City proposing new housing development fee to expand transit

A MUNI streetcar passes by the newly completed condo and retail complex on the corner of Buchanan and Market streets, in San Francisco, Calif., on Tues. July 21, 2015. San Francisco Mayor ED Lee announced today a plan to charge transit development fees on residential, office and commercial construction projects. less A MUNI streetcar passes by the newly completed condo and retail complex on the corner of Buchanan and Market streets, in San Francisco, Calif., on Tues. July 21, 2015. San Francisco Mayor ED Lee announced today ... more Photo: Michael Macor, The Chronicle Buy photo Photo: Michael Macor, The Chronicle Image 1 of / 4 Caption Close City proposing new housing development fee to expand transit 1 / 4 Back to Gallery

Mayor Ed Lee’s administration is looking to tap into the city’s housing boom to help bankroll $1.2 billion in transit improvements over the next 30 years.

A proposed transportation sustainability fee announced Tuesday would apply to new market rate condominium and apartment projects and would add $14 million to the $24 million a year already collected from other types of developments.

The money would be spent on expanding the Muni fleet with new buses and railcars, improving reliability on the busiest routes, retrofitting existing trains, investing in the electrification of Caltrain, and making streets safer for bicyclists and pedestrians.

The proposed fee, introduced at Tuesday’s Board of Supervisors meeting by Scott Wiener, was crafted by the mayor’s office, the city Planning Department, the Municipal Transportation Agency and County Transportation Authority after years of study.

“As our city grows, we must ensure that our transportation network grows along with it,” the mayor said in a statement from Rome, where he is at a meeting with the pope on climate change. “That is essential to meet the needs of our residents and workforce.”

The new transit fee is needed to strengthen public transit and get commuters out of their cars at a time San Francisco, which has added 100,000 jobs since 2010, is growing by 10,000 residents a year.

The proposed fee underscores what has become a hot-button issue around the city: complaints that the proliferation of high-end residential towers in neighborhoods such as Dogpatch, SoMa and Rincon Hill has not been accompanied by adequate improvements in open space and transit, not to mention sufficient levels of affordable housing.

While the idea of a transit impact fee is not new in San Francisco — the city’s current Transit Impact Development Fee applies to commercial developments and PDR (production, design and repair) facilities and produces that $24 million a year in revenue — the big difference is that the new fee adds builders of market rate apartments and condos. Making market rate housing developers part of the fee structure increases the amount collected 40 percent, from $720 million to $1.2 billion over 30 years.

Some fees jump

Under the proposal, market rate residential developers would pay a fee of $7.74 per gross square foot. Commercial developers would see the fees jump from about $14 a square foot to $18 a square foot, while new industrial space — the PDR — would stay about the same, inching up from $7.46 to $7.61. The fee was set by determining how much development impacts transit in terms of cost, roughly $31 per square foot, then balancing it with the results of a fiscal feasibility study that looked at what level a fee would discourage development.

Wiener introduced a similar proposal three years ago, but it was shot down by complaints that it would hurt medical centers and nonprofits. This time, both those groups are exempt from the fee, as are affordable housing developers and builders of complexes with fewer than 20 units.

“I’m thrilled that we are moving forward with this long overdue revamp of our transit fee,” Wiener said. “As the city grows we have to expand transit to make sure we can get people around. If we don’t, we are going to be in a world of hurt.”

No outright opposition

In the city’s development circles, the proposal was greeted with some muted grumbling, but so far no outright opposition. The city already has among the most expensive construction costs in the United States, and the price of building here is only going up. Adding the $7.74 a square foot to a 130-unit apartment complex would cost a developer about $1 million.

“We don’t suffer from a low cost of producing housing, and $7.74 (a square foot) is not a negligible fee.” said Tim Colen, executive director of the Housing Action Coalition, which represents developers. “But in the end, high-density urban infill doesn’t work without excellent transit, and we want to do the right thing.”

The fee will not be imposed on projects that are already approved, and those already in the process of being approved will pay 50 percent of the fee. Developer Oz Erickson of the Emerald Fund, which is developing about 1,000 units near City Hall, said the grandfathering in of projects already approved makes the fee palatable to builders.

“It’s not nice and it’s not fun, but for the whole city to work, everybody has to pay their fair share,” said Erickson.

Efforts to raise money for Muni, including the $500 million transportation bond passed by voters in November, have focused on maintaining the existing system, but the new fee aims to help Muni catch up, and keep pace, with the city’s booming commercial and residential growth, which has already sped past regional projections.

Ed Reiskin, the MTA’s transportation director, said the new fee is an acknowledgment of the effects that residential development has on the city’s transportation system and of the need to bolster it to avoid being overwhelmed by growth. The city will add 190,000 jobs and 100,000 homes by 2040, according to the Association of Bay Area Governments — without improving public transit, traffic in the city could increase by 40 percent.

“We are pretty much at capacity in terms of our roadways and transit systems,” Reiskin said. “If we don’t do anything, that could be another 600,000 cars in San Francisco. Imagine trying to get around downtown with 40 percent more cars on the road?”

Advocates for transit, bicycling and pedestrians said they support the plan. Thea Selby, chairwoman of the San Francisco Transit Riders Union, said her group hadn’t been told much about the plan, but supported the idea of charging developers for their impact on the transit system.

Urges higher fees

Nicole Ferrara, executive director of Walk San Francisco, said her group was also encouraged, but questioned whether the fee could be higher.

“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.”

Transit riders interviewed Tuesday morning welcomed the fee. “I wholeheartedly support developers giving back to the city,” said Alex Mak, a 33-year-old editor with the website brokeassstuart.com.

‘Part of the solution’

“More residents, especially wealthy residents, means more cars and more congestion. Public transportation will only become more important and needs to be expanded.”

Gabriel Metcalf, executive director of the urban think tank SPUR, called the fee, “definitely part of the solution.”

“If we are going to have job growth and we are going to have population growth, then we have to be investing in the infrastructure to support this growth,” Metcalf said.

J.K. Dineen and Michael Cabantuan are San Francisco Chronicle staff writers. E-mail: jdineen@sfchronicle.com, mcabanatuan@sfchronicle.com Twitter: @sfjkdineen, @ctuan