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PUBLIC FACILITY FEE ANNUAL REPORTS FOR FISCAL YEAR 2022-23
recommended action
RECOMMENDATION
It is recommended that the City Council accept by motion the Public Facilities Fee Program Annual Report for Fiscal Year 2022-23 (Attachment A) to comply with State reporting requirements.
It is recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this motion.
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Summary
Under State law, cities are required to make available to the public an annual report on Public Facilities Fees (PFF). The fees are collected for the purpose of mitigating impacts caused by new development on certain public facilities. Fee revenues are then used to finance the acquisition, construction, and improvement of public facilities needed as a result of new development. State law prescribes the required elements of the report, outlines public notice requirements, and specifies that the City Council review the report. The City is required to publish the annual report within 180 days of the last day of the fiscal year. The Fiscal Year (FY) 2022-23 Annual Report was filed with the City Clerk’s Office on November 28, 2023 and made available for public review on the City’s website.
The combined available PFF fund balance as of June 30, 2023, is $52,446,778. The City programs PFF funds in its five-year Capital Improvement Plan (CIP) for eligible projects that meet the local infrastructure commitments. In some fee categories, the available fund balances are insufficient to cover all infrastructure commitments and future collections will be required.
DISCUSSION
Background
California Government Code Section 66000 et seq., known as the Mitigation Fee Act (“the Act”) and/or AB1600, requires the City make an Annual Report of fees collected to support City infrastructure publicly available. The Act spells out the fee information that must be provided in the Annual Report and specifies that the report is to be reviewed by the City Council at a regularly scheduled public meeting. As required by the Act, the annual reports are to be filed and made available to the public no later than 180 days following the last day of the fiscal year. The Fiscal Year (FY) 2022-23 Annual Report was filed with the City Clerk’s Office on November 28, 2023 and made available for public review on the City’s website. The City is required to review the information at the next regularly scheduled public meeting, at least 15 days after the information is made public.
The Act provides that PFFs may be enacted and imposed on development projects. The City found and determined that new development projects create the need for the construction, expansion, or improvement of public facilities within the City and create new permanent financial obligations. The City imposes PFFs as new development projects are approved. In some jurisdictions, PFFs are known as Impact Fees or Development Impact Fees.
Utilization of a PFF program allows for the allocation of improvement costs across eligible development projects. Absent a city-wide PFF program, improvement costs would not be apportioned, and the full cost of mitigation improvements would be borne by the first project that established the need for the improvement. Such an approach would be a barrier to development in some instances given the disproportionate costs to early development projects. These issues formed the basis of the City establishing its PFF program beginning with the 1990 General Plan and the establishment of the original fees in 1991. The 1990 General Plan established the growth patterns and policies, and the PFF program was established to collect impact fees to address facility impacts from those growth policies. The fees are collected to finance eligible public facilities and collected for specific purposes.
Present Situation
Annual Report Requirements
The Mitigation Fee Act requires that each Annual Report contains the following information:
A. A brief description of the type of fee in the PFF fund.
B. The amount of the fee.
C. The beginning and ending balance of the fund in the year reported.
D. The amount of the fees collected, and interest earned.
E. An identification of the public improvement on which fees were expended.
F. An identification of an approximate date by which the construction of future public improvements will commence, once sufficient funds have been accumulated (the City meets this requirement by including PFF funds in the CIP).
G. A description of each interfund transfer or loan made from the fund, the approximate date the loan will be repaid and the interest the account will receive.
H. Refunds made under the provisions of the Mitigation Fee Act.
The PFF report attached to this staff report (Attachment A) presents the required information for FY 2022-23. This report provides additional information (balance sheet and the previous years’ data) to be transparent and comprehensive.
Fee Revenues and Expenditures:
The City received $14.0 million in total revenues in FY 2022-23; a decrease of $11.7 million compared to the $25.7 million collected in FY 2021-22. The variance is primarily due to the decrease in Water Connection Fees, Wastewater Connection Fees, and Street Improvement Fees.
The largest fee types by source in FY 2022-23 were Delta Water Surface fees at $4.1 million, Wastewater Connection fees at $2.3 million, Regional Transportation Impact fees at $2.0 million, and Street Improvements fees at $1.5 million.
