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A new impact fee asks residential towers to pay their fair share.

San Francisco hasn’t built nearly as much residential development as it ought to have in recent, well, decades. Lately whatever housing has emerged downtown received an enormous benefit: developers weren’t required to pay a fee for the congestion they added to the city’s public transportation network. So a luxury tower could advertise transit access as a perk, then dump all these new residents onto a bus and rail system that was already overloaded.

A new plan would right that wrong. Several civic agencies have teamed up to develop a “Transportation Sustainability Fee” that officials hope will help offset the impact that new residential development imposes on public transit. If demographic projections hold true, and San Francisco gets the 101,500 or so households it’s expected to add in the next 25 years, the new fees will go a long way toward making sure transit not only survives the new arrivals but serves them well.

“There’s no way we’ll be able to accommodate that kind of inflow of people if we don’t invest in capacity of the transportation system—particularly in transit capacity,” Ed Reiskin, executive director of the San Francisco Municipal Transportation Agency, tells CityLab. “The compact form and the transit accessibility are part of what make those areas attractive for people who are building housing and will move here.”

Luxury towers would pay most

In addition to office and commercial development, which already pay an impact fee, the new Transportation Sustainability Fee would apply to market-rate residential housing with more than 20 units (as well as large institutions, such as universities). Affordable housing and subsidized middle-income housing will be exempt—an acknowledgement by officials that affordability remains critical in the coming years. Smaller residential buildings and “most” nonprofits wouldn’t have to pay, either, according to the city.

Big downtown luxury towers are in line to pitch in the most. In one feasibility study by the city, a 15,000-square foot, 229-unit building would be on the hook for $2 million* more in fees than it would currently pay. Officials estimate the new fee could bring in roughly $14 million a year; when added to existing fees the city expects to generate $1.2 billion over a 30-year timeline.

Reiskin acknowledges that’s not huge money—especially for a transit system will billions in needs—but says a new rail car here ($3.5 million) or a new 60-foot bus there (under $1 million) can still make a noticeable difference. The new fee would go toward capacity expansion as opposed to basic maintenance. In addition to new Muni vehicles, that could mean street improvements, investments in BART or Caltrain, or more bike lanes around the city.

Alternative modes would benefit

The fee recognizes that the impact of new development must not only be dispersed across the city but across all modes—not just cars and roads, says Jeffrey Tumlin, a principal at transportation consultancy Nelson\Nygaard. In that sense it reflects the spirit of San Francisco’s existing (if imperfect) “transit-first” policy. It also extends the city’s recent progress on eliminating traffic guidelines that favor car-reliance over transit use.

“The new fee is based on the notion that San Francisco is no longer widening streets,” says Tumlin. “So if a new development project is bringing 10 new vehicle trips, we have to make transportation investment to reduce at least 10 existing vehicle trips—through improvements to transit, improvements to biking, improvements to walkability, and so on.”

The next step for the proposed ordinance is to go to the planning commission and the land use committee of the city’s Board of Supervisors, says Reiskin. He expects that to occur around September. From there it would advance to the full board for approval. If it gets the nod, the fee could go into effect by the end of this year or early next.

So far everyone seems on board with the plan—even developers. Reiskin says the real estate community appreciates that transit is both strained and critical to attracting tenants. “I think there has been a realization that it’s both in their best interest and not unreasonable at levels we’re suggesting that they partner with us to make sure these investments in the transit system can happen, so their buildings can be viable,” he says.

(torbakhopper / Flickr)

Is the fee too low?

Developer acceptance is great for the plan, but it does raise the question of whether the “not unreasonable” fee might, in fact, be a bit too reasonable. The proposed ordinance itself, provided to CityLab, acknowledges that the fee’s revenue will be “significantly below the costs that SFMTA and other transit providers will incur to mitigate the transportation infrastructure and service needs resulting from the Development Projects.”

Pedestrian advocate Nicole Ferrara voiced a related concern to SF Gate:

“Why such a low fee when (residential) development is costing San Francisco more than $30 a square foot?” she wondered. “Why not maximize that fee so that all the new projects, all those new people, can get around the city easily and safely.”

Officials say the fee wasn’t as high as it might theoretically have been—a figure estimated by a so-called “nexus” study—so as not to discourage residential development in a city that desperately needs it. Tumlin says finding an impact fee optimal for both sides is always a challenge. The new fee is certainly better than the existing arrangement, he says, and also represents an “absolutely replicable” model for other U.S. cities struggling to meet their growing transit demand.

“I think it’s a great program,” he says, “and potentially an unusual win-win approach that many jurisdictions could learn from.”

*Correction: A previous version of this article stated that a new 229-unit building would pay $2 million more a year in impact fees than it currently does; that is a one-time fee, not an annual fee.

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