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tv   Government Access Programming  SFGTV  November 2, 2019 3:00am-4:01am PDT

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>> good afternoon. it is october, 28. please place a cards in the basket to the right of the lectern. additionally, there is a sign in sheet on the front table. sfgovtv please show the office of small business slide.
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>> thank you out, everyone. it is our custom to begin in end every meeting with a reminder that the office of small business is the only place to start your business in san francisco and the best place to get answers to your questions about doing business in san francisco. the office of small business should be your first stop when you have a question about what to do next. you can find us online or in person here at city hall. best of all, all of our services are free of charge. small business commission is the official public forum to voice your opinions and concerns about the policies that affected the economic vitality of small business in san francisco. if you need assistant with small business matters, start here. first item. >> called to order at roll call. [roll call]
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mr. president, you have a quorum. >> for the record i need to leave at 315 today if the meeting is not over buy them for a doctors appointment. >> item two, general public comment. >> do we have any members of the public who would like to comment on any item that is not on today's agenda? seeing none. public comment is closed. next item, please. >> board of supervisors 190458 planning code. ordinance amending the planning code to modify the job housing linkage fee by inducting the fee, adding options for complying with the fee, requiring payment of the fee no
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later than the time of the first certificate of occupancy, dedicating funds for permanent supportive housing and the preservation and acquisition of affordable housing, and to remove the monetary limit for the small sites funds under the inclusionary housing program, affirming the planning department a determination under the. making findings of consistency with the general plan and the eight priority policies of the planning code. discussion and action item. presenters are courtney mcdonald, the legislative aide supervisor matt haney rate also aaron starr , manager of legislative affairs, and ken rich. >> come on up. >> thank you. good afternoon, commissioners. courtney mcdonald with a supervisor haney's office. you so much for having me today. i want to thank you all for the great work. we have many constituents to the
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office of small business. thank you for being a wonderful role model for our city. i'm here today to talk about the housing for san francisco workers legislation, also known as the job housing linkage fee program. as you know, san francisco is struggling to meet our growing demand for housing that is affordable to the vast majority of our growing city. we are falling drastically short for low and during the last decade the city aimed to produce over 2,000 new affordable units and only produced 657 net new affordable units. what that means is that low and moderate income households are leaving the city. we are failing our residents and our workers and that is why we are part of this legislation. what we hear on a daily basis from our constituents is the demand for more affordable housing.
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teachers and workers are moving further and further out of the city, because they cannot afford to live here. maybe they are leaving their jobs altogether. we have people dying on our streets because of the lack of housing. families crammed into small bedrooms. people waiting years to get into stable housing. seniors who are at risk of becoming homeless. san franciscans are demanding more affordable housing and this issue we know is not just unique to district six. our policies need to support this massive demand for affordable housing. when we talked to the mayor's office of housing, but we hear are barriers to building our funding, and land. in this legislation aims to address both of those. since 1980, our city's population has grown 27%. our job base has grown 32%. both great things. these are faster than the rate of our housing production which is only 17%. for every new large office development, over 25,000 square feet which is the type of new
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development that this legislation deals with. a third of the new employees are making under $100,000 per year. for every job created, five additional low and middle income jobs are created and yet we are squeezing out these workers and these residents. san francisco has the highest jobs to housing ratio in the bay area. we are only building one unit of housing for every 8.5 jobs that we are creating. only 25% of those units that we are building are affordable. think of the imbalance. this is a dangerous and unacceptable trend that we cannot afford to continue. the situation on our street and the migration of low and moderate income residents is unsustainable. we have been ignoring this problem for years. if we are not proactive now, the inequality gap will only continue to grow in the city. we must actively work towards the higher citywide housing to
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jobs ratio and update the decades jobs housing linkage fee to spur affordable housing development is one important step. this legislation will generate over $400 million for affordable housing in the next seven years. it will create funding for 1,000 new units for low to middle income workers. 715 units for people experiencing homelessness. and fund acquisition of 150 units are risk all by updating an impact fee that has not been updated since the '90s to grow affordable housing to match this growth. this housing for san francisco legislation is cosponsored by supervisor yi, if you are, ronan, walton, peskin and mar. the planning commission unanimously supported it. it is also supported by affordable housing advocates like the community don't coun count -- housing organization. the housing right community,
