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In August, the San Diego City Council passed "Build Better SD," a plan to unlock $220 million in unspent Developer Impact Fees (DIF) and spend DIF funds in areas of greatest need instead of the communities where they are collected. Yesterday, a coalition of homeowner groups sued to stop Build Better SD, arguing it violates state law and "the Constitution."
If successful, the lawsuit could have implications across the state. Los Angeles, San Francisco, and San Jose all collect DIFs and spend the money city-wide. The lawsuit argues that such policies violate the Mitigation Fee Act. The Mitigation Fee Act requires that fees collected from developers be used to reduce any negative impacts from new buildings. The plaintiffs argue that spending funds on projects up to 40 miles away from the development, as some San Diego projects will be, that paid the fee cannot meet that requirement.
As for the argument that Build Better SD violates the constitution itself, the San Diego Union-Tribune notes that "The lawsuit does not specify which articles of the Constitution the plan allegedly violates."
While the courts will work out whether or not Build Better SD violates state law, there is no doubt that San Diego needs to find ways to better fund projects in underserved communities. In the build-up to the bill's passage, nonprofit news website Inewssource published a story that illustrated the issue with the story of two parks both paid for with DIF's.
In Paradise Hills, the park is described as "sandy with rusty swings and climbing bars and paint-peeled picnic tables." The park is accessible by "a dirt and rock trail." In upscale Pacific Highlands Ranch, the park is described as having "updated playground equipment, more accessible turf padding, a soccer field, two dog parks, a skate plaza and a cycling track." The Pacific Highlands Ranch park was built three years ago with a $40 million investment.
And here's the kicker, according to Inewssource, "For example, roughly $30 million in development fees helped pay for just the park and recreation center in Pacific Highlands Ranch, which has raised $199 million through the fees collected since 1998. Meanwhile, the whole community that includes the Paradise Hills park has collected just $1.8 million from the same fees since its fund started in 1988."
For those not moved by calls for equitable spending, the city also argued that there are $220 million in DIF funds sitting unused in city accounts because it is earmarked for large projects that may not be fully funded for years or decades. Build Better SD focuses on the following priority areas of the city's Strategic Plan: create more housing, protect and enrich all neighborhoods, advance mobility and infrastructure, and foster regional prosperity.
Build Better SD was backed by advocates including Circulate San Diego which wrote a letter in support of the program. In the letter, they stated, "I write to voice our support for the Mayor’s proposed Build Better SD initiative. This initiative will create a more equitable development impact fee (DIF) structure by distributing funds citywide. It will also recalculate DIFs to encourage the construction of naturally affordable homes."
