HomeMy WebLinkAbout06/04/1991, L-1 - COUNTY-WIDE IMPACT FEES MUTING AGENDA
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990 Palm Street/Post Office Box 8100 • San Luis Obispo, CA 93403.8100
May 31, 1991
LIAISON REPORT
TO: Council Colleagues
FROM: Penny Rappa
SUBJECT: COUN'T'Y-WIDE IMPACT FEES
As your representative to this subcommittee, I would like to report the following update:
As you will remember, the County (with the help of a consulting firm) is developing a plan
for financing future improvements in various areas by implementing a county-wide
development fee.
The plan has been presented to all cities, piece by piece, over the last few months. We
have met with each new chapter. Ken and I, with input from various staff members, have
reviewed the material presented and made appropriate comments. We have continuously
stressed the fact that these county-wide fees may affect our own future plans for
development fees. We have given examples of where the City has already helped fund
some improvements (i.e., City-County Library) and the equity problems that might arise.
I have included the summary section of the plan for your review. It is our understanding
that in the near future additional workshops will take place and then public hearings.
This has been a difficult process for us, as very little time was given to review each chapter,
but we have tried to express concerns relevant to the City.
If you would like more information or have any questions, please ask me or Ken.
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CHAPTERI
INTRODUCTION & SUMMARY
County facilities provide service for the benefit of county residents and employees, the
service population. As the population increases, so does the demand for County
facilities. As developers build new homes and businesses, the County must provide
proportional amounts of infrastructure to serve it to maintain existing facilities standards.
This report documents the amount and cost of new capital facilities required to serve
new development through the year 2010, and reviews funding alternatives.
Several events during the past ten years have undercut the financial capacity of local
governments to build infrastructure: passage of Proposition 13, difficulty passing bond
initiatives, and severe reductions in federal and state assistance. Since Proposition 13,
property taxes have been inadequate to fund capital needs; and have been generally
insufficient for on-going operations and maintenance expenses at pre-Proposition 13
levels of service. As an immediate response to their funding crisis, cities and counties
throughout California cut back services, deferred maintenance, and slashed capital
investment. Generally, this holds true for San Luis Obispo County.
As a longer-term response, most cities and counties are shifting the burden of financing
the capital costs of additional infrastructure from tax revenuei'and general obligation
bonds to new development. This shift has primarily been accomplished through the
imposition of public facilities fees within city boundaries, also known,as development
impact fees.. Some fee programs address only a few specific facilities, such as sewer, fire,
or storm drainage, while other'municipal fee programs are comprehensive, requiring
developers to pay for all additions to municipal facilities needed to accommodate new
development.
As a result of wide-spread imposition of development fees, the Stafe Ugislature passed
AB 1600 which lays ground rules for imposition and on-going administration 6f impact
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may 10, 1991 - . Page 1-1
Chapter I Introduction & Summary
fees. The law, which became effective in January 1989, requires local governments to
document the new between the amount of new development and the facilities that.will
be built to accommodate it. The legal requirements restrict how local governments may
impose and use impact fees. But they have also made local governments less vulnerable
to litigation and have given developers a more predictable environment in which to
build. The principle of "nexus" was established by the Nollan vs. the California State
Coastal Commission, 107 S. Ct. 3141- (1987). Nexus requires that the fee amount
mitigate only those impacts new development creates for additional infrastructure to
serve it.
It is important to distinguish between a fee for public facilities.financing and a tax. Fees
must conform to the conditions imposed by the Nollan decision and AB 1600 and are
used. exclusively to fund the, capital costs of new facilities. In addition, fees only require
action by the elected governing board of a city or county to be imposed. Taxes, on the
other hand, may be used for either capital or operating and maintenance costs, and tax
increases generally must be approved by the voters. Consequently, it is critical in the
documentation for any impact fee program to demonstrate that the fee is not greater
than the cost of facilities to accommodate new development to avoid being challenged as
a tax.