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jobs for justice and countless others. you may have seen this as a planning commission there were dozens and dozens of people who came out in support of this. we would appreciate your support here today as well. a little bit of history on the fee. for decades san francisco has recognized the undeniable relationship between the construction of new large-scale office buildings. new employees on affordable housing demand. during our city's first phase of high-rise office expansion the city recognized really early on the need to link this large scale development to fees to mitigate the impact. we enacted a transportation impact fee, a childcare impact fee and a job housing linkage fee. the purpose of the fee is to offset the impacts of large scale commercial development on the community. unlike other impact fees, the job housing linkage fee already
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accepts small commercial development and over 25,000 square feet. this is really simple. every large commercial developer has employees a third of them are low to moderate income. focusing housing. housing is really expensive in the city. commercial developers have to plan not only for their investment on office space but also for the housing employees and office space. the city doesn't have the most equitable way to do this impact by having developers either one dedicate land towards affordable housing or to give money to help the city builder. over the past five years the linkage he has generated $70 million for a housing. a really critical source of funds that stabilizes our communities and houses our workers. to put one of the planning commissioners last month when we were there, commissioner koppel said "the missing middle is literally disappearing.
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i have not seen one thing done as far as addressing the middle-class issue and this is the first time. the people that live here should be working in those office buildings, not having to cross the bridge or not having to go through the tunnel to go to work. "this fee first established in the 80s and then updated in the '90s is meant to be updated periodically. it has hardly matched inflation since the 1990s despite the changing dynamics of the city and the fact that our offices are more dense and there is a growing population of low-wage workers in the city. right now, new office development's are paying just $28.57 per square foot. arete said a decade ago based on very outdated data about how many workers there are two office development, and data around old housing and construction costs. for years legislative and community members have been asking for this fee to be updated and an update has been anticipated for a long time.
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after almost 25 years, this past summer the office of economic and workforce of element released updated job housing study which is really setting the legal maximum for which we can charge on a new developments. it looks like a real need the new office develop minutes creating. the study looks at the total total affordable unit demand per square foot of new office by analyzing the density of employees and a new office space, worker incomes what it cost for the city to build affordable housing which we all know continues to increase. the study focused exclusively on quantifying the needs, housing needs just for a low and income workers. not even all new employees coming into the city. for a new office development to meet the demand creates on affordable housing, if we were to truly mitigate the impacts of these developments for new, low
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and moderate income workers we would be setting this fee adds 193 that is not what we ar are -- -- $193 per square foot. that is not what we are proposing today. these findings are a real wake-up call. we need to dramatically increase our investment in formal housing and spur construction of new affordable units that will serve our growing low and middle income workforce. what this legislation does is a changes the fee amounts for a new office, again over 5,000 square feet up to $69.60 for future projects. for projects that are currently in the pipeline, and then submitted their applications, paying $57.14. we are also changing the fee amounts for laboratory, and i am happy to share with you today that there are a couple of updates to the legislation you have in front of you.
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we will be amending the laboratory fee to $38.37. the legislation also aligns the indexing of the job housing fee with all other impact fees in the city. so we can make sure it is being updated on every single year and then also changing how the fees are allocated. right now, all of the fees just to go into our citywide affordable housing fund. we are specifying that 10% go to acquisition and preservation of affordable housing to maintain buildings that are at risk of losing affordability. second it specifies that 30% of those funds go to construction permit if supportive housing. this would be the first dedicated stream of funding for that. lastly the remaining 60% continues to be contributed to the citywide affordable housing fund by the mayor's office of housing. this fee increase that is in this legislation is consistent
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with other impact fees that are typically set at about 36% of what the nexus says that we can charge. that is how we arrived at the number of 6960. it also takes into consideration a recommendation from the nexus study as well as the feasibility study that i know ken will speak about shortly. again the nexus study justifies charging much higher fee rates than those in our proposal. with this new fee we would generate at least $400 million over the next seven years. just to close and then i'm happy to answer questions. we can expect nearly 50,000 new workers who will need housing in the next decade. many of whom will not be able to afford market rate rents. how many times have each of us heard of a friend, or colleague, not taking a job here, leaving do to a lack of affordable housing?
