City staff reported that without a new fee, nearly 1,000 apartment units to be considered by the city council next year may not provide any subsidized affordable housing. A so-called "nexus study," required by the court case, found that the city could justify a fee of up to 11.4 percent of the project's assessed value to subsidize affordable housing. City staff recommended no more than 3 percent, however, citing concerns over developers' profits and having parity with the city's 3 percent affordable housing fee for ownership housing. Previously the city's fee had been 10 percent, while Palo Alto's was as high as 25 percent and Sunnyvale's was 12.5 percent.
Opposing the new fee were council members Tom Means, John Inks, Jac Siegel and Margaret Abe-Koga, who instead favored exploring a voter-approved parcel tax for affordable housing. That threw into question whether the city would be able to receive any affordable housing at all from five apartment projects, totaling 960 units already in the city's planning pipeline.
The opposition to the fee from libertarians Inks and Means was no surprise, but opposition from Siegel and Abe-Koga apparently was.
"I'm just in shock," said council member Laura Macias after the meeting. "We are walking away from fees when we need revenue."
Council member Mike Kasperzak was fuming, and said after the meeting that "the poor" were the ones who lost out.
They had failed to sway Abe-Koga. "Housing is more and more unaffordable for the middle class. Aren't we taxing the wrong group?" she said, alluding to the sentiment that the fee would be passed on in the form of high rents for new apartments. The average rent in a Mountain View apartment complex has reached $1,793 a month, said Joshua Howard of the California Apartment Association.
But Macias pointed out that a parcel tax would be "regressive" in that the same tax would be paid by someone in a $300,000 condo as someone in a $1.5 million home in Waverly Park. Mayor Siegel suggested a tax of $5 a month. "I think we could sell that," he said.
Proponents of the development fee said it was justified because the growth in population requires public and private services, and those services are usually provided by people who cannot afford market rents.
"People want to live here in Mountain View and services are not free," Macias said.
Council member Bryant said that members were being "not modest" in giving up a relatively proven and widespread practice.
"Let's look at this fee which is basically what we had before, and move forward with that," Bryant said. "I think we're trying to reinvent the wheel in a way that will take more time than we have."
Kasperzak and Bryant said a parcel tax was unlikely to pass, and judging by what it takes to pass a school parcel tax, it would take "an amazing amount of work and an amazing amount of volunteers," Bryant said.
Kasperzak went as far as to claim that "anyone suggesting a parcel tax already knows the outcome and that's why they are suggesting it."
It was mentioned that a parcel tax to fund a new library failed twice.
"At least voters would decide if it is worth it" with a parcel tax, said council member Means, an economic professor at San Jose State University. He co-authored a study on such "inclusionary zoning" practices and concludes that housing is 8 percent cheaper in California cities that don't charge affordable housing fees to developers. He called the city's nexus study, and others like it which show why new development should bear the cost of affordable housing, "disingenuous and dishonest."
Abe-Koga defended her position several times. "I'm not saying let's kill this thing, lets get rid of it now," she said of the new housing fee. "I'm saying let's look at these other options too."
If the council approved the new fee, voters would see the parcel tax as unnecessary. "I don't think that's fair in giving the parcel tax a fair shot," she said. Abe-Koga didn't seem to share her colleagues' concern about the time it could take to pass such a tax.
"I don't want to kill this either but I'm not ready to approve it tonight," said Mayor Siegel, who reminded everyone that the city would be seeing substantial housing fees from new office development next year. He said the nexus study looked like a way to "skirt around the Palmer decision" or at least, "it smacks of that. I don't think it's fair."
After the council opinion became clear and the study session had run over an hour past schedule, City Manager Daniel Rich said city staff would look at polling residents on their interest in a parcel tax, among other options.
"If you're asking questions, you may as well ask on a whole set of revenue options," he said.
While adjourning the meeting, Mayor Siegel addressed tensions between council members, some of whom appeared to be at a turning point in their relations.
"It was a tough night for many of us," Siegel said. "I hope we can move on. I hope we don't hold grudges."
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