In contrast to most cities.in the state, California counties have been far less aggressive
imposing comprehensive fees that will fund the full costs of all additional infrastructure
serving new growth.;. Increasingly, however, counties are pursuing impact fees as a viable
means of accommodating.new;development. Therefore, as a funding alternative, impact
fees are.calculated for the County service areas included in this report.
As will be explained below, a comprehensive county-wide program for development fees
is more complex than an equivalent municipal program. To provide a clear
understanding of this complexity, this chapter discusses the following topics:
-- May 10, 1991-- - _ _ ._ Page 1-2
Chapter I Introduction & Summary
• Process of Fee Determination
• Summary of Facilities Costs and Proposed Fee Schedules
• Implementation and Administration
• Collection and Disbursement
The introduction is intended to provide a general understanding of the concepts and
methodology used to design the specific fees. The succeeding chapters each contain a
detailed analysis of the specific costs and assumptions involved in the calculation of each
group of facility fees.
Process of Fee Determination
The design of a development fee program follows a five step process: (1) Selecting a
time period (and area of development; e.g., city limits); (2) Projecting new development;
(3) Identifying the facilities to.accomrngdate new development; (4) Estimating their cost;
(S) Selecting an appropriate-and equitable!means to allocate costs among new
development.
(1) Time Period - The determination of development fees begins with the selection
of the time period over which population and employment-growth will be
measured. The County's master-plans and the official population and economic
forecasts are central to the impact fee study. The it is'convenient to have
the time period aligned with these documents. The County's adopted forecasts
are projected to at least the year 2010, and many department master plans
forecast facility requirements out to 2010. Hence, the planning period for this
report is 1990 to 2010. - - - —
(2) Growth Projection - The requirements for new facilities are based on forecasts by
the planning departments of the County and the seven cities in the county. It is
projected that county-wide population and employment will reach approximately
--- —. May 10, 1991 Page I-3
Chapter I Introduction & Summary
299,600 and 104,100 by the year 2010, respectively. The unincorporated
population and employment is estimated to reach about 120,600 residents and
approximately 29,000 workers by 2010. The projections of new development are
discussed in Chapter 11 and Appendix A.
(3) Facilities to Accommodate Growth - The determination of the quantity of new
facilities required to serve the forecasted population growth requires the adoption
of standards. These standards establish the minimum level of service for existing
and future county infrastructure. Standards are often stated in terms of a
department's,staff per capita or some amount of facilities per capita (e.g., acres of
park land). The amount of new facilities that new development must fund is
calculated according to the projected population growth.
In most cases, the County can adopt its own standards that reduce, maintain, or
increase the present level of service being provided to the existing population. In
some cases, however; the standards are mandated by state or federal regulations
(e.g. minimum number of jail cells with single bunks). New development cannot
be held accountable for higher standards than the current population provides for
itself; thus, if present facilities are not up to a chosen standard, the County may
establish a higher standard only if. the County funds the necessary improvements
to.its existing facilities.. In a number of cases, department master plans
recommend higher standards thancurrently exist. Appendix B of this report
discusses total facilities needs, including those that would result in.higher facilities
standards.and therefore cannot be funded by public..facilities fees.
(4) Estimating Cost of Facilities - Each department provided cost estimates .for the
new facilities it will require through the year 2010. Careful review was given to
the determination as to which facilities, and their costs, were appropriately
included as part of the development fee program.
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' Chapter I Introduction & Summary
(5) Allocating Total Facility Costs - There are three steps required to formulate an
equitable allocation of the capital costs for county infrastructure: (a) the cost of
remedying existing deficiencies must be separated from the financing of facilities
to accommodate new growth; (b) costs for county-wide services (e.g., criminal
justice system) must be distinguished from county services provided only in the
unincorporated areas (e.g., sheriffs patrol); and finally, (c) costs for new facilities
must be distributed among different types of development (e.g., residential, retail,
etc.).
