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ADOPT A RESOLUTION AUTHORIZING A PUBLIC FACILITY FEE REDUCTION PROGRAM
(Public Hearing Continued from November 3, 2015)
recommended action
RECOMMENDATION
Consider adoption of a resolution to implement the new Public Facilities Fee (PFF) program reduction discussed November 3, 2015.
It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the resolution.
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Summary
Consideration of this proposal is continued from the November 3, 2015 public hearing and regularly scheduled City Council meeting. The proposal would implement a PFF program reduction that maintains the existing fee waiver program, provides additional fee reductions for both single-family and multi-family projects in Stockton, offers even larger fee reductions in disadvantaged areas, waives PFF Administrative Fees and implements a local hire requirement. Future consideration of expanding the existing Down Payment Assistance Program was also discussed, but not included in the proposal. As requested by Council, staff developed and analyzed two alternatives to the proposal outlined on November 3, 2015.
The November 3 proposal would reduce fees to the point that an immediate General Fund subsidy would be required. The proposed fee reduction amount exceeds the fee levels collected for the Public Buildings, Street Improvements and Parks category and an immediate General Fund subsidy would be required to avoid contractual issues, jeopardizing debt financing arrangements or reducing current operations when attempting to increase development. The total impact of the proposal, including lost revenue for future improvements, would be nearly $20 million and the estimated immediate General Fund subsidy required would be $2.7 million. Additionally, an estimated $530,000 of available PFF fund balance would be spent to backfill lost PFF Administrative fees.
One alternative is to provide a smaller incentive for development in disadvantaged areas. If half of the additional incentives discussed on November 3 were offered the total impact, including lost revenue for future improvements, would be nearly $18.6 million and the estimated immediate General Fund subsidy required would be $1.3 million. An estimated $530,000 of available PFF fund balance would be spent to backfill the lost PFF Administrative fees as well.
Staff continues to recommend that any PFF reduction program implemented be limited to the amount available in the Public Buildings, Street Improvements and Parks category to avoid an immediate General Fund backfill. The final alternative analyzed would reduce PFF by 75 percent city-wide, and 100 percent in downtown and disadvantaged areas. The total impact of such a program, including lost revenue for future improvements, would be nearly $17.2 million. Although no immediate General Fund subsidy would be required, $530,000 of available PFF fund balance would still be spent to backfill the lost PFF Administrative fees.
For comparison, the Stockton Economic Stimulus Plan (SESP) was included in the chart comparing the various alternatives (Attachment A). As noted previously, the SESP PFF reduction would reduce fees by an additional $22.1 million. When combined with the existing fee waiver, which would continue under all proposals, the total lost revenue for future improvements would be $31.9 million. The estimated immediate General Fund cost would be $6.7 million and $530,000 of available PFF fund balance would still be spent to backfill the lost PFF Administrative fees.
It is important to note that the fee reduction program should be implemented as a percent reduction to particular categories and precise dollar amounts will vary by type of project and locale. An additional 60 days would be required after Council action to implement the changes. It is recommended that the existing PFF reduction program be continued until the new program becomes effective. Draft resolutions are provided for the proposal developed by Council November 3, 2015 and the staff recommended alternative.
Background
On November 3, 2015 Council considered 100 percent fee waivers city-wide, and additional fee waivers for disadvantaged areas. The proposed PFF reduction would incorporate the existing Economic Development Department Fee Reduction Program. Using a North Stockton single-family home example, certain fees for Public Buildings, Street Improvements and Parks are already reduced by $7,538 from $19,997 to $12,459. The current Council proposal would reduce the remaining $12,459 in this category city-wide, and offer an additional reduction of $3,115 ($12,459 x 25%) in disadvantaged areas.
The additional fee reduction for disadvantaged areas exceeds the amount of fees collected for Public Buildings, Street Improvements and Parks and would require General Fund backfill. As noted by staff and the City Attorney, reductions to the Utility, Pass Through/Other Agency, and Mitigation categories would create contractual issues, jeopardize debt financing or require General Fund subsidy for current operations. Any reduction above the amount suggested above should come from the Processing Fees category (amounts collected for the cost of plan check and inspection services), and a General Fund subsidy should be provided. Absent a General Fund subsidy, Community Development Department resources would be insufficient to perform plan check and inspection services in a timely manner and could increase construction costs because of delays. It is possible that the proposed level of fee reduction could also exceed the amount of Processing Fees due for a particular project, in which case the fee reduction program would be limited to the amount available as reductions to other categories creates difficulties. Additionally, staff determined upon further review that a waiver of all fees for Public Buildings, Street Improvements and Parks would also eliminate funding for PFF program administration. Appropriately calculating, collecting and accounting for PFF is necessary as long as there is a program. These costs would be funded with available PFF fund balance, and future consideration of reducing and restructuring these fees will be considered as part of the ongoing fee assessment effort.
Attachment A - Comparison of Proposals