By Erica C. Barnett
Two city council members who have argued for years that developers who build new housing should pay large fees to compensate for their impact on the city’s transportation system may end their terms without seeing their vision realized.
Councilmembers Alex Pedersen and Lisa Herbold, who are both leaving the council at the end of this year, have proposed a change to the city’s Comprehensive Plan—the document that guides development in the city—that would dictate how transportation impact fees will be determined in the future and lay out a list of specific projects they will fund. Pedersen, who is leading the charge, wanted to hold the one required public hearing for the change last week, which would queue the changes up for later this month, but land use committee chair Dan Strauss canceled the hearing, saying last week that he wanted to wait for a ruling on a legal challenge related to the fees.
The changes to the comp plan are the second of three necessary steps required to impose the fees; the third and final step would be adopting legislation to implement the fees laid out in the plan.
Pedersen has said fees for new housing could offset the property taxes that pay for the Seattle Transportation Plan, reducing property taxes for homeowners while raising the cost of new apartments. Both property taxes and the cost to build new units ultimately get passed on to renters, but the fees would typically cost far more up front than the annual property taxes for a building, according to both developers’ testimony and PubliCola’s own comparison of actual property taxes for new developments to the fees they would pay under a fee schedule, introduced as part of the city’s defense to the developers’ challenge, which represents the maximum the city could charge for each land use type. The legislation does not include a specific fee schedule.
For example, the owners of a brand-new, 171-unit luxury apartment building called the Ballard Yards will pay about $580,000 in property taxes this year. The impact fee for that same development under the proposed fee scheme, including apartments and the first-floor retail space, would be about $2.2 million, almost four times as much. For a smaller building like the Crane, a five-year-old, 39-unit complex in Interbay, the impact fee would add $495,000 to the cost of development, compared to a little more than $100,000 in annual property taxes.
One reason Pedersen’s proposal would cost developers (and therefore renters) so much more money overall is that the fees are calculated by unit, not development—so that someone building a single-family would pay one fee, while a company building a 100-unit building would pay a separate fee for every unit.
“I’ve tracked this over the years, and every time I dig into it I leave with as many questions as I have answered,” Strauss told PubliCola. For example: “What is the potential impact on MHA? How do we marry it with our budget this year? Are these projects still the right projects?”
During last week’s land use committee meeting, public comment over the proposal was extremely divided, Strauss noted. “To see the divided room—it told me that waiting until the [Seattle] hearing examiner makes their final decision before having that official public hearing was the right choice.”
Earlier this year, the city’s Office of Planning and Community Development determined that the fees would have no significant impact on the environment under the State Environmental Policy Act, prompting a group of developers and housing advocates to file an appeal; the city’s hearing examiner held the final hearing on that appeal next week, and will announce his decision sometime in the coming weeks.
In their appeal, the developers and advocates, organized as the Seattle Mobility Coalition, said the new fees would “raise the cost of development in Seattle across the board, amounting to a tax on new housing, which will reduce housing production, increase housing costs and undermine the goals of the Mandatory Housing Affordability (“MHA”) program,” which allowed more density in certain areas in exchange for new affordable housing.
For example, Mill Creek managing director for development Meredith Holzemer said in a declaration, a 397-unit apartment complex the company is planning on South Jackson Street would cost them several million dollars in impact fees over and above the $10 million they will already pay into MHA; the extra fees, Holzemer said, “will render the project economically infeasible and it will not be constructed.”
Although the proposal would exempt housing built specifically for low-income people, that doesn’t address the situation that’s driving up the cost of housing for everyone else: Wealthy people, including newcomers who move here for high-paying tech jobs, are “bidding up” existing units that would otherwise be affordable to middle-income people, pushing up the cost of housing at every level of the market.
Basing future road usage on past behavior is always a stretch, even without a pandemic that completely upended commute patterns and reduced the amount people are driving at rush hour, possibly for the long term. To name just one very recent (and very consequential) example, the state estimated that around 130,000 people would use the Alaskan Way Viaduct replacement by 2030, and used that estimate to justify building an $18 million bypass tunnel and the surface-level waterfront highway that is now under construction.