The first step separates the cost of bringing existing infrastructure up to standard
from the amount calculated to fund improvements to accommodate new growth
out to the end of the forecast period. The amount required to cure existing
deficiencies cannot be included in development fees. Thus, the capital investment
for a single facilitythat both remedies an existing deficiency and provides
additional capacity to accommodate growth must be allocated according to the
shares that benefit each group. For example, a county might build a new 20,000
square foot jail for $10 million. In order to reduce the current overcrowding, a
county might need to construct 5,000 square feet, leaving 15,000 square feet to jail
the forecasted increase in inmates through 2010. Development fees could provide
$7S million and the remaining $2.5 million would come from other sources,
perhaps the county's general fund or a one-time federal grant. If the entire
project were being financed with bonds, new development could not be made
responsible for more than three-quarters of the debt service.
The second allocation divides the cost for new facilities that will benefit growth
county-wide versus growth exclusively in unincorporated areas (e.g., sheriffs
patrols in unincorporated areas versus county-wide jails for all inmates). A
County service delivered exclusively to unincorporated areas will be charged in a
separate fee to development specifically in those areas.
May 10, 1991 - - - Page 1-5
Chapter I Introduction & Summary
The final allocation distributes the cost of new facilities that will serve growth
among five land use categories (Le., single-family residential; multi-family
residential; office; retail; and industrial). For most types of facilities, development
fees for residential projects are based upon an average number of residents per
dwelling unit for each land use type, and non-residential projects are charged on
the average number of employees per 1,000 square feet. Traffic impact fees are
based on trips generated and are differentiated more finely among land uses.
Summmy of Faality Costs and Proposed Fee Schedules
The three tables below summarize the facilities cost and fees necessary for the next
twenty years of new development. Table I-1 presents the cost of facilities that will serve
forecasted growth out to 2010. Note that this table does not include facilities needed to
improve existing standards or correct deficiencies. .
Table I-2 presents a summary of the proposed county-wide fees that would be charged to
each type of land use. These fees apply to all new development that will occur county-
wide including development within the seven cities. Table I-3 presents a summary of the
proposed fees paid by new development that will occur only in the unincorporated areas
of the county. Consequently, unincorporated area development will be responsible for
both the county-wide and unincorporated area fees.
May 10j- 1991-- -- - - --_ .. - - - - _ Paige I-6
' Chapter I Introduction & Summary
TABLE I-1
COST OF FACILITIES TO ACCOMMODATE GRowrH
(Millions of 1990 Dollars)
County- Unincor- Total
County Facilities wide porated
Fire $ 0. $ 8.1 8.1
General Government 11.0 6.2 17.2
Jails & Other County-wide
Sheriffs Facilities 14.3 0 14-3
Law & Justice 9.8 0 9.8
Libraries 9.5 0 9.5
Health Services 4.1 0 4.1
Parks & Recreation 15.2 38.6 53.8
Roads TBD' 0 TBD'
Sheriffs Patrol &
Investigation 0 1.6 1.6
- Regional Transit 0.7 0 0.7
Fee Administration 1.6 1.4 3.0
TOTAL 66.2 55.9 122.1
To be determined.
Source: San Luis Obispo County and Recht Hausrath & Associates.
May 10, 1991 - - Pae 1-7
Chapter I Introduction & Summary
TABLE I-2
COUNTY-WIDE PUBLIC FACmims FEES
LAND USE CATEGORIES
RESIDENTIAL NON-RESIDENTIAL
Single Multi-
Familyi Familyt Office2 Retail3 Industrial'
General Government $270 $154 $330 $198 $142
Jails 349 201 426 256 183
Law & Justice 240 138 293 176 126
Libraries 339 193 200 120 86
Health Services 101 58 124 74 53
Parks & Recreation 1,278 730 NA NA NA
Roads s s s s s
Transit 17 10 21 13 9
Fee Administration 65 37 35 21 15
TOTAL $2,659 $1,521 $1,429 $858 $614
Fees per dwelling unit.
Z Fee charge per gross thousand usable square feet. Includes all development with more than 2.50
employees per 1,000 square feet.
3 Fee charge per gross thousand usable square feet. Includes all development with 2.50 to 1.67
employees per 1,000 square feet. -
4 Fee charge per gross thousand usable square feet. Includes all development with less than 1.67
employees per 1,000 square feet.
