Item Number: {{item.number}}
City Council / Board of Directors
Public Hearing(s)
Meeting of: December 19, 2023
Submitted By:
Jenele Davidson, Deputy City Manager
Subject:
Development Impact Fees (DIF) and Capacity Charges Annual Review – Master Fee Schedule, Implementation Policy and Capital Improvement Plan Recommendation:
The Honorable City Council and Victorville Water District Board of Directors (District Board):
1. Open and conduct the Public Hearing;
2. Close the Public Hearing;
3. Adopt Resolution Nos. 23-100 and VWD 23-015, adopting an updated Master Fee schedule for non-residential DIF and Capacity Charges, City Council Policy No.
CP-23-02 to establish guidelines for implementation, superseding any prior resolutions and policies related to the same, and the associated Capital Improvement Plan.
Fiscal Impact:
There is no fiscal impact directly associated with the recommended action. If adopted as proposed, updated DIF and Capacity Charges will go into effect on March 1, 2024, as it relates to non-residential fees.
Residential DIF fees will be going into Year 2 of the phased implementation plan on January 1, 2024, as previously adopted in Resolution Nos. 22-050 and VWD 22-007.
Strategic Plan Goal:
Annual review and updating of the DIF and Capacity Charges Master Fee Schedule ensures the City is accomplishing Goal A: Financial Sustainability from the City’s current Strategic Plan. These incremental adjustments help ensure the City is collecting sufficient funds to fully mitigate the impact of new development in an amount sufficient to fund the needed investments in infrastructure, as outlined in the Capital Improvement Plan and in accordance with Goal E of the City’s current Strategic Plan. 3 4
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Background:
Development Impact Fees (DIF) are one-time fees assessed on new development to fund the cost of providing municipal facilities to serve the impact created by new development.
The authorization for a local jurisdiction to collect DIF and Capacity Charges exists through the enactment of California Government Code sections 66001 through 66025 (also known as the “Mitigation Fee Act” and sometimes referred to as “AB 1600” or “AB 602”). Additionally, under Victorville Municipal Code (V.M.C.) Section 16-5.01.080, development impact fees are applicable to all development in the City of Victorville.
The Mitigation Fee Act is premised on the concept that new development pays its own way or, put another way, new development must mitigate its own impacts on the City’s infrastructure. For the City to levy DIF, a comprehensive study must be completed to verify there is a reasonable relationship between the purpose of the fee, the fee’s use, and the type of development project on which the fee is imposed. Capacity Charges must also be studied to ensure that the charges do not exceed the estimated reasonable cost of the services and public improvements/facilities for which the charges are imposed and are of proportional benefit to the person/property being charged.
The California State Legislature passed AB 602 in 2021, which modified the Mitigation Fee Act and created new requirements relative to impact fees. Changes went into effect on January 1, 2022, including the requirement under California Government Code Section 66016.5 that a local agency adopt an impact fee nexus study before the adoption of an associated development fee. To meet these requirements, the City Council/District Board previously adopted the Nexus Studies for DIF & Capacity Charges and the associated Capital Improvement Plan under Resolution Nos. 22-045 and VWD 22-005 on June 7, 2022.
On June 7, 2022, the City Council/District Board also approved Resolutions Nos. 22-050 and VWD 22-007, adopting a Master Fee Schedule for DIF and Capacity Charges, City Council Policy No. CP-22-01 and a Capital Improvement Plan which collectively outline the DIF and Capacity Charge program, policy, fees and annual review process. As part of the annual review process, CP-22-01 established review of the Master Fee Schedule and application of the California Construction Cost Index (CCI), as published by the State Department, and review of the Capital Improvement Plan to ensure all DIF and Capacity Charge funded capital projects are accounted for. Residential DIF and Capacity Charges are in year two of the phased-in implementation plan and the CCI will be applied beginning in 2027, after the phased implementation plan is complete.
