PUBLIC COMMENTS
Item # 9
Opposition
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October 15, 2024
Victorville City Council
14343 Civic Drive
Victorville, CA 92393
Re: BIA Request for 30-day Pause To Consider Resolution of Intention to Establish a Community Facilities District No. 2024-01 to Provide City Services
Dear Mayor Becerra and fellow City Council Members,
On behalf of the Building Industry Association of Southern California San Bernardino County Chapter (BIA), we write to respectfully request a 30-day pause on considering any action regarding Agenda Item 9 Resolution of Intention to Establish a Community Facilities District No. 2024-01 to Provide City Services.
With your careful consideration, we urge no action be taken today on the following recommendations:
(1) Accept the petitions from the property owners requesting initiation of formation of Community Facilities District No. 2024 -01 of the City of Victorville (Municipal Services) (“CFD 2024 -01”) to finance certain ongoing municipal services; and (2) Adopt Resolution No. 24 -092, authorizing the intention to establish CFD No. 2024 -01, levy a services special tax, and set a Public Hearing date for November 19, 2024. We urge your support for additional dialogue to address conce rns regarding the wide divide between the city’s proposed new tax burden to Victorville residents of $525.35 per year with a 5% annual cost escalation increase or CPI in comparison to our analysis which resulted in a much lower tax of $292.59 per year with a proposed annual increase of 2% or CPI.
During the 30-day pause we request the formation of a working group to convene a series of meetings with City Manager Metzler, the petitioner, BIA and representatives of the High Desert Association of Realtors. Absent this collaborative dialogue the current staff report is woefully insufficient and does not provide the City Council with any meaningful input from key stakeholder s. While we support the city’s goals of enhancing public safety, it is also equally important to ensure the accuracy of the calculations to avoid adding an unjust tax burden on local residents. Specifically, the current study includes several flaws that deserve additional dialogue. We request a written response to the following concerns and to discuss with the proposed working group.
I. Flawed Home Price and Market Trend Assumptions
The City is calculating property tax revenues using a below market home price assumption of approximately $366,000 based on a weighted average of $263,775 per multi -family residential (“MFR”) unit and $482,545 per single family residential (“SFR”) unit from the City’s consultant. We recognize the city’s proposed tax calculations rely on the as sumption that 53% of the city’s future units are zoned as MFR and 47% of future units are zoned SFR based on the 2045 Housing Element. However, this is not the best methodology to calculate the proposed new tax burden. Instead, the City Council and staff should seek input from the working group experts regarding industry trends and utilize a market driven approach to guide the new tax burden calculations.
For example , per the City’s 2021 -2029 Housin g Element, there were approximately 14,250 SFR units constructed in comparison to approximately 1,500 MFR units developed in the last two decades, with NO MFR permits issued from 2015 -2020. Likewise, we are not aware of any MFR development from 2020 until now. We were informed by City staff on a call yesterday that there are 3 MFR projects that have been submitted to the City in the last year, however, we were not provided information on the scope or size of these projects. Despite the overwhelming evidenc e that MFR construction has represented a small fraction of home building activity the past two decades the proposed calculations artificially inflate the proposed tax burden by assuming 53% of current construction activity will consist of MFR projects.
We urge the City Council to provide additional time for the working group of industry experts to further elaborate on the land sale and project pipeline trends and consider a market driven alternative to the proposed 53% MFR and 47% SFR construction ratio which is devoid of the historic and current construction trends.
Furthermore, BIA recommends the working group review and discuss the data concerning newly constructed home sales in the last year which shows the average value for SFR units to be approximately $490,000 and we urge further study on the city’s questionable assumption of $263,775 per MFR unit.
Furthermore, we encourage further discussion by the working group to consider u sing a n alternative market driven construction ratio of 10% MFR and 90% SFR based on current and historical construction data. As a result, the weighted average home price would adjust to $467,000 which is in stark contract to the city’s below market weighted average home price estimate of $366,000.
II. Arbitrary adjustments in City Revenue Projections
The original analysis provided by the City on April 19, 2024 , used a 70% allocation of property tax, sales tax, and franchise fee revenues to offset Public Safety costs and resulted in the calculation of the new tax burden per home of $525.35. After conversations with City staff, they agreed to modify the allocation of costs between new and existing development as well as increase the assumed home value. We anticipated these changes would lower the resulting tax per unit . However, when the first revised analysis was provided by the City on October 1, 2024, the tax per unit was the same, as they had also arbitrarily reduced the allocation of revenues to offset Public Safety costs from 70% to 67.94% with no explanation .