Expenditures in FY 2022-23 totaled $11.7 million as compared to $14.9 million in FY 2021-22. The largest expenditures are primarily from Street Improvements Fee and debt services in the Water Utility.
Selected Program Highlights
Street Improvement Program
The Street Improvements Impact Fee provides for traffic improvements necessary to accommodate increased traffic generated by new development.
In FY 2022-23, revenues into the Street Improvement Impact Fee Fund totaled $1.5 million, approximately $1.2 million less than FY 2021-22. Expenditures totaled $3.3 million, an increase of $0.9 million compared to FY 2021-22. The Fund is owed approximately $2.7 million ($2.4 million from the Community Recreation Centers and $320,054 from the Police Stations Fund) that will be repaid by using all available revenues collected to make annual payments per City Council Resolution 2018-08-21-1107.
The ending fund balance at the end of FY 2022-23 was $21.9 million, with approximately $9.6 million available for future capital projects and reimbursement agreements. The City has two reimbursement agreements for future infrastructure projects with outstanding balances of $10.5 million as of June 30, 2023. The Street Improvements Impact Fee section of the report contains the pertinent details.
Community Recreation Centers
The Community Recreation Centers Impact Fee provides for the construction and expansion of community centers as required by new development.
In FY 2022-23 revenues totaled $93,684, approximately $41,000 less than FY 2021-22. At the end of FY 2022-23 this fund had an outstanding interfund loan balance of approximately $2.4 million that is owed to the Street Improvement Fund. The outstanding balance will be repaid by using all available revenues collected to make annual payments per City Council Resolution 2018-08-21-1107.
Fire Stations
The Fire Station Impact Fee provides for new or expanded fire stations as driven by new development.
In FY 2022-23, Fire Impact Fee revenues totaled $175,240; a decrease of $112,646 compared to $287,886 in FY 2021-22. The fund has an outstanding PFF interfund loan balance owed to PFF Library Fund of approximately $1.3 million. Per City Council Resolution 2018-08-21-1107, the Fire Stations Fund is required to make annual payments to the PFF Library Fund by using all fee revenues until the balance is paid in full.
Library Facilities
The Libraries Facility Impact Fee provides for new libraries as required by growth and new development.
In FY 2022-23, the Fund collected $498,737 in total revenues, expended $3,049, and transferred out $1,286,966 towards the construction of the new Northeast Library branch. As of June 30, 2022, the fund has an outstanding PFF interfund loan receivable from PFF Fire Stations Fund of approximately $1.3 million and will be repaid in full by 2038. At the end of the 2022-23 fiscal year, the fund balance was approximately $4.4 million.
Police Stations
The Police Stations Impact Fee provides for expansion of police stations as required by growth and new development.
The Police Stations Fund received total revenues of $143,875 in FY 2022-23. As of June 30, 2023, the fund’s outstanding interfund loan balance owed to PFF Street Improvement is $320,054. The fund will make annual repayment using all revenues until the loan is paid off, per City Council Resolution 2018-08-21-1107.
Parklands (Park and Recreation Impact)
The Parkland Impact Fee provides for the acquisition of land and the development of regional and neighborhood parks due to growth and new development.
In FY 2022-23, the Fund received fee revenues of $97,124. As of June 30, 2023 the fund balance was approximately $7.3 million with $5.8 million reserved for CIP appropriations.
Air Quality
The Air Quality Impact Fee provides for the partial mitigation of adverse environmental effects and establishes a formalized process for air quality standards as growth and development require.
In FY 2022-23, Air Quality Impact Fees received a total of $771,829 in fee revenues as compared to $1,831,191 in FY 2021-22. In FY 2022-23, the fund incurred total expenditures of $875,059. At the end of FY 2022-23 fiscal year, the fund balance is approximately $7.0 million with $1.5 million reserved for capital projects and other obligations.
Supplemental Reports
The “Supplemental Reports” section of the attached Annual Report contains information pertaining to deferred PFF fees, PFF interfund loans, public improvement expenditure details, and the PFF five year budgetary expenditures.
FINANCIAL SUMMARY
This report is an informational item only. There is no financial impact associated with accepting the FY 2022-23 Public Facilities Fee (PFF) Annual Report.
Attachment A - PFF Program Annual Report FY 2022-23