DATE:
February 1, 2022
TO:
Mayor and Council Members
FROM:
Nils Bentsen, City Manager
BY:
Rachel Molina, Assistant City Manager
Casey Brooksher, Director of Administrative Services
SUBJECT:
Development Impact Fee Update
RECOMMENDED ACTION
It is recommended that the City Council adopt Resolution No. 2022-01, which authorizes the reducing of the current discounted Development Impact Fees (DIF), in the DIF categories of Fire Suppression Facilities, Vehicles, & Equipment, Police Facilities, Animal Control Facilities, City Hall Facilities, Records Storage Facilities, Drainage Facilities and Transportation Facilities that will amend the fees to Single Family Residence/Multi-Family/Office/Retail sites per 1,000 square feet (SF), Industrial sites per 1,000 SF, and Hotel/Motel sites per room.
BACKGROUND
Government Code Section 66000, enacted by the State of California in 1987, enables cities to establish development impact fees for the purpose of mitigating the cost of additional municipal facilities as a result of new development. It is appropriate for municipal governments to periodically evaluate their fee structures and conduct studies to determine whether the fees collected are an adequate representation of costs incurred. On May 08, 2018, David Taussig & Associates (DTA) completed the nexus study, which utilized project information, demographic information, and industry accepted assumptions.
The nexus study calculated the maximum amount that can be charged as a Development Impact Fee for each type of land use based on the capital project needs list. The City Council may elect to set the fee at or below this maximum amount. Table 1 illustrates the maximum DIF fee allowed by the approved nexus study.
The DIF nexus study was presented to the City Council during the May 15, 2018 meeting. Upon careful consideration, the City Council discounted the maximum rates, which is reflected in Table 2. When comparing Table 1 (maximum rate) to Table 2 (adopted rate), each category (single family residence (SFR), multi-family, commercial/office/retail, industrial, and hotel/motel) was discounted from the nexus study maximum. Table 3 demonstrates the percentage reduction (discount) for each category when compared to the maximum rate.
This discounting of rates means that the City must identify other funding sources for projects identified in the DIF nexus study.
ISSUES/ANALYSIS
There are substantial infrastructure expansion needs in Hesperia to accommodate growth in previously undeveloped areas. There are numerous large scale industrial projects west of Interstate 15 currently in the development process. The area has little infrastructure and the City is heavily reliant on DIF for expansion. As shown in Table 3 above, industrial, along with commercial/office/retail and hotel/motel, receive a larger discount than that of SFR and multi-family. The City’s infrastructure needs will always outpace its ability to fund all identified needs. As a result, any discount of DIF results in a marked impact to the delivery timeline of improvement projects.
Across the City, additional infrastructure needs and Capital Improvement Projects have been identified as funding priorities. One such project is the Main Street Widening and Aqueduct Construction Project, which is included on the list of projects slated to receive future funding from San Bernardino County Transportation Authority (SBCTA). Like the Ranchero Road Widening project, SBCTA will provide partial funding, with the City responsible for funding 59% of the project. With the current DIF rates, the City may not have adequate funding for the Main Street Widening and Aqueduct Construction Project when the SBCTA funding becomes available.
To ensure adequate DIF is collected to fund crucial Capital Improvement Projects, staff recommends reducing the discount of DIF rates on SFR, multi-family, industrial, and hotel/motel. This reduction of discount allows for the City to keep pace with inflationary increases, while allowing for increased capacity in critical areas. At this time, there is no change being proposed to commercial. If approved, table 4 summarizes the recommended rate by dollar value, while Table 5 shows the percentage comparison.
FISCAL IMPACT
Development Impact Fees are an important source of revenue that allows the City to pay for the expansion of infrastructure projects triggered by new development. Revenue will fluctuate based on building activity; a component of the annual budget is an estimate of construction permits issued. By reducing the discount, the City will be in a better position to provide much needed expansion of infrastructure.
ALTERNATIVE(S)
Provide alternate direction to staff.
ATTACHMENT(S)
Fee Summary Memorandum prepared by David Taussig & Associates Resolution No. 2022-01
City of Hesperia STAFF REPORT City of Hesperia STAFF REPORT City of Hesperia
STAFF REPORT
City of Hesperia
STAFF REPORT
Staff Report to the City Council
Development Impact Fee Update
February 1, 2022