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San Diego To Replace Redevelopment Funds With Fees -- But Will Downtown Development Agency Survive?

Bill Fulton on
Mar 21, 2012

SAN DIEGO -- Seeking to make up for lost redevelopment funds, the City of San Diego has decided to require downtown developers to pay processing fees for the first time in decades. But it remains to be seen who will process the permits and get the money the city's planning department or the city's nonprofit downtown redevelopment entity, the Centre City Development Corp.

For decades, the CCDC and the Southeastern Economic Development Corp. have performed San Diego's redevelopment functions in the downtown and the southeast area functions that will wind down now that redevelopment is dead. Uniquely, however, CCDC and SEDC also perform land-use permitting functions in their project areas on behalf of the city.

The San Diego City Council is expected to act on the processing fees in April. CCDC has already approved the fees assuming the city allows CCDC to continue processing permits downtown. 

Speaking at an Urban Land Institute event in San Diego on Tuesday morning, CCDC's board chair, Kim Kilkenny, said his organization can process land-use permits much faster than the planning department typically in about three months. And even though the downtown fees are much lower than fees elsewhere in town, he said, they would be enough to keep CCDC afloat. 

In essence, of course, the cost of processing downtown permits is being shifted from the tax-increment flow to the developers.  Jim Oliver of the Oliver McMillin development company, another ULI panelist, said that would be enough to kill downtown projects, at least for the time being. "If you find a project that works with a nothing land cost, that's a deal you might be able to do," he said.

The CCDC/SEDC setup dates back to Pete Wilson's days as mayor of San Diego in 1970s, when he decided the nonprofit approach would be more effective than a traditional redevelopment agency. For decades, CCDC has been a model for downtown redevelopment entities.

Kilkenny said that without the tax-increment flow, San Diego will have to find another way to finance infrastructure downtown and in outlying neighborhoods. "Up to know, the assumption downtown has been, Densify and build infrastructure with tax increment; while the approach in outlying areas has been, Density and the infrastructure is adequate," he said. "We're going to have to start thinking about an infrastructure bond."

Kilkenny also said that Sen. Darrell Steinberg's "asset bill" which would allow redevelopment agencies to retain assets and use them as an endowment for future activities wouldn't help CCDC.

"We were in the business of taking bad property and turning it around," he said. "We owned a lot of bad properties." Sacramento City Manager John Shirey made similar comments at a ULI event in that city last week.

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