Certain residential single-family developments are grandfathered into the City/Board’s former DIF and Capacity Charges (those that existed prior to the new fees that went into effect on January 1, 2023), if they pull building permits prior to January 1, 2025 and have made significant progress, such as the project applicant making a final map submission to the City for plan check review; the underlying development is within a recorded Final Map (including a recorded Dash Map within an approved, unexpired Tentative Tract Map); or if a project is in the Final Map Approval Process, prior to June 30, 2022. However, if building permits are not pulled by January 1, 2025, the residential single-family 3 4
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development projects will be charged the current rates at the time the project moves forward in obtaining building permits.
Discussion:
It is important that the City/District periodically review DIF and Capacity Charges to ensure fees/charges are sufficient to mitigate the impacts of new development on the associated capital facilities and other improvements needed to maintain the existing level of service. The corresponding City Council policy and Capital Improvement Plan should also be reviewed annually.
For the Master Fee Schedule, the annual review process consists of applying the CCI to ensure sufficient fees are collected to complete projects when accounting for annual costs. The CCI index rate for July 2023-over-July 2022 from the State Department of General Services was 4.57%. This rate has been applied to all non-residential fees, as seen in Exhibit A to Resolution Nos. 23-100 and VWD 23-015 (Attachment A). By applying this inflation factor, the City is keeping pace with construction costs and will be less likely to subject developers to substantial increases in fees, as was the case when the Nexus Study was completed in June 2022.
Additionally, the City Council policy that guides implementation of the DIF and Capacity Charges is reviewed annually to ensure the policy is working as expected and that the City’s program continues to meet the requirements as defined in the Mitigation Fee Act.
The changes to the policy contained within proposed City Council Policy No. CP-23-02 are minor and include the following:
•Section II – Removed the introductory paragraph which referred to an effective date that was tied to the initial implementation of the DIF and Capacity fees in January 1, 2023.
•Section III - Modified the effective date for updated fees/charges from January 1 of each year to March 1 of each year to allow for the required 60-day waiting period before fees can become effective. This correction was needed as staff plans to bring this item to the Council/Board in December of each year for consideration. •Section VI - Removed the reference to “CRIA” as a geographical area that is exempt from DIF and Capacity Charges. When the policy was approved in June 2022, the Old Town Specific Plan and Community Revitalization Investment Authority (CRIA) geographical areas were largely similar. However, the CRIA has since been expanded to include various undeveloped properties throughout the City for which this exemption was not intended to be applied.
Lastly, the annual review of the Capital Improvement Plan allows the City to identify projects that have been completed, update project status with completion time frames and budget estimates and add new eligible projects. The Capital Improvement Plan is a requirement for AB 602 and is made available on the City’s website.
This year, the Capital Improvement Plan has been updated to include the following projects:
•Parks DIF: Land acquisition for the Sports Complex
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•Parks DIF: Civic Plaza & Police Station
•Parks DIF: Rectangular Field
•Parks DIF: New Walking Loop
•Roads DIF: New Traffic Signal at Nisqualli and Ninth Ave. •Roads DIF: New Traffic Signal at Stoddard Wells and Abbey Lane •Roads DIF: New Traffic Signal at Mojave and Mesa Linda •Roads DIF: Bear Valley Bridge Widening (City share of Apple Valley project) •Water Capacity Charges: Pipeline Area 28, MWA Turnout #5 If Resolution Nos. 23-100 and VWD 23-015 are adopted as proposed, the new City Council Policy No. CP-23-02 will supersede the prior policy and will become effective immediately, along with the Capital Improvement Plan. Non-residential DIF and Capacity Charges will go into effect on March 1, 2024. Residential DIF and Capacity Charges that were previously adopted under the phased implementation plan will become effective on January 1, 2024.
Staff recommends that the City Council/District Board adopt Resolution Nos. 23-100 and VWD 23-015, adopting an updated Master Fee schedule for DIF and Capacity Charges for non-residential development, the associated City Council Policy No. CP-23-02 to establish guidelines for implementation, and the associated Capital Improvement Plan.
Staff is available questions the City Council/District Board may have.
Attachments: A. Resolution Nos. 23-100 and VWD 23-015