Commission hears sharp split over pipeline grandfathering and PDR replacement; staff and Supervisor Daley offer competing fee approaches

A central focus of the June 19 hearing was how to treat the planning "pipeline" — projects already filed with the city but not yet entitled — and how to handle the loss or replacement of PDR (production, distribution, repair) space.

Staff framed the pipeline categories and posed a set of policy choices: which review rules apply, whether projects that remove PDR must replace it, which impact fees and inclusionary housing rules apply, and how other code requirements (heights, parking, ground-floor uses) should be phased in. Staff estimated approximately 4,000 units in the pipeline (February data) and proposed different treatments for two groups: projects that required rezoning (roughly half the pipeline and generally larger, staff proposed subjecting these to full Eastern Neighborhoods rules and waiting for Board action) and projects that were code-compliant when filed (staff proposed a cutoff date and a phased approach for fees and some code requirements).

Staff recommended using a cutoff tied to commission/Maxwell resolution timing (Jan. 19, 2007 mentioned in the presentation) such that code-compliant projects filed before the cutoff would follow the prior entitlement process (and in some staff scenarios be exempt from full Eastern Neighborhoods impact fees), whereas projects that needed rezoning at filing would be subject to the new rules. Staff presented a revenue estimate range for the full Eastern Neighborhoods impact fee program of $100 million to $150 million and said a staff grandfathering approach would forgo an estimated $11–12 million in community benefits fees from 65 projects (about 1,208 units) that pre-date the cutoff.

Planning staff also summarized Supervisor Daley's ordinance as an alternate policy for the pre-adoption pipeline: a $21 per square-foot residential fee on projects filed after March 31, 2006, a community stabilization fund, and PDR-replacement options that include constructing comparable PDR space, paying $125 per square foot of PDR removed, or paying an amount equal to 80% of the construction cost of the replaced PDR. Staff noted Daley's proposal uses an earlier cutoff and would grandfather fewer units than staff's proposal.

Public comment was lengthy and sharply divided. Numerous small builders, lenders and contractors urged the commission to grandfather pending projects and recommended August 30, 2007 (the commission's prior binding action on exactions) as the fair cutoff date. Residential-builder groups, financing professionals and many labor representatives warned that retroactive fees would make projects unfinanceable, cost local jobs and sink small firms. Community organizations and tenant/anti-displacement groups argued for an earlier cutoff (staff memos and some community speakers suggested February 12, 2004) or no broad grandfathering, saying developers had long notice that rezoning and public benefits were imminent and that the city needed impact fees to fund promised transit, parks and affordable housing.