Pedersen and Herbold were quick to point out that changing the city’s Comprehensive Plan is just a precursor to adopting impact fees—one Herbold called a “small procedural step” that “is not complex” at all. In fact, amending the comp plan is a consequential process that the council sets aside time for once a year, usually rejecting a majority of the proposed amendments that come before them. Setting up a plan and project list in the city’s primary planning document isn’t some mere gesture, but a major first step toward adopting the fees themselves.
One reason Pedersen’s proposal would cost developers (and therefore renters) so much more money overall is that the fees are calculated by unit, not development—so that someone building a single-family would pay one fee, while a company building a 100-unit building would pay a separate fee for every unit. The fee for each new apartment would be a few thousand dollars less than for single-family houses or duplex units, but the overall cost would be much higher; developers would also be encouraged to stay away from single-family areas by discounts for building in already-dense urban villages. The proposed fee structure could have the effect of keeping the city’s suburban-style land use patterns the same while placing another wall around historic single-family zones—a longtime goal for Pedersen.
How could someone living in an apartment in a dense area with easy access to transit service “cost” nearly as much, in terms of negative impacts on the city’s transportation system, as someone building a new house in one of Seattle’s car-centric suburban-style neighborhoods? According to the Pedersen-Herbold amendment—which, if adopted, would become a permanent part of the city’s overarching growth strategy—the costs are based on a couple of factors.
The first is “Seattle’s expected growth in person trips over the next 12 years”—that is, how many “trips” Seattle residents will take using the overall transportation system. This measurement of “person trips” comes partly from vehicle trip estimates from the Institute of Transportation Engineers, which uses its own “trip generation manual” to estimate the number of people using the entire transportation system during the evening rush hour, and the Puget Sound Regional Council, which estimates population growth and surveys commuters on how they get around. Using these two tools, the city estimates there will be about 85,000 new rush hour trips every day by 2024, most of them by car.
Perhaps you are sensing one issue with these estimates: Basing future road usage on past behavior is always a stretch, even without a pandemic that completely upended commute patterns and reduced the amount people are driving at rush hour, possibly for the long term. To name just one very recent (and very consequential) example, the state estimated that around 130,000 people would use the Alaskan Way Viaduct replacement by 2030, and used that estimate to justify building an $18 million bypass tunnel and the surface-level waterfront highway that is now under construction. When the drivers didn’t arrive—prior to the pandemic, about 53,000 people drove through the tunnel daily, a number that plummeted to 40,000 in 2020—the state’s plan to use tolls to help pay for the tunnel fell apart.
It’s worth noting that the ITE’s predictions have come under significant scrutiny because they overestimate the traffic generated by new development—and especially new apartment buildings—substantially. One comprehensive study found that the ITE overestimated the trips generated by new development, on average, by 55 percent; for new multifamily buildings, the ITE overestimated trips by 108 percent. The city, in other words, could be assuming twice as much “impact” from new apartments, simply in terms of how many new trips they generate, as they have in reality.
Of course, not all trips are created equal—a solo driver has more impact than a single person riding a bus or biking to work, for example. The city’s plan attempts to address this by measuring how much physical space people using different transportation modes take up on the road. A driver, by this measure, takes up 180 square feet of space, whereas a person biking to work takes up 22.5 square feet, so the driver has about 8 times as much impact on the overall transportation system as someone who walks to work.
It’s easy to see why this measure is somewhat silly. It’s obvious that someone driving a 6,000-pound, gas-guzzling Land Rover—or a 8,500-pound electric Rivian!—contributes far more to the state of Seattle’s roads (and traffic) than a cyclist, whose space needs and physical impact are negligible in the first case and basically nonexistent in the second. (Also, bike lanes typically use space that would otherwise be used by heavier, more impactful cars—so wouldn’t they have a positive impact?) If eight cyclists are the equivalent of one vehicle, then it makes sense to assume an apartment building where almost everyone walks or rides a bike has the same impact as dozens of new lawn-locked single-family houses with two or three vehicles in the driveway.