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someone who is commuting, maybe an hour or two because they cannot find a place to live. commercial use in the city benefit from the availability of housing close by for their employees. we have to increase public investment and affordable housing at a rate that keeps paying for job growth. we have to ensure sufficient housing to meet the full range of worker income and demand to have a healthy city. this jobs housing fee the update will continue to provide revenue significantly below the cost that affordable housing developers will incur to mitigate the massive housing need. resulting from over 7 million square feet of planned office in the next two years. if we don't raise this fee, who also pays? this fee update has been discussed for many months. we first introduced it in may. i welcome your support as we go to the full board of supervisors tomorrow for a vote. thank you so much for your time. i'm happy to answer questions
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before or after ken. >> have a question. i hate increasing fees i think it is ridiculous. the city is definitely in a housing crisis, especially for low and middle class. but you fail to realize how we got there, and that is because of all of the red tape and all of the bs it takes to build low and moderate income in this town. i know projects that can't be built because neighborhoods don't want it built in their neighborhoods. i have to scratch my head and wonder, why doesn't the board of supervisors look at why this stuff is not going to be built? there is a lot of stuff, small and other, formal housing pause on the pipeline that wants to be built. it is being held up because of archaic laws.
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call supervisor haney a look at that stuff, too. you can raise all the money you want, and is still not going to make a difference until you change the way this city looks at building affordable housing. right now it goes on the back burner. and the red tape with planning everything, no problem with planning. you just follow the laws. the bureaucratic way of doing business in this town has got to stop, okay? we have small businesses closing left and right, okay? this impact fee. you are going to see more small businesses close, okay? they will not be able to afford it anymore. there is my 2 cents. >> thank you for your comments, commissioner. i can't fully discuss some of the things we are working on because they are on the ballot this year.
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in terms of making it easier to build housing in the city. like i said, when we sat down with the mayor's office of housing early on we said what can we do to help you? they said we need funding and we need land. that is what we are aiming to address here. we don't pretend to say that this is the solution to our housing crisis. it's a very complicated issue. there are a lot of solutions we need to look at. they want to make sure that we are recognizing the impact that we need to medicate from the large office development and putting up funds is not going to hurt that problem, it would only help it. i will pass on your comments. >> thank you for the presentation, courtney. >> would you be available to sit around, i would like to ask more questions but after we hear rich's presentation. i just want to make sure i understand anything correctly before i ask any.
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>> of course. i can be here until the item is over. thank you. contrary good afternoon commissioners. i am ken rich from the office of workforce development. i have a short presentation. i will go for you -- there it quickly. it is fairly dense. please let me and ask questions afterwards. apologies for the technical difficulties. i'm going to do the overhead projector. i probably need some help getting that figured out. there we go. hopefully that will work. i just want to do a brief description of how we look at whether fees are changing are going to be feasible, which means that they will actually leave enough return for the developer so the developer will still build the project and talk about some policy considerations around that.
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the city. okay i got a change that. the city assesses the impact fees on native element as you well know. these fees are intended mitigating specific impacts on this availment. one of these fees is the jobs housing linkage fee that was introduced to you by courtney which is money from which goes to pay to build affordable housing in the city. any fee, by state law must be supported by a nexus study which demonstrates there is an explicit link between the fee and the magnitude of the impact it is intended to address. this is required by state law. what we do, as a matter of good practice, we always try to do a feasibility study which it not at whether we can justify the fee, but whether the fee is essentially too high, or not too high, to make the project that it is intended to get the money from still be feasible. as i say here on the slide, does the fee leave enough room --
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return for the developer to allow the project to be built? there is often confusion between a nexus study and a feasibility study. please come back to me if i have not made clear with the difference is there. i guess you can see that. we did go ahead and do a feasibility study looking at the proposed changes. the purpose of that, over the objectives of the study were to assess the oversaw -- overall state of san francisco by looking at a set of examples will be call prototype office development projects. it is a test of aerial -- various increases in the fee. to see what might be sustainable and then to determine obviously fee increase range that the -- balances considerations with the goals of increased community benefits in this case, affordable housing.
