City Council Ensures Future Development for Downtown

On December 13, 2016, the City Council unanimously decided that high-rise housing developers will continue to receive 50 percent reductions in construction taxes and parkland fees for downtown projects beginning construction before July 2018. “We’re trying to get development and dollars out into the community,” said Councilmember Raul Peralez, who led the effort along with Mayor Sam Liccardo.

Despite record development in the Silicon Valley as a whole, the last high-rise residential project to start construction in downtown San Jose was Silvery Towers in February 2015. According to Councilmember Johnny Khamis, “It’s harder for developers to get money these days, and the fees we charge as a city are too high,” he continued on to say that “If no development is breaking ground, then 100 percent of nothing is nothing.”

As of now there is no cap on the number of units that could qualify for the discounts. Currently ten high-rise housing projects representing more than 3,600 units are in the city’s development que.Before the Council voted, developers including KT Urban’s Mark Tersini and CORE’s David Neale described difficulties associated with securing financing, such as rising construction costs. Tersini has plans to develop the former Greyhound Bus Station site, and CORE has a tower project in SoFA.

Union workers have also requested new labor and wage requirements to be part of the proposal. In response to this, the council included provisions to hire locally, encourage compliance with state apprenticeship program requirements and agreed to work with labor and businesses in 2017 on an agreement benefitting both sides.

In addition to these measures, a task force will form with the intent to study the parkland fees. City staff estimated that $20 million would be dedicated to parks if an additional 2,000 downtown high-rise units are built, even with the 50 percent discount. The city estimated that at 2,000 units, developers would receive an $18 million discount in park fees, but annual property taxes would increase $10 million in the first year after they are built. In addition, downtown businesses would feel positive economic impact of new residents.

The incentives will help take several of the current proposed projects from the “sideline to skyline,” according to SJDA Executive Director Scott Knies. The high-rise incentives were first passed in 2007 for parks only and then again in 2012 for parks and construction taxes. Developers have used the incentives to build 1,522 finished units and another 1,043 units currently under construction.