DATE: April 18, 2023
DEPARTMENT: PUBLIC WORKS DEPARTMENT
FROM: DAVID JACOBS, PE, PLS, DIRECTOR
BY: ADRIANA ROBLES, PE, CFM, CITY ENGINEER
LYNN MAU, PUBLIC WORKS ASSISTANT
TITLE: CITY DEVELOPMENT IMPACT FEE ANNUAL ADJUSTMENT
RECOMMENDED MOTION:
A motion to approve a Resolution increasing City Development Impact Fees by 4.9% effective July 1, 2023.
EXECUTIVE SUMMARY:
City Council is requested to approve a resolution adjusting the City development impact fees by 4.9% which will become effective July 1, 2023. The increase is based on the Engineering News Record (ENR) construction cost index (CCI) increase over the last year, which is consistent with the fee ordinance.
BACKGROUND:
The City imposes fees on development to fund improvements to capital infrastructure and facilities required to accommodate and service ongoing development (Development Impact Fees).
Appropriately adjusted Development Impact Fees are a benefit to the community and to Developers alike. The public benefits by being able to improve or expand facilities as necessary to accommodate growth. Developers benefit by being able to mitigate certain impacts caused by their project on a fair share basis. No developer is required to solely mitigate a large impact caused by cumulative development. In other words, there is no single developer to construct a major interchange project, build a new fire station, or upgrade a major sewer trunk main. Developers are also able to mitigate many impacts of their project identified through the CEQA, without lengthy and expensive study. A fee program that is not appropriately adjusted, does not allow for the proper mitigation of impact due to growth.
Article V, Section 9-40 through 9-50 of the Salinas City Code, defines the scope of these fees. Section 9-42(b) of the Code allows Development Impact Fees to be adjusted annually to account for the fluctuation in construction costs. The industry standard for determining the fluctuations in construction costs is the Engineering News Record (ENR). The “construction cost index” (CCI) as published by the ENR is based on a combination of labor rates and material costs, which are most reflective of construction costs averaged among 20 major metropolitan areas around the United States. Code Section 9-42(b) specifically states “The development impact fee levels may be changed in accordance with the percentage change in the ENR index from January 1 to January 1 of each preceding year, but in no case shall the indexing increase or decrease in development impact fees allowed by this section fee exceed that shown in the ENR index.” Attached to this report is a copy of the ENR Construction Economics summary for January, which provides background of how the index increased 4.9% between January 1, 2022 to January 1, 2023.
Exhibit A lists the current and proposed development fee schedules for impacts to City infrastructure, including parks, street trees, storm sewers, sanitary sewers, and traffic. Exhibit B lists the current and proposed development fee schedules for impacts to public facilities, such as fire, police, library, and recreation, and impacts to park facilities.
Finance Committee
City staff presented the Development Impact Fee Schedule and City-Wide Fee Schedule to the Finance Committee at its March 7, 2023 meeting. The Finance Committee unanimously approved recommending to the City Council approval of a resolution increasing City Development Impact Fees by 4.9% effective July 1, 2023.
Outreach
Chamber of Commerce. City staff provided the Development Impact Fee Schedule and City-Wide Fee Schedule to the Salinas Valley Chamber of Commerce via email on March 3, 2023. Staff is scheduled to meet with the Government Relations Committee on April 12, 2023 at its monthly meeting.
Salinas United Business Association. City staff provided the Development Impact Fee Schedule and City-Wide Fee Schedule to the Salinas United Business Association (SUBA) via email on March 3, 2023. SUBA board meeting for March 27, 2023 was canceled. Staff received an email from SUBA director, Alejandro Chavez on March 27th, stating that the executive board had no comments on the proposed annual adjustments.
Development Community. City staff provided the Development Impact Fee Schedule and City-Wide Fee Schedule to members of the development community including Future Growth Area developers via email on March 7, 2023. The email provided the proposed adjustment along with the anticipated public meetings and business association meetings. As of the March 28, 2023, no comments had been received.
CEQA CONSIDERATION:
Not a Project. City of Salinas has determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) pursuant to Sections 15378 and 15061(b)(3).
STRATEGIC PLAN INITIATIVE:
Updating Development Impact Fees to match the fluctuating cost of construction is consistent with the Council Goals of Investment Strategies/Risk Management, Operational Efficiencies, and Public Safety by investing in existing facilities and infrastructure, reducing City expenditures to address impacts due to growth, and by providing adequate funding to additional need for policing and emergency medical services due to growth.
DEPARTMENTAL COORDINATION:
Public Works staff has consulted with other City Departments to develop the recommendation herein, including Administration, Finance, and Legal. Should the City Council approve the recommendation, Public Works will continue to collaborate with these departments, along with Community Development.
FISCAL AND SUSTAINABILITY IMPACT:
Increasing fees proportionate with the ENR construction cost index allows revenues to keep pace with construction cost inflation to minimize or eliminate the impact on the General Fund. As a consideration of the possible impacts COVID-19 had on our community, Council did not increase Development Impact Fees for the fiscal year 2019-2020. Fee increases for the past five years (F.Y. 2017-2018 – 2021-2022) have been 3.3%. 3%, 0%, 2.1%, 8.0%, respectively.
An evaluation of the adequacy of the Development Impact Fees for public infrastructure and traffic development impact fees will be undertaken concurrently with the General Plan update to ensure the fees are adequately covering the costs. The Public Facilities Impact Fee Nexus Study developed by Wildan Financial Services in 2020 provided an update to public facilities and park fees.
ATTACHMENTS:
Resolution
ENR Construction Economics Summary
Exhibit A – Public Infrastructure Fee Schedule
Exhibit B1 – Public Facilities Fee Schedule
Exhibit B2 – Public Facilities Fee Schedule for Residential Development Exhibit C – Statement of Revenue and Expenditures for Development Impact Fees Page | 2
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