Building Industry Association
of San Diego

The San Diego County Board of Supervisors voted unanimously Wednesday to evaluate and enact regulatory reform recommendations presented by the Red Tape Reduction Task Force.  This was the second time the board voted on the Task Force recommendations in response to a litigation threat from community activists who claimed the County failed to follow appropriate public noticing procedures. The Supervisors decided it was more prudent to simply rehear the proposal rather than defend against a law suit in court.

The BIA, along with several property owners and small builders, spoke in favor of the recommendations citing the length and difficulty of navigating the county’s land use approval process. The County has long been criticized as the most difficult jurisdiction to do business compared to other local cities due to  voluminous regulatory requirements that take years to complete. “We put a man on the moon in nine years, surely we can approve development projects faster than that,” said BIA Vice President, Matt Adams.

Others, were not so supportive of the reform process.  Several planning group members took exception to proposals intended to improve the planning group review process which included term limits and modest experience requirements. Other suggestions included a plan to remove planning groups from the county’s umbrella outright and allow them to function independently.

The Supervisor voted to enact some reforms immediately such as empowering project managers to make decisions, create performance measures to address project timelines and the creation of an external Audit Committee to review the performance of the planning department.  County staff will use the month of March to review remaining proposals and return the the board on March 29th with their implementation strategy.

The top construction industry trade associations have thrown their support behind  Carl DeMaio in his bid to be the next Mayor of San Diego.  The BIA, along with the Associated General Contractors (AGC) and the Associated Builders and Contractors (ABC) held a joint press conference to announce that DeMaio is their candidate for San Diego Mayor.

“San Diego cannot compete unless we have the types of reforms (DeMaio) has been talking about for the past four years… and he needs the office of the mayor to make those reforms a reality,” said Borre Winckel, President and Chief Executive Officer of the BIA. (more…)

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.

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.

The City of San Diego’s Land Use and Housing Committee will consider an extension of the city’s fee deferral policy for Facilities Benefit Assessment (FBA) areas on Wednesday, September 14th at 2:00 p.m.  The deferral allows builders to pay fees at the time of final inspection rather than having to pay at the time they are issued a building permit which is months earlier.

First established in 2009, the deferral is considered a necessary incentive to make projects more financially feasible at a time of scarce construction financing and building permits at historic lows.

The committee was scheduled to consider the extension back in July but a last minute memo by the City Attorneys Office questioned the appropriateness of the policy governing FBA fee increases.  Those questions caused the committee to delay action until the City Attorneys Office had more time to review.

Since the program was established 82 projects used the deferral program totaling more than $33 million in fees with over $23 million already paid to the city. The average length of the deferral has been only 4 months.  The BIA strongly supports the program and will testify at the hearing.

On Monday, the San Diego City Council will consider a proposal to change its Inclusionary Zoning Ordinance that will result in a 100% increase in the fee paid by homebuilders for affordable housing.  While being touted as ‘clean up legislation’ the change will end the current policy that allows homebuilders of 10 units or less to pay half of the  ‘in-lieu’ fee charged by the city.  The current fee is approximately $10,000 for a typical 2,000 square foot home.

The Ordinance also requires the fee to be charged on all rental construction – even though the state Appeals Court ruled that it violates state law.  (Palmer/Sixth Street Properties, L.P. v. City of Los Angeles 175 Cal.App.4th 1396). This opinion binds cities throughout the state. The cities of San Jose and Oceanside have already exempted rental construction from the inclusionary requirement in response to the state ruling.

The hearing is scheduled for 2:00 p.m. Monday, July 18th at San Diego City Hall

The San Diego City Council rejected a plan that would have doubled the Housing Impact Fee paid by commercial, industrial and retail construction projects.  The 4 – 4 vote on the ‘Linkage Fee’ came after two hours of testimony from business community representatives and housing advocates.  In the end, the tie vote killed the proposal after opponents successfully argued that the increase would not generate significant revenues for housing and was tantamount to a Jobs Tax because it targeted new and existing businesses that seek to expand in the city.  The proposal could have cost retail, R&D, hotel and other projects hundreds of thousand of dollars in new fees putting San Diego in a competitive disadvantage.  No other city in the region charges businesses for expanding operations.

The council now turns its attention to alternative funding mechanism that could include housing bonds, sales tax increases or a real estate transfer fee.  The Housing Commission will report to the Land Use and Housing Committee later this month on alternatives generated by a Task Force that has met over the summer to explore alternatives.

The Oceanside City Council voted 3 to 2 to revise its Inclusionary Zoning fee calculation methodology to more accurately reflect the impact of the housing market downturn.  The vote was the second and final action needed by the council to implement the new process that will calculate the fee charged to new homebuilders on a square foot basis rather than charge a  $10,375 per home fee for affordable housing. Councilmembers  Jerry Kern, Jack Feller and Gary Felien questioned the logic of the city charging $10,000 on every new home for affordable housing in an era of plunging home values.  They reaffirmed their support for the changes saying it could  stimulate construction jobs and economic activity in the North County city.  Councilmember Esther Sanchez acknowledged that Oceanside had one of the best affordability rates of coastal cities but nonetheless  continued her strong opposition to the changes. Mayor Jim Wood also voted against the measure. (more…)

Your Paper’s coverage of the Oceanside City Council June 22nd action on lowering affordable housing fees as a cost component of new home construction failed to mention a key fact. The article reads as if Council Members Kern, Feller and Felien slashed the $10,375 per home fee mainly as a stimulus measure to jump start construction. While welcome news to 45,000 unemployed members of our industry as a measure of hope, the City had no choice.

The City hired Keyser Marston Associates (“KMA”) to prepare the fee study which would set a legally justified cost factor on a square foot basis. KMA is used by many cities Statewide to set these so-called Inclusionary Housing In-Lieu fees which are paid by new home buyers to subsidize the construction of homes for low – to moderate income families. KMA is required by law to use actual economic data.

KMA’s low fee calculation is the result of a very bad real estate market, record low housing values and low interest rates. Because the fee is pegged to the real market, it goes up and down as the market changes. Opponents to this action can jump up and down all they want. Record high housing affordability in Oceanside means that record low subsidies are needed, especially coming from new home buyers. Affordable housing advocates who work primarily with tax payer subsidies need to wake up to the new reality. Government no longer has funding and new construction which used to pay these fees is at a standstill. A proposed Density Bonus Program which follows state enforced global warming mitigation mandates is the only smart solution on the table. It is ironic that Council Member Esther Sanchez, a global warming believer, has not caught on yet.

Federal Reserve Chairman Ben Bernake

“The high unemployment rate in the construction industry at 25% of total unemployment is a drag on the regional economy.”

Federal Reserve Chairman Ben S. Bernanke said high levels of joblessness and home foreclosures are restraining the U.S. recovery and putting many people and communities at risk of being “left behind.” “The broader economy is in a moderate recovery, and we have recently seen some welcome, if gradual, improvement in the labor market,” Bernanke said in a speech today in Arlington, Virginia. “But our economy is far from where we would like it to be, and many people and neighborhoods are in danger of being left behind.” Bernanke’s comments on the economy echoed remarks he made two days earlier at the Fed’s first regular press conference after a monetary policy meeting.