To help the city meet its lofty affordable housing goals, San Jose Mayor Sam Liccardo wants to slash construction taxes on new development.
The recommendation, which goes before the City Council on Tuesday, comes in response to complaints from developers about financing being harder to come by. In a memo calling for the lower taxes, the mayor also proposes deferring payment on fees and other costs until a project is fully occupied.
Liccardo also expressed anxiety about the 2021 sunset of an exemption from inclusionary housing fees, which require developers to either set aside 15 percent of a project’s units as below-market-rate or pay an in-lieu fee to build subsidized units elsewhere. Unless the city extends the exemption, the mayor suggested in his memo, “the probability of high-rise residential development becomes far-fetched.”
The mayor cited a Keyser Marsten analysis from last fall, which showed that a 300-unit high-rise project would owe about $6.4 million in taxes under a partial discount and $7.3 million if the tax break expired. According to that study, the project would not have penciled out without the tax break, the mayor noted. And if the inclusionary zoning exemption timed out, the same project would have to pay another $7.5 million, bringing the total in fees to the city to $14.8 million, Liccardo said.
“We all would like nothing more than for downtown development to also help us build more affordable housing, where we currently have four separate 100 percent affordable projects under construction,” the mayor wrote in his memo. “However, getting 15 percent of nothing—the impact of our current inclusionary rules—does not move the needle on that objective. An alternative approach—perhaps one that shifts construction tax revenue into affordable housing funding—may do far more.”
The tax-slashing proposal is part of a broader discussion about the city’s housing crisis work plan, a multi-year blueprint for how to address the intractable shortage of affordable homes. The council on Tuesday will hear a progress report on the work plan, which calls for 15,000 new market-rate units and 10,000 affordable by 2023.
San Jose has a lot of ground to cover to accomplish those lofty targets. In 2018, some 14,255 were made available through policy changes, but only 464 received planning approvals, according to a presentation by the Housing Department. That same year, 2,827 market-rate and 563 below-market-rate units received building permits while 797 market-rate and 31 affordable units received certificates of occupancy.
More from the San Jose City Council agenda for March 19, 2019:
- The council will accept Mayor Liccardo’s March spending plan. In his budget message, he highlighted the city’s “modest” $3.5 million surplus and highlighted a multi-year, multi-million dollar plan for the city’s infrastructure and environmental projects. The mayor has proposed up to $300 million in pothole repair and street upgrades.
- Also on Tuesday’s docket, the council will amend city code to allow San Jose Clean Energy, the city’s provider of wind, solar and other clean-energy sources, to adjust rates in accordance with PG&E without having to send paper notices to residents. City officials proposed the measure as a way to reduce paper waste.
- The city will present the winners of the Climate Smart San Jose, a energy-related planning contest.
- Tyler Gordon, an 11-year-old painter who appeared on the show Little Big Shots will receive a commendation for the feat.
- The council will hear a report about an audit of its 911 and 311 emergency systems. They will address issues such as slow response times and underutilization of its non-emergency number, 311.
- The city is poised to settle with Benjamin Cooper, a resident who in 2016 was shot in the eye with a non-lethal projectile by an SJPD officer, causing him to go blind. Cooper was outside a convenience store on South Jackson Avenue holding a knife to his throat and threatening suicide when police intervened. The settlement will cost the city $215,000.
- The city will consider accepting a $1 million grant for its Internet Crimes Against Children Task Force, which hunts down predators and distributors of child pornography.
- Railroad maintenance plans for the crossing at West Virginia Street and Auzerais Avenue are up for consideration. Proposed improvements include new median islands, pavement striping and updated signage to keep up with federal railroad standards.
- The council will weigh a resolution denouncing President Donald Trump’s attempted deportation of Vietnamese immigrants. City Attorney Rick Doyle indicated that his office is prepared to fight any legal action taken by the federal government against local Vietnamese immigrants.
WHAT: City Council meets
WHEN: 1:30pm Tuesday
WHERE: City Hall, 200 E. Santa Clara St., San Jose
INFO: City Clerk, 408.535.1260