Building Industry Association
of San Diego

Recommendations to improve project processing will be heard by the County Board of Supervisors on Wednesday, December 7th. The board appointed Task Force began its work in April and focused on the discretionary land use permitting process and produced 17 recommendations to improve regulatory efficiency.  The  recommendations include ongoing staff  training, an end to redundant plan checks, reform planning group procedures and the creation of an Audit Committee to monitor the regulatory process.

The recommendations were crafted following 16 meetings and multiple interviews with county staff.  The Supervisors are expected to accept the report and direct staff to evaluate the findings and report back within 60 days.

The City of San Diego Land Use and Housing Committee  accepted a laundry list of recommendations that could fund and create more affordable housing units as part of an Affordable Housing Master Plan.  The recommendations were the byproduct of a stakeholder task force that was created after the BIA and the business community strongly objected to an earlier proposal that would have doubled the affordable housing linkage fee paid by commercial/industrial development.

The recommendations are a combination of broad based funding sources and regulatory reforms that could make affordable housing production more economically viable.  For two decades, the city has targeted new construction as the primary funding source for its Affordable Housing Trust Fund despite the fact that it was originally designed to have multiple funding sources. The BIA has argued that the reliance on new construction is tantamount to a job tax because it targets job creating commercial and industrial projects.  No other city in the region charges such a fee.

The list will be vetted by city staff  and is expected to return to committee in January 2012.

The Chula Vista City Council voted to extend the city’s fee deferral program through 2012.  First established in 2009, the deferral program allows builders to pay their impact fees at final inspection rather than at the initial building permit stage.  Fees can go for tens of thousands of dollars or higher in many cases  and the ability to delay payment until the end of the project can now be the determinant factor as to whether or not a project is economically viable. The city reports that the program may have a long term positive impact on city property tax revenues due to the projects that went forward as a result of the fee deferral program.

Deferred fees include Transportation, Park,  Drainage, and Sewer.

Cut the red tape and get people back to work was the central theme during a Monday evening workshop on regulatory relief held by the San Diego city council.  A nearly full house was on hand for the three hour workshop that focused on ways to improve the city’s regulatory process in an effort to jump start the local economy.  The workshop was organized by Council President Tony Young and Councilmember Lorie Zapf and brought out businesses large and small.

The BIA presented a host of recommendations on issues involving project processing and regulatory reforms.  BIA Chairman, Russ Haley addressed the council with a list of 20 recommendations designed to stimulate construction activity in the hopes of getting some of the 40,000 unemployed construction workers back to work in San Diego. The list also included a call to expand the fee deferral program to include water and waste water fees and the creation of a ‘Little Hoover Commission’ to explore ways to further improve the land use process.

The city council will consider the proposals as part of their 2012 legislative goals.

The San Diego City Clerk’s Office has just announced that the Comprehensive Pension Reform Initiative has qualified for the June 5, 2012 primary.

The hard fought signature drive – with BIA support – collected over 115,000 valid signatures despite fierce union opposition.  The effort blew past the necessary 94,000 signatures needed to qualify.  Unions plan to mount a vigorous campaign to defeat the ballot measure leading up to the primary election.

Regulatory relief aimed at improving the city’s business climate will be the subject of a special city council workshop on Monday, November 14th.  The council seeks input from business and civic groups as well as the public at large on what the city can do to ease regulations affecting economic development in San Diego.

The BIA will present its regulatory relief package at the 6:00 p.m. hearing and will include a menu of regulatory and fee reform proposals.  The association has successfully advocated for fee deferrals, map extensions and project processing improvements as a means to jump-start construction activity that remains at historic lows.

County wide, approximately 4,000 building permits have been issued between January and September this year.   That exceeds last year’s total of 3,346 but remains well below the SANDAG average of 10,500 needed to keep pace with population growth.  The region last exceeded 10,000 permits in 2005 when 14,000 building permits were issues.  Since then the region has averaged 5,700 permits annually.