Subsequently, we pointed out a calculation error in the first revised analysis which when corrected should have lowered the tax per unit. Unfortunately, once again a pattern emerged whereby upon receiving the second revised analysis the tax remained unchanged. We were informed by the City’s consultant that the allocation of revenues to offset Public Safety costs had been even further arbitrarily reduced from 67.94% to 63.13%, which once again kept the per unit tax at exactly $525.35. The BIA recommends the city maintain the original 70% allocation of property tax, sales tax and franchise fee revenues to reflect the current budget and welcomes continued dialogue of these concerns.
III. Flawed Annual Escalation
The City is proposing to implement an exorbitant annual tax escalation of 5% or CPI (whichever is the highest), which sets the tax burden on a path to a minimum 25% increase for residents in the next five years. The working group should discuss the unintended consequences of this punitive approach which will hurt working families and discourage new development. We were informed by City staff that this dramatic annual increase is proposed to account for any infla tionary increases in costs that are not captured in CPI. Over time these annual escalations will likely outpace the increase in costs, as a 5% minimum annual increase in costs in perpetuity is simply not sustainable or realistic for a City. Additionally, when disclosing taxes in a new community, the developers will be required to disclose the Maximum Tax regardless of what City Council approves to levy each year. Typically for Public Safety CFDs, the annual escalation is much lower than seen in the proposed RMA, and the most common escalation factor is the greater of 2% or CPI. Examples of cities with cost escalation policies lower than 5% are Lake Elsinore, Oceanside, Hesperia, Rancho Cucamonga, Perris. Many of these cities have no minimum increase.
IV. Housing Crisis Trends
Despite the rhetoric surrounding California’s Housing Crisis, the pace of housing production in Southern California is decreasing with many builders looking at moving production out of State. As reported by the Southern California News Group on August 29, 2024, developers “submitted permits for 15,109 housing units” in the Los Angeles, Orange, Riverside, San Bernardino and San Diego County region, which represents a 13% decrease year-over-year.1 This bolsters a July 9, 2024, OC Register article finding that in “Southern California, the median house price has jumped 45% since early 2020 and 183% since 2010.”2 It is abundantly clear that current housing approaches and policies have not resulted in significant new production, meaning supply remains woefully out of sync with demand.
Moreover, the Housing Crisis impacts every aspect of life in California and is discriminatorily holding back California’s economy.3 “On average, Black Californians see a larger chunk of their paychecks going to housing costs than any of the state’s other major demographic groups.” 4 “Latinos, comprising 39.5% of the state’s population, represent 68% of the housing insecure. The majo rity of housing insecure individuals reside in Southern California, with over 55% concentrated in Los Angeles, Orange, San Bernardino, San Diego, and San Bernardino counties, and Latinos account for 71.8% of this housing insecure population.” 5 Not only a re existing policies not producing new housing, but they are also disproportionally impacting our communities of color. With your support the working group can provide invaluable insights that ensure the proposed tax does not exacerbate these disturbing trends.
1 https://www.sgvtribune.com/2024/08/29/southern-california-homebuilding-permits-drop-13/ 2 https://www.ocregister.com/2024/07/08/la-oc-home-prices-10-times-greater-than-incomes-report-finds/ 3 http://calmatters.org/commentary/2024/09/california-economy-lags-other-states/ 4 Black Californians' housing crisis, by the numbers - CalMatters 5 https://www.lewis.ucla.edu/research/unveiling-latino-housing-insecurity-in- california/#:~:text=Qualitative%20data%20from%20literature%20reviews,68%25%20of%20the%20housing%20inse cure.
In conclusion, we respectfully request a 30-day pause on considering any action regarding Agenda Item 9 Resolution of Intention to Establish a Community Facilities District No. 2024 -01 to Provide City Services.
During the 30 -day pause we request the formation of a working group to convene a series of meetings with City Manager Metzler, the petitioner, BIA an d representatives of the High Desert Association of Realtors to discuss the city’s written response to the aforementioned concerns referenced in this letter .
There is no statutory deadline to proceed with Agenda Item 9 and a decision of this magnitude warrants an abundance of caution to ensure all the available information i s carefully considered before making a decision. We hope you support our request for further dialogue before taking any action.
