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San Francisco is broke. The banks aren’t lending. And development in the Eastern Neighborhoods, which includes the Mission, has slowed to a crawl.

That means that there’s less money than the city planned to spend on niceties here like parks, libraries, and transit improvement, as well as affordable – aka below market rate – housing.

Enter the mayor’s office stimulus package, which proposes writing  a new option into the city code for developers to meet their affordable housing responsibilities.

However, the repercussions of the fee change proved so difficult to gauge that members of the Eastern Neighborhoods Community Advisory Committee meeting on Monday night took a pass on supporting it.

The committee was unable to send its blessing on to the Board of
Supervisor’s Land Use Committee, which will vote on the option March 22.

The newly-formed advisory group – its members appointed by the mayor and the city’s supervisors – was created to discuss and weigh in on development matters in the region.

They listened Monday to a run down on the mayor’s proposed Affordable Housing Transfer Fee option. It allows developers to essentially give away 1 percent of their equity. Every time a unit is sold, the city would collect 1 percent of the total sale price. In exchange, developers would see the up-front fees and requirements related to affordable housing reduce by a third.

“Think of it as private transfer tax,” said Michael Yarne, development advisor at the Mayor’s Office of Economic and Workforce Development.

The logic is that this option would make it easier for developers to come up with the money to build, by deferring losses until their properties turned over.

“There aren’t any taxing tools available, so we had to be more creative,” Yarne said about the mayor’s approach to stimulating the economy.

Years of development planning in San Francisco crafted a series of options for developers to participate in required affordable housing. Current city code – section 313 – allows the developer to provide below market rate housing on their site, off site, or to pay an in lieu fee according to this formula.

Committee member’s were split on whether to support the proposal. Mostly, many said, they needed hard numbers.

Fernando Martí, a community planner and committee member, spent the weekend with spreadsheets trying to understand how the proposed fee would change development in the area. He arrived armed with carefully calculated printouts.

Martí’s work concluded that the affordable housing fee deferral would eliminate 400 below market rate units and defer $116 million in fees.

Yarne disagreed.  The estimates, he said, failed to subtract the benefits of having 1 percent of every sale.  That sum, he said,  would generate significantly more money in the long run.

“What the city’s giving up, the city’s getting more on the back end,” Yarne said.

In a worst case scenario, he said,  the controller’s office estimated it would take 15 to 18 years to earn back the money lost by the proposed 33 percent reduction. After that break-even point, the city would continue to benefit from the revenue stream at every sale, in perpetuity.

Martí decided to oppose the fee while some were willing to vote for it, as long as the city was tracking its effects. One member of the public, Joe Boss, encouraged the committee to vote for having no position because there were too many outstanding development questions.

The committee floated a resolution to support the legislation, with a caveat.  They  wanted “rigorous analysis done prior to the three-year soft sunset,” as phrased by Kate Sofis, who offered the resolution. But with only six of 11 members there voting in favor,  it  failed. Three voted against, and 2 members were absent.

If the Planning Commission decides to pass the fee, the soft sunset means the fee option will persist unless it’s opposed at the three-year mark.

Also within the mayor’s office’s stimulus plan is a proposal allow developers to delay the date at which they pay impact fees – irrespective of the affordable housing fees and requirements – until the first permit of occupancy.

The committee considered this proposal during their February meeting and decided to support it, with 10 members voting in support.