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Proposed Level of Community Benefits for Large-Scale Downtown Buildings

The Wellstone Democratic Renewal Club is concerned that the significant community benefits to be provided by developers of large developments in the downtown, as proposed by Mayor Bates and Councilmember Capitelli for consideration at the Council’s May 26 meeting, are inadequate and require unacceptable tradeoffs between needed labor practices and affordable housing.

We appreciate the efforts of the council to allow community input into setting a City standard for significant community benefits, rather than allowing developers to offer these on a case-by-case basis.

However, we believe that a pro forma economic analysis should be performed for each proposed large project that exceeds usual heights. Each project will impact the community differently and each will garner different amounts of profit from the City-granted planning permission to build above current height limits. For example, the project at Harold Way will impact valuable cultural resources; this impact should be mitigated before application of the community benefits formula. The economic analysis accompanying the Downtown Plan indicates that a project at the corner of Shattuck and Allston (across the street from the proposed Harold Way project) could feasibly support $33,000 in community benefits per unit – nearly $10 million -- in addition to 20% affordable housing. 

We are mindful of the possible administrative burden placed on the City by requiring site-specific analysis, but we do not believe the burden to be excessive given the number of potential projects (three) and the sizable benefit to be realized by undertaking such an analysis. Santa Monica has completed 25 site-specific pro formas in the last few years. The City of Berkeley required a pro forma analysis for the recently approved and much smaller Stonefire project (1974 University Avenue) and found that a return on equity to the project developer of slightly over 6% was reasonable and provided sufficient incentive for project construction. 

WDRC asks that the Council: 

• Require project developers to mitigate the loss of benefits already generated by each locale before applying the community benefit amount. The amount provided should represent both mitigation of existing site benefits and new community benefits above those mitigations.
• Wait until the final affordable housing nexus study is complete before approving the community benefits amount, as this will likely affect the total value of benefits.
• Not, as called for in the proposal, discount the community benefits dollar amount to be provided in exchange for a project labor agreement with local hire and training requirements. Instead require these provisions in addition to monetary amounts. This should be a basic standard for all of our large projects downtown.
• Require these projects to comply with standards that will be in place when the project is completed, in particular the state net zero energy requirements that will be in place in 2020.
• Ensure that benefits are binding, enforceable, and transferred to subsequent site owners by including community benefits in conditions of project approval and any regulatory agreements.