Our goal is to collaborate with you through this working group to ensure we address the significant housing needs, strengthen the local economy and increase opportunities for families to prosper now and in the future. We look forward to working together and appreciate your consideration.
Sincerely,
Carlos Rodriguez,
Chief Policy Officer
Est. Population Increase: 86,124
General Fund Expenditures Operating Budget $ Per Capita % of Total Public Safety Services
Police Services 25,680,510$ 298$ 57% Fire Services 15,775,645$ 183$ 35% Code Compliance 3,325,485$ 39$ 7% Total Public Saferty Expenditures 44,781,639$ 519.96798$ 100% Increase in Public Services Expenditures 44,781,639$
General Fund Revenues - New Development New Homes Per New Home Totals Per New Home Totals Property Tax 1 2 24,467 382.01$ 9,346,645$ 539.39$ 13,197,133$ Property Transfer Tax 24,467 16.18$ 395,967$ 16.18$ 395,967$ Sales and Use Tax 2 24,467 369.11$ 9,031,014$ 409.25$ 10,013,242$ Franchise Fees (Combined) 2 24,467 129.46$ 3,167,498$ 143.54$ 3,512,042$ Measure P 24,467 435.46$ 10,654,393$ 435.46$ 10,654,393$ Code Compliance 24,467 20.47$ 500,880$ 20.47$ 500,880$ Total General Fund Revenues 1,352.70$ 33,096,397$ 1,564.30$ 38,273,657$ General Fund Impact New Population Per Capita Totals Per Capita Totals Expenditures 86,124 519.97$ 44,781,639$ 519.97$ 44,781,639$ Less: Applicable Revenues 86,124 384.29$ 33,096,397$ 444.40$ 38,273,657$ Balance to be Funded 86,124 (135.68)$ (11,685,243)$ (75.57)$ (6,507,983)$ Administration/Reserve/Contingency Expense @ 10% of Balance to be Funded (1,168,524)$ (650,798)$ Total to be Funded 86,124 (149.25)$ (12,853,767)$ (83.12)$ (7,158,781)$ CFD Tax Rate Factor Per Capita Tax Rate Per Capita Tax Rate Per Residential Unit 3.52 149.25$ 525.35$ 83.12$ 292.59$ Notes:
(1) City provided analysis assumes an average home value of approximately $366,718 and BIA analysis assumes an average home value of $467,000.
City Provided Analysis BIA Analysis as Adjusted
(2) Property tax, sales and use tax, and franchise fees in City provided analysis are based on a 63.13% allocation of revenues to offset public safety costs and BIA analysis uses a 70% allocation.
2021–2029 Housing Element
Chapter 2. Community Profile
2-12
Figure 2-9. Housing Type
2.2.2 Housing Type Trend
As depicted on Figure 2-10, single-family units have consistently represented the overwhelming majority of housing types over the last 20 years, while only approximately 1,500 multi-family units have been developed over the last 2 decades; the number of mobile homes has remained flat. According to City staff, historically, the development community has shown little interest in developing multi-family units in the City, particularly since the Great Recession. The declines in property values in the Victor Valley region were more pronou nced than in other parts of the region, like the Counties of Los Angeles and Orange. Lenders that developers rely on to provide financing have been hesitant to provide loans for multi-family projects in inland areas in the last 10 years due to the risk related to future recessions, which has resulted in no multi -family units being developed between 2015 and 2020.
Figure 2-10. Housing Type Trend
CA DOF E-5 Population and Housing Unit Estimates
FIGURE X. HOUSING TYPE
79.5%
0.8% 4.5%
10.7%
4.6%
54.4%
7.2% 7.5%
27.3%
3.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Single-Family Detached Single-Family Attached Multifamily, 2-4 Units Multifamily, 5+ Units Mobile Homes Percent of Total Units
Victorville (%) SCAG (%)
CA DOF E-5 Population and Housing Unit Estimates
FIGURE X. HOUSING TYPE TREND
16,457
4,284
1,757
21,731
4,494
1,730
29,406
5,512
1,737
29,987
5,819
1,743
30,720
5,819
1,758
0 5,000
10,000
15,000
20,000
25,000
30,000
35,000
Single-Family Residential (SFR) Multifamily Residential (MFR) Mobile Homes Housing Units
2000 2005 2010 2015 2020