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so, this basically is just showing us that offices as they are proposed to pay a range of fees to the city. our current jobs housing linkage fee, if you look at the pie charts here, that represents the right hand pie this is showing us in addition to the jobs housing linkage fee. not everywhere in the city, but in the central part of the city they do. they pay early care and education commercial rent tax and they pay other fees. if you look at the left-hand pie, you will see the total cost of building new office space in the city, the city sees about 25% of what it costs. the rest of it being obviously the physical cost of construction and things like that.
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to do this study, we work with a couple of consulting firms. we work to develop six prototypes that would be representative of office space being built in central soma, where we are seeing most of the office development. we constructed a financial model for each prototype which just looks at estimating all of the cost of building the office estimating the revenues which is basically the rents that the developers are going to get. and then looking at what the return would be to the developer. the rule of thumb here is that you would need a yield of about 6.8% per year to make the sources that the developers go to for their money, pension funds, other sorts of capital forces. for a project of this level of risk in san francisco they will want to see 6.8% a year. obviously a higher number than
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to get by putting it in a treasury bill or something like that. but is adjusted based on the fact that these are riskier longer-term projects. this very intimidating chart which i don't think you can see very well. i think you have it in front of you. i apologize for that. it just shows that the consultants went through and they tested the fee increase for the six prototypes you see across the top. they tried five, ten, 15 and 20. the yield was still in the range that we think the project would happen at a 15-20-dollar increase it started to look like the yields are going to be lower than what would be expected. i do want to say, this is not exact science. there was a comment made at the board .-dot this must be suspect because we lent them $10 even.
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obviously the fee, the highest possible fee is not $10 even as some number that is between 10-15 and we just landed on round numbers, right? this is the best of our consultants ability to see what might be feasible. the way you would deal, as a developer with a fee that was higher. you don't really control most of your variables. he bought the land for what you bought it for, or what the price of land is. the price of construction is what it is. your money is going to go away if you don't give them the right yield. what you will do to pay higher fees is raise rents. that is what will happen. with a very large projects we are seeing opposed in central soma -- soma, there some rent and elastics. google and facebook is not going to run away because the rent goes up five or $10. our concern is what happens down
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the line with smaller companies and smaller buildings. in addition, the controller recently did a fixed study that looks at this. what they found is that an two increase as proposed in the jobs housing linkage fee up to $16 would result in hundred 45,000 fewer office square foot in the city. but this is an average number. both of these numbers would probably be higher in the next two years. we have a pent up timeline of office. we both see a bigger hit to the supply, and a bigger confusion into the job housing linkage fee. over years as into the future, the estimate is that it was sort of smooth out to these numbers. but they did not look at, but wait we have asked them to is what the impact would be on the general fund with a slightly smaller amount of office built
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year by year because we have property taxes on business taxes and other things. while you're increasing the jobs housing linkage fee, your decreasing the property taxes and other fees. the taxes, at least, annual, not one time. we want to look at a net value of what we would lose over the years of property taxes. first of all, we want to make sure public policy changes are made with a lot of data and analysis. so far, what we have from the seasonal study point to some caution on this. further analysis may or may not point in the direction of caution but we do not have it yet. then to get back to a point because i alluded to a few moments ago. developers of the large class a office space that we are seeing proposed in central soma will pay for a higher fee by raising rents on larger companies who
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are often willing, they really want to be in san francisco, willing to absorb higher rents. in the class b or c buildings where our smaller companies are, there may not be the ability for those developers to get from those tenants, these higher rents. there is a concern that we may lose some of the smaller businesses as the rents go up. i have a chart here which is interesting, i apologize it's a little small. what that tells us is you look at the one on the bottom, asking the red line, class a office space. the purple, if they really tried together, as the class a office space goes up and rents, the cheaper office space goes up, but it goes up with it. that frankly is our larger policy concern. it does not center around google or facebook paying 5-$10 more
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per square foot. almost finished. thank you for bearing with me. in terms of what we think needs a further look. we think it would be useful for the controller to do a review of the economic feasibility analysis that we did. the controller was able to very successfully kind of come in, if you will, referee this conversation when it was about the housing fees a couple of years ago. he is able, you know, with a lot of credibility to take a look and see whether, you know, we got it right or miss the mark on it. we would like to controller to tell us, as i alluded to, what will be the effect on the cities general fund in terms of property taxes, and other revenue. also it will be the job effect on both construction jobs and ongoing jobs. again, because we are focused on the effect of smaller businesses.
