diego that don’t charge these fees, like Poway, Santee, or Carlsbad. It’s short-sighted and couldn’t come at a worse time,” noted Cate.
Cate told me to my astonishment that the proponents of this “jobs tax” actually had the nerve to claim in testimony at the Land Use & Housing Committee hearing that increasing the linkage fee would help generate jobs. Say what?
“This is a smoke and mirrors tactic that flies in the face of economic reality,” Cate pointed out. “The collection of linkage fees has been virtually non-existent over the course of the recession. Builders aren’t building right now. If it were increased, it would only result in a further downward spiral of activity, hindering the creation of jobs and stifling the generation of money from the current fee.”
This observer’s commentary: D’oh!
The good news is that a coalition of 24 organizations is rallying support of jobs creation and to promote sound economic policy and firmly believes the linkage fee is nothing but a jobs tax that will further harm the local economy. Cate said coalition members believe the Housing Commission should to continue to work with stakeholders on both sides to find ways to help address both jobs creation while seeking other more equitable, broad-based funding sources for affordable housing.