Developer Fees Coming

Ronald Reagan is famous for saying “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”  This has been proven over and over again.  I was reminded of the quote when I read that B'game Planning Commission is recommending a "Developer Fee" for new residential development.  The DJ notes the amounts as

Under the proposal, rental developers seeking to build up to 50 units per acre would be required to pay $17 per square foot; those proposing up to 70 units per acre would be required to pay $20 per square foot; and those proposing more than 70 units per acre would be required to pay $30 per square foot. Condominium developers proposing 7 units or more would be required to pay $35 per square foot.

That last bit seems like a typo, but the point is adding some costs that could total $15 mil over the next five years for the 400-600 units that are in the "pipeline" may have the unintended consequence of slowing down development.  If it does, I'm all for it, but that ain't what the initial goal is.  What to do with $15 mil and where to do it is another political football.  While we ponder that eventuality, here is another Reagan quote: "The nine most terrifying words in the English language are “I’m from the government, and I’m here to help.”

Comments

[Charles Magnuson]

Regan was the first president in modern times to view the theory that the government is supposed to serve "the people" with disdain. Don't put much stock in the wisdom of Reagan.

This is the same man who directly supported the overthrow of numerous democratically elected politicians in Central and South America, causing those countries to descend into decades of violence and the deaths of hundreds of thousands of people, leading to the present situation we are in today with the migration of immigrants. Additionally, in order to fund these illegal efforts, Reagan further engaged in illegal activity by selling weapons to Iran, a country which is now a state sponsor of terrorism.

And how about his wisdom in deregulating Savings and Loans? That act of genius wound up costing taxpayers $132 billion dollars.

When it comes to following advice about regulation or the government, the wisdom of Reagan is a remarkably poor choice. Reagan is one of the primary reasons we today have a criminal in the White House who is taking a wrecking ball to the institutions that make our nation work.

[Phinancier]

You are kind of blowhard, Charles Magnuson and you have a very selective view of history when it comes to Reagan. I notice also that you avoid the central premise of the post. Why is that? Perhaps it is because Joe is correct on the fees.

[Joe]

Happy, respectful Presidents Day, you guys.

[Bruce Dickinson]

Oh boy, talk about the Diatribes-R-US of non-sequitur diatribes. Sorry, Chuckle-Baby but Bruce Dickinson agrees with Joe and Reagan on this one. Outside of a few obvious areas, Government cannot allocate resources as effectively as the private sector. We have to look no further down the train tracks to see a defunct HSR that squandered $10 billion dollars and a $2.5 billion dollar glorified bus station (Transbay Terminal) that is not being used and was at risk of collapsing not even six weeks of its grand "opening".

Now onto the real subject at hand: developer fees. Let's take a a closer look on how we got here, which will tie in a little into the incompetence of government (yet again). So the State of California, in coming up with this dream of taking high speed and electrified trains everywhere, basically has forced cities to increase transit-oriented housing that needs to be located within a certain distance to modes of transit (ie the non-existent HSR) Now, this creates a ton of negative externalities as the housing is higher density, doesn't have sufficient parking, and starts straining the infrastructure of the towns.

Cities like Burlingame, are basically forced to develop this type of housing at the risk of getting sued by the State in the most extreme case, or having transportation and infrastructure grants being shut off. Now how do places like Portola Valley and Hillsborough get away with not getting any mandated housing allocation? One reason is that they're not next to railroad tracks, giving them a strong negotiating positions. The other reason, is that members of the Burlingame City Government (council) sits on the Association of Bay Area Governments (again the G-word), and basically horse-trades housing allocation quotas. Burlingame, San Bruno and San Mateo basically say "we'll assume Hillsborough's housing allocation needs in exchange for getting more funds for infrastructure, roads, etc" This gives Hillsborough a big free-rider status on the back of Burlingame's willingness to trade housing allocation.

Unfortunately the transportation and infrastructure funds available to Burlingame are peanuts in comparison to the social cost of transit-oriented development. So cities have to start looking at developer fees in order to supplement at least the monetary costs of road usage, police, fire, city services, etc.

For the developers, a $30 per square foot fee is pretty lenient, in Bruce Dickinson's opinion. First of all, the real estate will be worth $1,100 per square foot, the "stack and pack" condos (which can now replace parking space with people space, which sells for more per square foot) cost $400 per square foot to build, thereby enabling developers to pocket $700 per square foot. Yeah property taxes go up, but that get re-distributed by the State in a socialization mechanism that goes back to each school in the state roughly equally. Burlingame as a district does not get sufficient state funding, but makes up the difference through the Burlingame Community Foundation and Fundraising. So paying $30 per square foot is letting these guys off the hook big time. Would say should be at least $50, which is 7% of net profits and still less than what you and I pay in sales tax shopping on Burlingame Ave!

So, back to the original thought about government, excessive regulation, and consequences of dumb decisions with no accountability. Yes some smart regulation is always needed but more often than not, it can hurt in many ways because of some of the really dumb people administering it. Just look at the development morass that we're in, how we got there, and how there's really no way out. Hopefully Chuckie-Baby doesn't live in Lyon-Hoag, but even if he does, maybe he can downsize into a 700 square foot condo with parking for an electric scooter!

Now if you'll excuse me, I'll just drop the microphone and go back to drinking a glass of the 1952 Chateau Lafite-Rothchild that I'm finishing with my dinner *wink*

[Joe]

BD, here is a case where you are (again) right on. For an even more in depth view, people can read Mayor Colson's oped piece in yesterday's DJ:

San Mateo County communities had no voice in the CASA Compact process. Not a single elected from San Mateo County was included on the leadership team, steering committee or technical committee which is frustrating as many small cities were already taking the initiative to craft viable housing solutions for their communities.

https://www.smdailyjournal.com/opinion/guest_perspectives/how-the-county-is-closing-the-jobs-housing-gap/article_165e4ef4-3965-11e9-b37b-07352fcc306d.html

I'll revisit this OpEd in another post, since it merits further discussion, but for now it hits on many good points.