Misconceptions Fuel Non-Profit Opposition to Crucial Muni Funding Reform

The city's proposed reforms on transportation fees would end a non-profit exemption for major developments like hospitals and university campuses, but opposition is stirring from smaller organizations who seem to believe they'll be affected. Photo: THE Holy Hand Grenade!/Flickr

With any increase in the number of people living and working in San Francisco comes an added strain on the city’s streets and transit system. To account for that, San Francisco collects fees on new development — with an exception carved out for just about any non-profit organization. That means that even massive developments like hospitals, university campuses, or museums — which generate thousands of daily trips — may pay nothing to help the city’s transportation agencies accommodate them.

That would change under a city-led effort to reform the way San Francisco collects and distributes transportation revenue, but city officials say they’ve met with unexpected opposition from small non-profit organizations based on misconceptions about who would have to start paying fees. The fact is that most non-profits would not pay the one-time fee under the proposal.

The debate is expected to culminate at a Board of Supervisors hearing on December 4 on changes to the city’s Transit Impact Development Fee (TIDF). The board routinely approves TIDF updates, but this one is more significant because it would be used as a stepping stone toward the proposed Transportation Sustainability Fee (TSF). The TSF is expected to replace the TIDF in 2014 as part of the Transportation Sustainability Program (TSP), a broader effort to reform the way the city plans and funds transportation projects with a focus on improvements for transit, walking, and bicycling.

Championing the effort is Supervisor Scott Wiener, who says that the TIDF reform will provide crucial funding for Muni while leaving the vast majority of non-profits unaffected.

“City Hall rarely puts its money where its mouth is in terms of funding Muni, and we know that Muni has a $100 million annual operating structural deficit, and that leads to inadequate maintenance, not enough vehicles, and all of the other things that reduce Muni’s reliability,” Wiener told Streetsblog. “The updated TIDF, and ultimately the TSP, is going to be a critical stable source of funding. We have this broad non-profit exemption that was put into the original TIDF which is something of an anomaly because non-profits typically pay other impact fees, and I don’t think it makes any sense to exempt particularly larger non-profit projects like hospital projects and large private schools or university campuses from the fee.”

To help clear up any misconceptions circling around non-profit and housing organizations about who would pay the fee, Wiener’s office produced a Frequently Asked Questions sheet [PDF], which explains that the vast majority of non-profits would remain exempt:

Who will pay TIDF under these changes?

Anyone who:

- Has a non-residential development over 5,000 square feet AND
- Increases the net square footage of the current building by at least 800 square feet AND
- Doesn’t change the building use from a high-trip generating use (like retail) to a low-trip generating use (like industrial)

Who doesn’t have to pay the full TIDF?

Anyone who:

- Is a non-profit (proposed) or small business with a development under 5,000 square feet OR
- Is building affordable housing OR
- Is building a residential project of 20 units or less OR
- Doesn’t increase the square footage of the current building OR
- Doesn’t build the maximum allowable parking spots OR
- Changes the use from a high-trip generating use (like retail) to a low-trip generating use (like industrial)

Any one of the above factors will either exempt a project from TIDF or make them eligible for up to 100% in TIDF credits.

“We’ve met with a number of social service providers,” said Wiener, “who have been very pleased once we clear up the misconceptions and understand that when you do real estate development, whether it’s for-profit or not-for-profit, there are traffic impacts, there are transit impacts, and that an impact fee can be appropriate.”

Leading the opposition is Ron Smith, Senior Vice President for Advocacy for the Hospital Council of Northern and Central California, who says that 140 non-profit organizations have rallied against the proposal. Smith gave Streetsblog a list of talking points against the proposal that is being distributed by the San Francisco Human Services Network, an association of over 110 non-profits. The document claims that the amount of new revenue generated would “be burdensome on individual nonprofits, while providing just a drop in the Muni budget.” It does not include any information clarifying which organizations would be required to pay the fee.

“Why is transit more important than the medical, mental, spiritual, or educational needs of the city?” Smith said. “I don’t understand why the organizations that provide those services should be paying for transit.”

Without prompting, Smith denied that any of the hospitals he represents are currently planning any expansions in San Francisco that would be affected by the fee (California Pacific Medical Center, he noted, is negotiating a development deal with the city under which it’s likely to pay more for its planned expansions than the updated TIDF would require). “What we’re concerned about is the number of non-profit organizations that care for vulnerable San Franciscans after they leave the hospital,” he said. ”I don’t think non-profits should be taxed, period.”

SF Transit Riders Union spokesperson Robert Boden said organizations that rely on Muni to bring a significant number of new riders to their institutions should pay for it. “Muni has served hospitals, universities, and private schools for 100 years,” he said. “It’s sad to see those institutions turn their back on Muni.”

Of the more than $630 million the TSF is expected to generate over 20 years, city staffers say 20 percent is expected to come from non-profit developments (half of which would come from hospitals, according to Smith), and that forfeiting that revenue could undermine the benefits of instituting the TSF.

Wiener said legislators are considering a compromise that would raise the exemption limit to include non-profit projects of up to 20,000 to 25,000 square feet. ”Just to make clear that we’re not trying to impact smaller non-profit projects,” he said. The proposal already includes a grandfather clause for non-profit development projects until January 2014 to avoid charging developers who may already be planning projects without anticipating the fee. It’s also worth noting that the TSF, if instituted in 2014, would be expanded to cover large housing developments, but that housing would still be completely exempt from the updated TIDF until then.

“This is really a test for how committed we are to ensuring that Muni has enough stable funding to meet the needs of the city right now,” said Wiener. “We need to prioritize Muni’s reliability.”