Tuesday, February 28, 2006 | In the high stakes game of downtown development, density rights are the currency the City Council controls and property owners seek.
Developers want the ability to build denser, taller buildings so that their properties become more valuable. Many city leaders are hopeful that the City Council can leverage its control of density rights to capture the money needed to pay for parks, fire stations and infrastructure to make downtown a livable community.
So valuable are the density rights that developers can – under strict rules – trade them between one another.
The city’s downtown planning agency has over the past three years calculated how much of that currency will be on the table for the next 25 years and what it is worth to the developers who are being asked to create an urban core that is both denser and more inhabitable.
The Centre City Development Corp.’s proposed blueprint for downtown growth will be weighed by the City Council on Tuesday. Council members are being asked to agree on the best way to make sure the public benefits from the taller, denser and more valuable projects that will be built downtown while also keeping developers interested in the game.
“This is about trying to balance a healthy commerce with an enhanced environment in San Diego to maintain the quality of life,” said Michael Johnson, chairman of the Downtown San Diego Partnership, a business group.
Developers and their critics are tussling about the Centre City Development Corp.’s proposed update to the downtown plan, which was last amended in 1992. The proposal acts as the new blueprint for downtown’s growth and asks the City Council to boost the current density limits at its meeting Tuesday.
Developers say they need the density limits lifted in the downtown area after having been shut out of building denser projects in other parts of San Diego. If downtown is supposed to soak up three times as many residents and twice the workforce by 2030, builders argue the city should dole out new density rights to make developing downtown an attractive enterprise.
At the same time, others maintain that the city shouldn’t dispense of the density rights without getting a fair payoff for the public. These groups want to see that money is raised for the parks, fire stations and transportation improvements that are needed to support the downtown population boom. Further, they say the city needs to ensure that affordable housing is built to accommodate the many service workers employed there and to defend the bay from the increase in urban runoff.
CCDC initially proposed handing out up to 19 million square feet of new density rights, above the 1992 limits, for free to downtown property owners. The proposal includes a bonus program, where another 33 million square feet are available for developers who provide public-benefit perks in their projects, such as preserving historical landmarks or including ground-floor retail shops and onsite affordable housing. If passed, the new downtown plan would allow for a maximum of 106 million square feet of development.
After pressing for their plan’s passage over the past few months, CCDC last week discovered a blunder in the way parks were paid for.
In its original proposal, CCDC allowed developers to give the city a parcel of land to be converted for a park in exchange for more density rights on other properties. That was unfeasible, CCDC President Nancy Graham said. Property values are so high, developers would be reluctant to do a swap like that, she said.
CCDC, however, had assumed in its proposal that the density-swap-for-parks program would help bridge the gap between what parks cost and what the city could pay with developer fees and property taxes.
Mayor Jerry Sanders and Councilman Kevin Faulconer, both of whom were backed heavily by the real estate industry in their elections last fall, responded to CCDC’s gaffe by asking developers for concessions last week.
After days of behind-the-scenes meetings, Faulconer said he would ask his council colleagues Tuesday to change CCDC’s proposed density rights distribution in order to bridge the funding gap for 10 acres of parks.
Faulconer, who was elected in January to represent downtown, said he wants to strip the CCDC proposal of its provision to boost density rights beyond the 1992 levels for free. Faulconer’s amendment, if approved, would require developers to pay for more density. Under his plan, the city would sell the 19.5 million square feet it planned to hand out for free for $15 per square foot.
Because CCDC estimates that only 6.6 million square feet of the density rights it initially thought to dispense for free, Faulconer’s amendment is projected to raise $100 million for parks.
However, the money raised from the sale of density rights will not be earmarked for parks, but will be controlled by CCDC. Groups who met with the mayor and Faulconer to hammer out a compromise said they believed that money would be spent as intended.
“We’re taking it on faith right now because of our belief in Mayor Sanders and our confidence in the Centre City Development Corp.,” said Mike Madigan of the East Village Association at a Saturday press conference.
Paul Tyron, CEO of the Building Industry Association of San Diego, said he was confident the density-swap-for-parks program, as originally proposed by CCDC, would work.
“True programs like this, if they are going to work, work in traditional downtown environments,” Tyron said.
Nico Calavita, an urban studies professor at San Diego State University, said that program and other bonuses will never work under CCDC’s proposed windfall. Density rights lose their value as a bargaining chip if millions of square feet are dished out for free, he said
“Density should start out low and bonuses for [density] should be given out for very specific occasions,” said Calavita, who will speak Tuesday on behalf of grassroots planning group Citizens Coordinate for Century 3. “You cannot give densities automatically for free; they should be tied to public benefits.”
Faulconer’s proposed changes, if accepted by the council, will automatically increase the likelihood that bonus programs are used, groups say. Although, they noted that the $15-per-square-foot amount was tied only to a CCDC-determined parks shortfall and no other needs.
Groups said they are poised to argue at the council meeting Tuesday or in a courtroom later that the costs of upgrading storm drains, public safety, transportation and more parks are not known.
Faulconer said that he trusted CCDC’s due diligence over the past three years, despite the parks miscalculation. Passing the proposal Tuesday is important because the opportunity to locate downtown land for parks will dwindle if further delayed, he said.
“This, I believe, was the absolute biggest thing from a quality-of-life standpoint,” said Faulconer. “My goal was to get the money we needed for parks, but to not be a disincentive for people to do business.”
Others, however, would like to see the plan delayed to further study whether the city is getting a fair deal for the density rights it would sell under Faulconer’s. The city should compare the tentative price, $15 per square foot, to other cities and study if other impacts should be paid for with this price for density rights.
The city of Los Angeles, for example, has sold density-rights in its downtown area at a rate tied to land prices since the 1980s. Prices there have fluctuated between $22 and $35 per square foot, according to Don Spivack, deputy chief of operations at the Los Angeles Community Redevelopment Agency.
The City Council’s independent budget analyst and other critics say there are several questions about the additional density’s impact on the city’s multibillion-dollar infrastructure backlog and other costs where taxpayers foot the bill.
“Do you really think you can squeeze in another 52.8 million square feet without addressing mitigation, and no one would notice?” said Planning Commissioner Carolyn Chase, referring to the proposed amount of new density rights beyond the 1992 plan.
The San Diego City Council will consider CCDC’s proposal Tuesday at 2 p.m. on the 12th Floor of the City Administration Building, 202 C Street.
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