Public Comment

We are concerned that the proposed community benefits associated with large downtown developments are woefully inadequate based on the City’s own assessment in the Downtown Area Plan and likely profits from City-granted planning permission to increase height at the sites.

The proposed assessment should be evaluated against the numbers the City itself developed as part of the economic analysis accompanying the Downtown Area Plan. For example, that economic analysis indicates that an 18-story 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 -- PLUS meeting a 20% affordable housing goal twice the City’s current requirement of 10% on site or a $20,000 fee. Since the Downtown Plan indicates that a similar project could support a level of affordable housing twice that required in current statute (20% vs. 10%); the corresponding affordable housing fee should equal $40,000 per unit, or approximately $12 million. This combined total of $22 million is very conservative given continuing rent increases since the 2011 completion of the Downtown Plan. The City Council itself recognized this fact when voted to reexamine the affordable housing fee once the long-delayed affordable housing nexus study is complete. 

Again using the Harold Way project as an example, it appears that that the proposed assessment would provide for about $14 million in community benefits (see Attachment 1). The fee would then be discounted by $6.5 million (5% of estimated construction costs) for having a project labor agreement, reducing available fees to approximately $8 million. Since the proposal would allow another portion of this money to be credited toward on-site arts and cultural activities, these funds would basically replace the $10 million in funding claimed as a rent subsidy for the Shattuck Cinemas in the developer’s original community benefits package. Thus, the proposal before the Council appears merely to repackage the numbers into a different format without any significant increase in community benefits. 

We instead request that instead of a standard per square foot assessment, a pro forma economic analysis be performed for each proposed large project that exceeds usual heights. This analysis should mitigate the loss of pre-existing site benefits before applying community benefits. The expected level of community benefits should also be evaluated against the potential revenues the project developer will receive from the site, as is done in other cities such as Santa Monica. For the much smaller Stonefire project (1974 University Avenue), Berkeley not only required a pro forma analysis of the project’s economic feasibility but also concluded that a return on equity of slightly over 6% was sufficient.