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we would like to see if we could do some research that backs up some of our concerns. i'm happy to take questions as you wish. zouzounis is great you did all of these studies. it is pretty clear that, you know, whether it is $10 or $15 there is an inflection. inflection point. this legislation reaches far beyond that inflection point. it it is asking for a 40-dollar increase. not a 10-dollar, not a 20-dollar, but a 40-dollar increase. in this chamber, we represent the business middle class. okay? our constituents have been hit hard by the gentrification of
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commercial space. the law of a small small numbers makes it actually -- we are affected disproportionately. it is a lot easier to raise low rents faster than it is to raise high rents faster. so, and, many of our spaces, my self especially have become the cool spaces it to be in. a high firm is willing to pay, often times 5-10 times what i can pay as a manufacturer for an old warehouse that has had no improvements. and then they can afford to come in and put their own money, several million dollars in two improvements to that space. we are getting shut out, okay? just income people are getting shut out of housing. small businesses getting shut out of commercial real estate. we are moving. we are going out of business. we are going bankrupt. we are seeing that throughout the city, throughout the country, in every major metropolitan area. this just piles on.
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it trickles down and it trickles down and disproportionately to our group of people. so, you know, what happens here at city hall. what happens to big developers. what happens to big companies does bite us and it does matter. that is why those of us here actually sit on this commission to try to make our constituents, who do not have time to interact with city hall, and government aware of those effects. i am very concerned that this is not good for the city. i know it is not going to be good for small business through this i think that the supervisors are pushing something that flies in the face of the very analysis that we are asked to make when we are considering these changes. it's kind of like well, that be damned. analysis be damned. what do we care what the smart
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people, who were actually called upon to do the analysis have to say? we are on a mission. in this city, progressive initiatives like this get a lot of momentum. there is a lot of support. if you can name hundreds of organizations that are in support of this. there are hundreds of progressive organizations here that want affordability, and all kinds of other benefits for those who cannot afford them. that is great. we have to remember these development projects also drive the city in terms of its overall income. if these projects start not drying up, and if our businesses start leaving town are going out of business, who is going to be left to pay for all of the essential things? my other question is, of the $70 million that has been raised so far, how has not been spent? no one has said anything about how effective the money that
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goes into this, this pot, is deployed by our city. i haven't heard one person say, oh look what we have done with the money we have already got. look what we can do with even more. everyone just says we can do more with more. that is lazy. everyone can always do more with more. and, to the point that was made by our president. this is not the whole problem. it isn't just a money problem. this city is just stuck in first gear when it comes to getting stuff going. we have a bureaucracy and a process problem that really needs the attention before throwing more money at it. my fear is we are just throwing good money after bad and we are penalizing the developers, and them, by association, all of the businesses that are going to be victimized by this.
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you know, i think the supervisors should heed the analysis that the cities' other departments do and be realistic. i think there should be an accountability for the money that has already been raised and i think there should be, you know, and a lot more attention paid to how we are going to make the city more efficient. we are wasting a lot of money with the inefficiency. you know, it is well-known that developers are starting to reconsider the work they are doing in our city. a couple of projects have just gone on hold because of rising expenses. i think one of the major flaws i see is the notion that you can raise this tax, this fee on a project that has already been approved and it's already shovel ready or already in the ground. that is outrageous, okay?
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the developer makes a deal with the city. it is a business proposition. i will build if i know what it is going to cost me to build. a deal is a deal. if you checked out of the supermarket, pedro bell, and then some blocked out you forgot to pay an extra amount of money that we would like you to pay before you leave the door. you can't leave the store until you pay this. we made a deal with the developer that is putting up a project now and now we are going to go back and say, oh, we are changing the deal? how can any business person, developer, account for that. do we have to put bucket in our budget. the city is not trustworthy so we have to make an allocation into that bucket in case there is some capricious change befort approved and everything is dialed in, our investors as dialed in. everyone knows what they're going to make and now all of a sudden we have extra fees.