And, of course, these estimates all assume that every new person has only a negative impact on the transportation system and the environment—ignoring the many positive impacts of living in the city rather than commuting into Seattle by car from a highway-dependent suburb.
Pedersen and Herbold have tried to rush their impact fee proposal through while they’re still on the council—an acknowledgement, perhaps, that this isn’t a priority for other elected officials. None of the people running for open council seats have identified impact fees as a campaign issue, and it’s possible, perhaps likely, that if the proposal doesn’t go forward this year, it will die from lack of interest.
But there are some pretty significant reasons not to push forward with a fee proposal before the end of the year. First of all, it’s pretty clear that the proposal is a bit half-baked. The list of projects the fee would help fund was developed by then-councilmember Mike O’Brien back in 2018, and it’s showing its age. The list includes some projects that have already been fully funded—the bus-rapid transit project on Madison Street, for example—and others that may now be outdated or lower-priority. In theory, the city could enshrine the project list in its comprehensive plan and then amend it list later, but why adopt a major change to the city’s growth plan without a public discussion of the projects a new impact fee would fund?
It’s debatable, for example, whether renters who live in a new building on Capitol Hill ought to be paying directly for improvements for freight trucks driving on East Marginal Way, which is one of many road improvements on the list of projects ostensibly impacted by new housing. And, as Councilmember Teresa Mosqueda noted last week, it’s unclear whether the project list represents an equitable distribution of improvements around the city, relative to the equity impacts of adding to the cost of housing in areas that may desperately need it.
“I want to make sure that… we look closely at whether or not there is an a disproportionate impact on equity or [Race and Social Justice Initiative issues that our city closely monitors” before adopting impact fees, said Mosqueda, who submitted a list of about a dozen questions about the proposal to the council’s central staff. “I understand the comments that were made” by Pedersen and Herbold “about how [outreach for this proposal includes] every stakeholder that has informed the pedestrian, bike, and transit plans, but that does not equal to me an RSJI equity analysis for this specific proposal.”
Indeed, Pedersen has waved aside concerns about outreach and engagement on his fee proposal by repeatedly pulling up a pie chart, based on undisclosed data, showing that 75 percent of people his office surveyed supported the proposal. Here it is:
Beyond the dubious project list, Pedersen and Herbold are trying to move the new fees forward at a pace they would never have allowed a proposal like MHA, which allowed slightly more density in exchange for new fees to fund affordable housing. Herbold, in fact, pushed for more process and deliberation before passing MHA (which she ultimately supported), and Pedersen made opposition to the program a centerpiece of his campaign for office, later hiring a homeowner activist who repeatedly sued the city to stop MHA as his legislative assistant. MHA went through years of deliberation before it even came before the council, followed by months of meetings and extensive outreach to every neighborhood in the city.
In contrast, Pedersen has made it clear he hoped to pass the comprehensive plan amendment, setting up a process to quickly pass impact fees, in the course of a couple of weeks. Now that that won’t happen, it will be up to the council to decide whether to consider the plan before he and Herbold leave. If the hearing examiner comes back with a ruling quickly, and sides with the city, Pedersen will have to provide 30 days’ notice of a new public hearing, which would push the proposal well into the period when the council will be debating the 2024 budget.
If the council decides it’s too busy with the budget to add changing the comprehensive plan to their schedule, it would push the debate into next year, when there’s a distinct possibility that no one will be motivated to bring it up again. Currently, housing construction is on a downward trajectory, thanks in no small part to the city’s slow permitting process, with just 441 master use permits last year compared to 975 in 2015.
Recently, the Puget Sound Business Journal announced that developer Barrientos Ryan backed out of plans to build a 300-unit “workforce housing” development along 15th Ave. W in Interbay, citing new requirements from the city that added more than $1 million in unanticipated costs. Instead of housing, the property will now be home to 20 new pickleball courts.