The County Board of Supervisors voted to streamline its general plan amendment process that project applicants have long complained was duplicative and overly bureaucratic.  The process – known as Policy I-63 – required applicants to seek county staff approval before being allowed to submit their plans for consideration.  Concerns were that the process was tantamount to an  ‘application for an application,’ which added unnecessary time and costs. Policy I-63 is set to expire in December and will be replaced with a more  streamlined approach.

The Supervisors decided to replace I-63 with a BIA supported preliminary review process that would allow staff to identify major issues the applicant would have to address but staff will no longer have the authority to deny projects for consideration.  The Supervisors agreed that property owners had a right to have their projects considered and should be allowed to proceed with the full knowledge that there was no guarantee that their general plan amendment request would be approved.  The Supervisors will vote on the final ordinance in early December.

Responding to a ruling by the state Court of Appeals and concerns raised by the Building Industry Association, the San Diego City Council voted 5 – 3 to change its inclusionary housing ordinance to a fee based program.  The move stems from a court ruling that declared that imposing inclusionary housing mandates on rental unit construction violated state laws governing rent control.  Instead of having to provide deed restricted units – up to 55 years – rental projects will now pay an affordable housing fee to the Housing Commission.

The BIA argued that the fee program still ran afoul of state law and that rental projects should be exempted from the program outright. Attorneys for the BIA argued that the nexus study used to determine the fee was flawed because its methodology was based on a premise that adding new homes to the housing stock contributes to the housing crisis.  The latest numbers released by HomeDex, a North County research firm that tracks  household affordability put  the affordability rate for San Diego at 59 percent, its highest level in years.

The proposal will pro-rate fees for projects of less than 10 units.  The result will be a fee increase of up to 80% for 9-unit projects while projects of 4-units or less will see a fee decrease.  Larger projects will continue to pay the current fee of  $4.98 per square foot.

Councilmembers David Alvarez, Marti Emerald, Todd Gloria, Sherri Lightner and Council President Tony Young voted in favor of the changes while councilmembers Carl DeMaio, Kevin Faulconer and Lorie Zapf voted against the proposal because of the issues raised by the BIA that the revised plan was still legally questionable and opened the city to potential litigation and their opposition to fee increase on smaller projects.

New Affordable Housing Fee Structure

Projects above 10 units pay $4.98 sq. ft.

On Tuesday, the San Diego City Council will consider changes to its Inclusionary Housing Ordinance that will eliminate the on site requirement and instead require all projects to pay a fee into the Affordable Housing Trust Fund.  The existing ordinance  requires residential construction projects to either deed restrict 10 percent of the units for 55 years or pay an in-lieu fee to the Housing Commission.

The changes are part of the city’s effort to comply with an appeals court that ruled that jurisdictions that require rental unit construction to provide deed restricted units violated the state’s Costa Hawkins Act that governs rent control.  The Housing Commission believes the ordinance revisions will allow them to collect fees from rental units without running afoul of the state law.  Attorneys for the BIA testified that the proposed revisions continue to violate the appeals court ruling because it still mandates a fee or deed restricted units from rental projects.

The amendments also include proposal to double the fee charged to smaller projects of 10 units or less.  Currently, those projects pay 50% of the fee because of its punitive economic impact.  The ordinance would reduce the fee paid by condo conversion projects.

Two hotly contested bills by Senator Juan Vargas fell victim to the veto pen as Governor  Jerry Brown rejected Senate Bill 469 which would have subjected Wal-Mart type retail projects to additional regulatory review and Senate Bill 833 which would have killed the Gregory Canyon Landfill project.

The union backed Wal-Mart bill came after the San Diego City Council reversed course on an ordinance that imposed similar regulatory conditions after a ballot initiative calling for the repeal of the new rules qualified for the ballot last year. Vargas took up the cause in Sacramento shortly thereafter with SB 833. The Governor vetoed the bill saying it would add yet another layer of review to an already cumbersome process.

As for the Landfill legislation,  the Governor conceded that the 20-year old proposal was a local matter that was twice approved by the voters.  The Vargas bill would have prohibited the construction of a landfill within 1,000 feet of a site considered sacred to a tribe or within 1,000 feet of the San Luis Rey River or an aquifer connected to it. The Governor declared that it was not appropriate for the Legislature to intervene and overturn a hard-fought local land-use decision.