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that is just crazy, okay? that is not trustworthy. as we have seen from the federal government on down. once you lose the trust of the people that you're dealing with, the business people and the citizens and you're really in trouble. i think we jeopardize, again, the trustworthiness of our city when we do things like this that are retroactive and capricious in my opinion. you know, i don't think anyone is going to deny the good intentions. i think the execution of this flies in the face of all of the reason and all of the analysis that we try to get done and every piece of legislation that affects the city. to have it in this case is unusual in its own right. and then to deny it, just pretend it doesn't exist is pretty outrageous in my opinion. i think the supervisor should go back and think about how they
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are basically disregarding the other smart people in the room, this room, city hall. >> i had a question about whether you had considered, with your legislation, some kind of up, something that would not allow the pass-through of this particular fee, if it was a small business that there would be a up at a certain amount of square feet and then say if you're in a huge building, but you're only running 3,000 square feet it would be, in my opinion, a good idea to put something in there so it won't impact the smaller businesses. i mean, this really is directed more towards the larger forums. why not make that very clear and not have it impact further down the line to our small businesses
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that cannot afford any more than they are paying. that is just my thought. >> that is a great question. thank you, commissioner. we had not contemplated a up like that, at least i know we have some level of that when it comes to residential rents. i won't pretend i know everything about commercial rents. i hadn't heard of any precedent like that. i think it is an interesting idea. i think there are a lot of really important barriers to recognize when it comes to small businesses accessing commercialone the city. i think that fees are just one of them. we have seen that we have the highest commercial rent rates in the entire country and yet our fees have remain pretty consistent. there are a lot of other things going on here.
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we are really open to hearing other ideas whether it's through this legislation, or out side of it to make sure we are addressing when it comes to having access to affordable commercial space. >> a couple of quick questions for rich, then courtney -- i'm sorry, can, apologies. >> people do it all the time. [laughter] i get called chucky all the time. feel free to call me chucky going forward. >> two quick questions for you, one on page six, actually three quick questions. in the pipeline scenario resul results, at the bottom you have a graph, or what appears to be a ledger for office rent increase that says 13% increase.
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i don't see anything that is actually colored that area and i'm wondering if there is a part of the chart i am missing, or if that is referring to somethin something -- >> , let me explain. sorry, the title on the top of that table, pipeline scenario results. we were testing actual projects in the pipeline. there in the pipeline, they're going to make a lease in a few years with tenants. we originally ran them at today's rents which are still pretty high, they are like 80-$90 per square foot. we found they were not working at all. we arbitrarily, that may be the wrong word, we tested going up $13 over what they were today, that is reflected in these numbers. in order to get to the feasibility levels you see in
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this chart that is already a 13-dollar rent increase over two days class a. >> 13% or $13? >> it says%, not dollars. >> what is the difference between small-cap and large-cap? >> we should be better with our terminology. there is something called prop, which i hope we do not have to talk about here today. it has defined, for its own purposes that buildings below 50,000 feet are small-cap and buildings above 50,000 feet or large-cap. we are just using that as a shorthand. the larger point is small buildings and large buildings. if there were, and we have certainly been advocating for a reduced fee for for smaller new office buildings. we can set that number at whatever the board of supervisors wants. i apologize for that jargon.
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>> just to be sure i understand correctly. the legislation does affect small-cap because it starts at 25,000? >> as it is currently drafted the jobs housing try kicks in at 20,000 feet, as it's currently drafted it would be the same all the way up. we have a desire to see not actually an increase, but a smaller increase for the small buildings which i would -- should stop calling small-cap. >> that is fine. then, i read the controller's report. this is a separate report from that. separate group of people. >> the controllers we hired by law to do a report on any ordinance that they believe will have an economic impact on the city on so they did that. >> there was mention of, you know, clearly there would be some revenue loss to the extent
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that there is less office space, of all of the associated taxes and fees and there was mention of 1500, up to her in the range of 1500 jobs. from what i recall. it's in our book. maybe it's over there. so, i guess one question i have is, does the oewd coordinate with the controller's office to a certain extent? >> we try. part of their power, so to speak his or her independence. we coordinate with them but they certainly do not take directio direction -- >> is there even an initial rough estimate of what the
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annual revenue loss might be? >> that was not part of the report they did. frankly to give credit where it is due, someone in public comment brought this issue up and we all said, that is an important thing. the thing to understand is, property tax, or taxes are annual, fees are one-time. we want to make sure we are not throwing the baby out with the bathwater by giving up an annual revenue stream that turns out to be a lot over time for a one time -- >> i'm also thinking about the payroll taxes, 1500 employees hypothetically better paid employees. that seems to be -- >> we have asked them to help us get more than information. >> okay. great. >> while i'm up here if i could respond to commissioner dooley.
