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San Diego Raises Development Fees, Months After Adopting Fast-Track Approval Process

San Diego’s recent push to speed approval of new housing and other projects comes at a price: Developer fees are increasing to cover additional city workers, new technology and other efforts.

This week, the City Council approved a sweeping new rate structure for the Department of Development Services, which aims to increase the department’s annual revenue by $15.6 million, from $113.1 million to $128.7 millions of dollars.

Although a consultant’s analysis indicates the increases are justified and will only cover the city’s costs, local developers and the business community are expressing concerns.

They say these fees will make housing more expensive in a particularly dire affordability crisis. They also question the validity of the consultant’s analysis, which relied on only one year of data due to the pandemic.

The San Diego Regional Chamber of Commerce noted that long delays in obtaining permits are still common and suggested that increases should come with caps on the time it takes for approvals and reimbursements for delays.

“We believe additional revenue should be coupled with increased accountability,” Evan Strawn, the chamber’s policy advisor, told council members Tuesday before voting 9-0 to approve the fee increases.

Councilor Kent Lee, who heads the council’s planning and housing committee, said he shared the business community’s concerns about higher fees making housing more expensive at the wrong time.

But Lee noted that the city’s recent innovations, such as guaranteeing any approval of subsidized housing projects within 30 days, are absolutely necessary and come at a cost.

“It is important that our rates ultimately reflect the full cost of the services we provide,” Lee said.

Other recent changes include online appointments, an enhanced call center to reduce wait times, fully digital permitting, and expedited approvals for accessory dwelling units and renovations at life sciences facilities .

These efforts helped increase the number of permits issued last year to 75,000, an increase of 9% from 2022. But they also require more workers.

The number of employees working for the department has increased by nearly two-thirds, from 393 to 647, since the city last conducted a rate analysis in 2016. The department’s vacancy rate, which between 20 and 30 percent for years, is now 7 percent.

Additionally, most city employees recently received additional pay raises, which are still in effect but will amount to about 25 percent over three years.

Consultant MGT Consulting concluded the department was charging fees overall 12 percent too low.

But not all fees will increase by 12 percent. MGT’s analysis showed that some fees were too low but others were too high.

He also said San Diego charges too many different types of fees, so the increases come with a consolidation of many fees. In addition to approving the increases, the board reduced the types of fees charged by the department from 538 to 313.

Under the changes, the permit cost for a 500-square-foot ADU increases from $1,484 to $2,885. For a 3,000 square foot home, the fees increase from $4,925 to $6,640.

The new pricing structure also changes to an hourly formula. The city will now charge the applicant $145 an hour for staff time, an amount the consultant chose based on analysis of how long typical tasks take.

Given that the department has accrued 887,000 work hours in 2023, the $145 hourly fee is estimated to generate $128.7 million per year.

Along with the increases for developers, the council approved steep fee hikes for historic homeowners seeking property tax reductions under California’s Mills Act. The fee for applying for a Mills Act designation increases from $471 to $1,305.

The city will also begin charging $1,000 for appeals regarding historic resource designations, but owners of properties designated as historic against their will will still be able to appeal for free.

These changes come as the city begins to consider a significant overhaul of its historic designation policies, in part to reduce the frequency with which such designations block new housing projects.

California Daily Newspapers

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