5 To be determined.
Source: Recht Hausrath & Associates
May 10, 1991 — Page I-8
Chapter I Introduction & Summary
TABLE I-2
UNINCORPORATED AREA PUBLIC FACILITIES FEES
LAND USE CATEGORIES
RESIDENTIAL NON-RESIDENTIAL
Single Multi-
Familyl Family' Office2 Retail3 Industrial'
Fire $678 $387 $836 $502 $359
General Government 445 254 . 543 326 233
Parks & Recreation 1,414 808 NA NA NA
Sheriffs Patrol 111 63 137 82 59
Fee Administration 66 38 38 • 23 16
TOTAL $29714 $1,512 $1,554 $933 $667
Fees per dwelling unit.
2 Fee charge per gross thousand usable square feet. Includes all development with more than 2.50
employees per 1,000 square feet
3 Fee charge per gross thousand usable square feet. Includes all development with 2-% to 1.67 .
employees per 1,000 square feet.. -
' Fee charge per gross thousand usable square feet. Includes all development with less than 1.67
employees per 1,000 square feet
Source: Recht Hausrath & Associates.
Implementation and.94:h71i7i3tmti01Z
A small part of the-cost of supplying the facilities to accommodate development consists
of the documentation, administration and implementation expenses of the fee program.
An estimate of 25 percent of all fees collected appears to be reasonable for these costs.
The County is therefore justified in adding a 2.5 percent surcharge on all fees collected
to cover these overhead costs. .The actual expenses incurred will be monitored and
compared with this estimate;.the fee will be adjusted as necessary to insure that'excess
funds are not collected.. Experience shows administrative costs decline over time as the
May 10, 1991 Pdge I-9
Chapter 1 Introduction & Summary
responsible department becomes more proficient at processing permits and annual fee
updates become more automatic.
The County will undertake annual and longer-term (perhaps five-year) reviews of its
facilities fee program. The annual review will verify that the assumptions on which the
fees are based remain generally applicable; it will also involve adjustments for inflation.
The longer-term reviews will allow for re-examination of previous assumptions with
regard to growth forecasts, development trends, facilities needs, annexation, inflation,
land costs, etc. Such reviews will help attune long-range infrastructure planning to the
County's changing needs and ensure that the County is proceeding with remedying its
current deficiencies.
The actual implementation and administration of an impact fee program will involve _
adopting new procedures, training personnel, tracking,facility costs and accounting for.
fee revenues. In addition, County staff will be frequently confronted with particular
situations in which they must interpret the program's criteria and render special
judgements. A few examples include determining what type of building permits do or do
not require fee payment (e.g., residential remodeling), fees for temporary uses (e.g.
model homes), conversions of property from one type of land use to another (e.g., retail
to office space), and the timing and method of updating the cost assumptions and
inventory of additional infrastructure needed to serve growth. Furthermore; the
accounting involved in the program is likely to require more attention than a municipal
fee program does because of the added complexity of the county-wide fee program
compared to fees collected by cities.-
Many
ities:Many cities implementing comprehensive fee programs (as well as specific traffic, park,
and public safety fees) have adopted administrative guidelines that provide staff and the
development community with guidance during the initial implementation and on-going
operation of the program.- The guidelines are intended to maintain consistent standards
May 10, 1991 _ _ Page 1-10
• Chapter 1 Introduction & Summary
regardless of city personnel turnover or updates to the fee program. Administrative
guidelines will be prepared and continually updated as implementation proceeds.
Collection and Disbummunt
Impact fee revenues for each service area will be collected in a separate trust account,
and interest earned on fund balances will be credited to that account. Funds will be
transferred from that account to specific accounts for construction as needed to finance
the facilities required to serve new development. These facilities are summarized in
their respective, chapters and Appendix B, and in greater detail in specific master plans.
The County's capital improvement program will'document the actual phasing and
location of new facilities.
May 10, 1991 Page 1-11