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i hear your idea about trying to give a break to smaller businesses. unfortunately there is a prohibition and state law against commercial rent control. while the city has the power to set, within reason, to say things about residential rents or the city has no power to tell any business with they can rent space bar. which means the best thing we can do when we are looking, is try to look at a particular project and say, okay, those are the development projects that are likely to have small businesses in them. we can say we have the legal ability to have different size developments. we cannot go to the company and say, you can charge this one that rent and that when this rent. we have to hit it from eight less of a direct way. try turning. i'm not done. questions for courtney. if you could, please?
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what do you feel is the purpose of this ordinance? in other words, i would imagine that every legislation that is drafted has some, you know, ultimate goal. what do you feel is the purpose of this ordinance? >> thank you for the question. the jobs housing linkage fee purpose is to mitigate the impact of new, large scale commercial development. the fee has not been updated in nearly a quarter of a decade. we are bringing the fee in line with the current condition so we can generate more funding for affordable housing. >> the purpose of the legislation is to generate more funding for affordable housing? >> yes. >> okay. i'm genuinely trying to wrap my head around what is happening.
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>> sorry to cut you off. there is some data aware of the funding has gone, commissioner dwight. $70 million has been generated, it has partially funded 527 units. it is not a one-for-one unit to housing being built. as you are aware, it is a mix of financing for each affordable unit. >> that was going to be my next question. how much does the city spend on affordable housing right now? >> what we call our affordable gap is $239,000. i believe it is close to a total of $700,000 per unit that we create and then we get financing from the state. >> i am sorry. i mean, what is the total budget, in the city? >> i am not sure. >> okay. could you hazard a guess? is it in the millions, the
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billions? >> probably the hundreds of millions. i can't answer that with confidence. >> sure. i think we can stipulate it's out amendment in the hundreds of millions. i am getting nods from our analysts here. i guess one question i have, how is the 25,000-foot delineate arrived at? how is that the difference of a small project not worthy of the fee and a large and a project it is worthy of the fee? >> that number goes far back to the 80s. i believe it was first determined when prop m was
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established in the 80s. and obviously far predates my time here. that limit has been consistently used after prop m. under the allocations there was a limit to the amount of overall office space we can approve per year, and then of small-cap, 25000-50,000 square feet that we can approve per year. at 25,000 cut off, or project smaller than 25,000 are exempted from prop m and the jobs housing linkage fee. they are also exempted from the childcare impact fee. many of our other impact fees to assess a fee on commercial projects under 25,000 square feet. >> would you say 25,000 feet is no longer a small business? what is the rationale of this
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being the particular cutoff point. >> we wanted be consistent with the definitions that have been used in the past. what does small-cap in relation to small businesses a a really important question and one we have been pushing for data around. when i did my own research and looked at of the ten small-cap projects that have opened in the past two years. there are not necessarily i would consider to be small business. and i'm all that we know has been vacant by some time, those other small-cap projects. >> okay. i'm sorry. >> my point is to say that small-cap is not necessarily equate to a small business.
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>> have you considered when looking at that list out there is a possibility you might be seeing survivor bias? are you familiar with the term? >> i am not. >> goes back to the 40s where they were flying fighter jets in world war ii and a gentleman was commissioned with the job of determining what would make -- what would be the appropriate place to place additional armor on these jets so that they could survive the battle. they looked at where the bullets were arriving on the jets, and the initial assumption was to put all the armor where the bullets were hitting the jets. they had this moment of genius of realizing where the bullets were hitting just indicated those were the jets that came back. the bias was towards putting the armor where the battle scars were survivable.
