Fee threatens housing affordability
By Tracy Hernandez
On Tuesday, the Los Angeles City Council will consider approving a 1,000 percent increase in its Street Damage Restoration Fee, or SDRF, ordinance.
This is a fee that companies or utilities pay when they must cut into a street in order to fix or build new infrastructure like internet cables, gas lines or water pipes. A 1,000 percent increase will make it more expensive to build housing that needs these kinds of services and more expensive to repair our already crumbling infrastructure.
Developers, utilities and infrastructure providers pay when they excavate a city street. This fee increase will eventually equate to a $114 million per year increase in new costs for property owners and ratepayers, on whom it would be imposed with little to no public notice or input.
Department of Water and Power ratepayers will get hit the hardest since they’re projected to pay $37 million per year for their infrastructure improvements. Los Angeles cannot guarantee that all the money will be used for repaving.
Housing costs and homelessness throughout Los Angeles County are top-level concerns to business owners, along with taxes and fees. Los Angeles has a lot of housing and infrastructure to build, and the city keeps making it harder and more expensive. This creates a vicious cycle that will continue the exacerbate our housing affordability crisis.
As not only stakeholders, but as the builders and providers of new, sorely needed housing and infrastructure improvements, we consider our relationship with the city to be a partnership. Together, we must build more housing to combat this housing crisis. We must modernize our infrastructure for the 2028 Olympics. Those challenges will not be overcome if the city continues to penalize the very businesses that build them.
Over the last two years, the building industry has seen exponentially increased park fees, a brand-new linkage fee and Measure JJJ. All of these have added cost, which has made several projects financially infeasible, which means the city has already missed out on adding housing stock to an inadequate supply.
There has not been a single ordinance aimed at making it easier or less costly to build. Material costs, land costs, labor costs and city fees have already risen dramatically over the year. Tariffs on wood from Canada and steel from China have added $5,000-$12,000 to the cost of building a single unit of housing. Those costs are reflected in the prices that homeowners, renters and small businesses pay just be here in Los Angeles.
It takes years to get a project built due to Environmental Quality Act litigation, neighborhood pushback, council office negotiation, waiting in the queue for committee or council approval, waiting for utility designs, for inspections, the list goes on.
Since there’s such a heavy backlog in the queue to construct the needed housing and infrastructure to keep L.A. thriving, we have not fully seen the effect of the damage we’ve inflicted through fees; in a few years, that will dry up to a trickle down.
Adding to our concern about the SDRF are major problems with process and planning. The City Council opted to include this partial increase of revenue from the proposed changes in this year’s budget before the ordinance was even adopted; a change from $7 million to now $70 million, with no reference on how that increase would have taken place.
A City Council committee approved significant changes to the amount and application of the SDRF without any outreach or public input. We believe that a task force should be convened to address the impacts of this increase in relation to the adjustments done to a similar policy affecting street trenches that was approved last year. Los Angeles claims it needs the fees to pay for street repairs. Voters have already approved billions in new taxes, like Measure M and SB1, which fund transportation improvements, including street repairs.
Companies that build housing and infrastructure are providing things that we sorely need in Los Angeles — so why does City Council keep treating them like a piggy bank? These policies in combination with other market factors have drained the piggy bank and we see the results: not enough housing or infrastructure to keep up with the realities of our city. The L.A. City Council is expected to vote on this gigantic fee increase Oct. 23. We need ask the council to go back to the drawing board to figure out a thoughtful, realistic, workable change in this fee that works for the city budget and doesn’t decimate technology infrastructure and housing production.
Tracy Hernandez is the founding CEO of the Los Angeles County Business Federation, BizFed.
This Opinion was published on the Los Angeles Daily News
