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CBS News 8 - San Diego, CA News Station - KFMB Channel 8 | cbs8.com

City may have overcharged San Diego property owners on granny flat permits

It’s unclear how many people the city might have overcharged for impact and utility fees.
Credit: Zoë Meyers/inewsource
John Sewell-Thurston shows where a new granny flat is being constructed on his City Heights property, July 28, 2020.

SAN DIEGO — If you’re one of the hundreds of property owners who built a granny flat in San Diego since 2017, you might have been overcharged thousands of dollars in fees.

Two state laws, one that took effect in 2017 and one this past January, waived fees for some new granny flats to encourage building more affordable housing. But San Diego city officials won’t say if these fees have been waived for anyone, and the city hasn’t provided any records to inewsource showing compliance with these state law changes despite repeated requests.

An inewsource analysis of 280 granny flat permits issued since Jan. 1 found up to nearly half might have qualified to have water and sewer fees waived. The law waiving the utility fees took effect in 2017.

The other law that took effect in January eliminated fees for homeowners who build granny flats that are less than 750 square feet.

But because of San Diego’s incomplete record keeping on granny flat permits, it would take a thorough review of every one of these housing units permitted since 2017 to determine how many people were overcharged on one or both of these fees.

Homeowner John Sewell-Thurston thinks he was wrongly charged $3,585 for water and sewer fees on a granny flat he’s building in City Heights. While he doesn’t expect a refund, he said he hopes someone at the city or state level can tell him one way or another.

Credit: Zoë Meyers, inewsource
John Sewell-Thurston is shown outside his home in City Heights on July 28, 2020. He believes that he has been wrongly charged by the city for water and sewer fees for the granny flat he is constructing on his property.

Sewell-Thurston said he’s reached out to as many people and agencies as he can think of, including the City Attorney’s Office, Council President Georgette Gómez, Assemblymember and mayoral candidate Todd Gloria, the state Housing and Community Development Department and others.

“I still haven’t gotten a clear answer from anybody what the deal is,” he said.

He called the entire process of trying to work with the city to build a granny flat and provide affordable housing “a nightmare.”

“It's crazy. It's way more expensive than you'd think. And what still irritates the hell out of me is if in fact these fees were reduced — for who? Can they tell me that?” he said.

Representatives from Housing and Community Development and Gloria’s office can’t even agree on whether the state is investigating allegations of violating state granny flat law.

The city’s communications department has refused inewsource requests to interview people in the departments that oversee permitting and fees — Development Services and Public Utilities — saying the matter is now under review by the city’s lawyers.

City Attorney Mara Elliott’s chief of staff, Gerry Braun, said the office has asked the Public Utilities Department to conduct a review of Sewell-Thurston’s project.

“Of course, we don't order Mayoral departments about, we only advise them, and I've yet to hear that anything was done wrong at (Development Services),” Braun said in an email to inewsource. “But they're good people, and Elyse Lowe (the department director) is a true public servant. If they think they need to review their work, my guess is they will.”

Requests to Mayor Kevin Faulconer’s office for clarification have gone unanswered.

Who pays what and when

This would not be the first time San Diego failed to follow laws related to granny flats. A previous inewsource investigation found two city departments weren’t sharing information that allowed at least seven people to build granny flats and turn them into short-term rentals, a violation of city law.

It appears the city’s lack of documentation on granny flats is causing this latest problem. For example, the permits posted online don’t show the size of the new granny flat, and details about the construction are often vague.

Since 2017, state lawmakers have passed several bills to make it easier to build granny flats as a way to address the lack of affordable housing in much of California. Some changed when cities and utility companies can collect development impact and utility fees.

The impact fees are used to offset the cost of providing public services to a new development. Utility fees offset the increased use of the water and sewer services. To promote housing development, lawmakers eliminated these fees for certain projects.

Starting in January 2017, someone who converted a space within an existing residence — a garage or guest suite, for example —  into a granny flat should not have been charged any utility connection or capacity fees, said Jeff Barbosa, a spokesperson for state Sen. Bob Wieckowski, a Democrat from Fremont who sponsored the bill.

Wieckowski’s office wasn’t sure whether a new granny flat constructed above an existing garage would qualify for waiving the water and sewer fees. San Diego has issued at least 19 permits since January that fit this design, city records show.