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the right place to put the armor where there was no evidence of bullets hitting the vehicles, because those were the vehicles most likely to survive the battle. one thing i would encourage you to consider when you looking at these small-cap projects that are being built that are clearly being occupied by notable tech companies is that it may be those of the ones getting built because those are the only companies that can afford to build them. >> will be like to look at and requiring that the city conduct a study every five years on development impact fees is to also consider let's actually have data on who the tenants are in these different types of buildings and where our small business is so we can guide our decision-making. >> i cannot agree more. let me ask you another question. in this sub 100,000 office development, do you have a sense of what the demographic of those employees are in your typical
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building that is under 100,000 feet? >> no. the nexis study looked at an average average, what is typical office building by ami level and found on average? >> i am sorry what is ami? >> area median income. i looked at workers who are making under 30, i believe between 30 and 80% ami come up to 120% which would mean you're making about $100,000 per year. about 30% of the employees on average new office projects are making less then 120% ami. that is the population that nexis aims to solve four. of these new workers who are low to moderate wage earners, how are we building enough housing for them, because we know when we generate new revenue for
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affordable housing it gets spent. we don't have have affordable housing finding sitting there waiting. those dollars are put to work really quickly. >> i will get there in just a second. just two, you know, a brief observation, if i may? the office space, that we currently occupy is 56,000 square feet. i don't think many people in the building, are making much more than 50000-$60,000 per year. most of them are less. it's a collection of artists and small businesses. i am wondering if you have given consideration to the impact that this could have on development for multitenant, arts, uses, you know, one thing that is certainly a concern for me with this legislation is everybody
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that works in our building is hanging onto living into the city by a tiny thread. they are, you know, quite literally the missing middle that you were referring to earlier. we are eyeballing a lease that is expiring in about a year to two years. certainly our area, we are over on the chavez by bayshore, has seen a tremendous amount of development and i think it would be nice to see some development that was not for the benefit of a firms. my concern is the legislation as crafted, the only ones that will survive the fee increase will be the large firms with high profit margins, not the small businesses and crafts such as this.
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that is my concern. i'm still not quite done with a couple more questions here. >> if i could just say really quickly. i hear you, i absolutely agree that we need to make sure we are creating space that is not just for large tech companies that is a missing piece. like i said before, we have the highest commercial rents in the country where fees have remained relatively consistent. >> i would just say candidly. i just signed a lease to park vehicles under an overpass, in an area that is entirely surrounded by people sleeping in tense -- tent and behind it chain leaked fence and barbed wire, by a taco truck. i'm paying hundred $50 per vehicle that is parked there.
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it is $4,500 per month, which for my business is an extraordinary amount of money. meanwhile, that is on top of the $6,000 a month we are paying just for the office space for ten employees. we are super sensitive to any sort of upward pressure on office space rent. my concern is, it's always a supply and demand game, at the end of the day, as anyone will be able to tell you with respect to housing when you get more supply that helps somewhat familiar meliorate demand and that is what brings prices down. my concern with this legislati legislation, if by raising your class a rent and decreasing the affordability and viability of the smaller up -- commercial
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space you will be increasing the pressure on the existing space which will apply further pressure on the missing middle. which might be a fair trade-off. the goal, as you told me at the beginning of this, of the legislation was to maximize affordable housing to increase the amount of money that is available to fargo housing which we stipulated wasn't in the hundreds of millions of dollars of what we are currently spending. do you have any reason to doubt either the controller or the oewd reports on the feasibility? >> yes area that is a great question. in the feasibility study the first premise is that it is
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currently infeasible to build office space. and yet we have more than 7 million square feet of office space, in the pipeline. that is why we looked at the feasibility study and a does and formed the decisions we are making. we are also looking -- >> i'm sorry. just put you on pause for just a second. the gentleman behind you is shaking his head and i would like to ask him about -- >> you can finish, i don't want to interrupt. >> actually, this is part of the process. i'm trying to learn. i am not the expert. somebody of here promulgating the legislation, there someone else who has expertise. i want to hear from the person. >> i want to defend the integrity of the work that we do which is come at the end of the day, an estimate. it is not electrical engineering where there is


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