San Jose, Santa Clara Union School District Continue Negotiations on North San Jose Development Fees

The latest offer in the ongoing negotiations between the school district, the City of San Jose, and developers has Mayor Chuck Reed of San Jose offering to kick in $75 million in redevelopment funds towards building schools to support the planned developments. The $75 million is in addition to the $58 million developers have agreed to pay. The district is projecting the need for 3 new schools, including a high school requiring 30-acres of land.

The cost of the schools is estimated at over $400M by the school district. Given land costs of roughly $40-45 psf, the cost of acquiring enough land for the high school alone will be close to $60M, so it is conceivable that the cost of acquiring the land necessary for three schools is up there. Still though, $400M seems like a strong number, but this is the government we are talking about so anything is possible.

If the city and the school district are unable to come to an agreement, the school district intends on getting the support it needs from the community through the ballot initiative it is pushing. If successful, the initiative would slap a $30,000 per unit tax on new development in the area, and would raise $12.20 per unit from existing owners.

At $30,000 per unit, that is a very significant number, particularly if developers have to contend with construction prices continuing to rise, and BMR (below market rate) requirements which are imposed on them. Many developers have claimed that the additional fees would put a lid on new development. The reality is that development will more likely than not continue, land owners will simply just need to lower their price expectations as developers reflect the per-unit fee on their development proformas.

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