And starting this year, impact fees are waived on new granny flats less than 750 square feet, while the fees are reduced for those that are larger, Barbosa said.

Todd Leishman, an attorney with Best, Best and Krieger, a Riverside-based law firm that handles municipal cases, co-wrote a blog post late last year warning cities about the changes coming to granny flats.

“Nearly every — if not every — city and county in the state will need to amend its (granny flat) ordinance in time to take effect before Jan. 1,” the post said.

No clear answers

Sewell-Thurston retired from the aerospace industry in 1993 and is now a freelance photographer. The 65-year-old bought his City Heights home with a detached garage in 1979.

Credit: Zoë Meyers, inewsource
John Sewell-Thurston is constructing a granny flat next to his home in City Heights, July 28, 2020. He believes that he has been wrongly charged by the city for water and sewer fees.

He and his spouse decided to convert and expand their garage into a granny flat to create an additional income stream and provide someone with an affordable place to live.

“Everyone complains about housing in California, and we felt that we could kill many birds with one stone by getting an income source, increasing the value of the property (and providing) affordable housing,” Sewell-Thurston said.

But the city isn’t making it easy to do that, he added.

When work began to convert and expand the garage to 350 square feet, the contractor found rotting wood and termite damage, he said. They decided to tear it all down and rebuild.

According to Barbosa in the state senator’s office, the planned expansion and new construction complicates Sewell-Thurston’s argument for a utility fee waiver. But the homeowner would still like a clear answer from the city or state.

His problems started in February, when he received the nearly $3,600 bill from the city for water and sewer capacity charges. He anticipated having to pay a substantial amount in fees, so he paid it without a second thought, he said. In early June, he saw a news report about certain fees being eliminated to spur construction of granny flats.

Feeling like he should have qualified for that fee waiver, Sewell-Thurston sent emails to as many government officials as he could. So far, no one has given him an answer on whether his project applies for the fee waiver.

Credit: Zoë Meyers/inewsource
John Sewell-Thurston expresses frustration while showing new trenches dug for pipelines to a granny flat on his property in City Heights, July 28, 2020.

A representative in Gloria’s Assembly office did send an email, saying the situation was being examined at the state level. It said:

“I tried to get an update from my contact at (Housing and Community Development). He informed me that: ‘Our compliance review team is conducting a full investigation into the allegations of violating state (granny flat) law. Until they complete their inquiry, they will not release information regarding the investigation status, in order to make sure that the Department’s findings cannot be challenged.’ I’ll contact you as soon as I receive the results.”

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But a representative with Housing and Community Development told inewsource no such investigation is underway. The department only provided the city of San Diego with technical assistance in early June. But that technical assistance did not include fees charged on granny flats.

Gloria spokesperson Nick Serrano said the office was told differently and couldn’t comment on the disagreement.

“We’re the intermediary between the constituent and the department,” Serrano said.

It’s unclear how many people the city might have overcharged for impact and utility fees.

San Diego officials could not tell inewsource how many permits were issued this year for granny flats less than 750 square feet and the types of fees collected. Those permits would be eligible for impact fee waivers.

As for utility fees, the details of the projects — listed on the city's permit activity reports — often aren’t clear enough to determine whether someone qualifies to have utility fees waived.

inewsource asked multiple San Diego officials to show that the city is complying with changes made in recent years to state granny flat laws and whether anyone has qualified for fee waivers. Four weeks have passed and the city still hasn’t provided answers.

Of the granny flat permits inewsource reviewed since January, it appears up to 125 converted an existing structure. That includes building on top of existing structures, such as a garage. Without more information from the city, it’s unclear how many of those people might have qualified to have their utility fees waived.

But the law doesn’t mention what happens if someone is overcharged. Leishman, the attorney with Best, Best and Krieger, said it might take legal action for someone to get their money back.

Have you built a granny flat in San Diego since 2017? We want to hear from you, including how the process with the city worked. Email reporter Cody Dulaney at codydulaney@inewsource.org.

inewsource intern Sofía Mejías-Pascoe contributed to this story.

 

RELATED: San Diego granny flats turned into short-term rentals - violating city law