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STOCKTON ECONOMIC STIMULUS PLAN UPDATE
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RECOMMENDATION
Per Council direction, an update on the Stockton Economic Stimulus Plan is provided 18 months after implementation. The report is provided for informational purposes only, and no Council action is required.
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Summary
On November 17, 2015, the City Council adopted a resolution to implement the Stockton Economic Stimulus Plan (SESP) to stimulate new development. The SESP program reduced certain public facilities fees with the goal of enticing more construction activity, which in turn would improve the local unemployment rate and jump-start the local economy. The fee reduction was limited to seven of the 13 Public Facilities Fees, totaling $19,997. Any larger reduction would have impacted fees which are obligated by bonds or immediately required environmental mitigation measures and would have resulted in the cost being covered by the General Fund. The program’s duration was set for 36 months from the date of Council adoption, with an update to Council to occur 18 months after program adoption. The SESP program applies to the first 1,000 single family and 500 multi-family unit permits. The limits apply citywide, and builders must comply with program requirements.
The SESP program went into effect on January 19, 2016, following the implementation of guidelines, processes, and configuration of the City’s permit management system to allow proper administration of the program.
Since the program's inception 18 months ago, a total of 303 single family homes and no multi-family homes were built under the SESP program. Throughout this same time period, 320 single family homes were built in total. Historical data, starting with Fiscal Year (FY) 2011-12, shows an increase from a total of 107 single family units per year to 181 units in FY 2016-17. More detailed information is included as a table in Attachment B.
Of the total number of single family permits issued over 18 months, 96 percent were issued under the SESP program. With half of the program time expired, 31 percent of the SESP fee reductions were utilized. Comparing the last full fiscal year before the SESP program, FY 2015-16, to the first full year of the SESP program (FY 2016-17) shows that permits for single family construction increased from 109 to 181 annually. It is not possible to say definitively whether the increase in construction was due to the SESP or builders took advantage of the fee reduction for already planned construction.
The report is provided for informational purposes, and there is no recommendation to modify the program at this time. Council has the option to maintain, modify, or terminate the existing program at a future Public Hearing.
DISCUSSION
Background
Stockton Municipal Code section 16.72.260, as adopted in 1988, established the authority to impose and charge public facilities fees for new development. Over the years, the City adopted several resolutions that increased fees, implemented fee reduction programs and extended the components of such programs. A historical timeline of the programs is detailed in the 2015-11-17-16-02 SESP Resolution (Attachment A).
On November 17, 2015, The City Council adopted the SESP program. The SESP program was based on a proposal submitted by the Building Industry Association (BIA) of the Greater Valley. The adopted program reduced the following Public Facility Fees (PFF) by 100 percent for applicants who comply with program requirements. Total fees of more than $57,000 were reduced by almost $20,000.
• City Office Space
• Community Recreation Centers
• Fire Stations
• Libraries
• Parkland
• Police Stations
• Street Improvements
The program requirements are as follows:
• The program applies to the first 1,000 single family and first 500 multi-family unit residential permits.
• Fees are reduced up to $19,997 or 100 percent of any of the PFF categories listed above, whichever is less.
• At least 50 percent of the workforce on a permit must reside within City of Stockton city limits to meet the Local Hire requirement. By the time of permit issuance, the builder must provide a list of all employees who work on a permit. The list must include the names and addresses of all employees, identifying which employees reside within Stockton City limits.
• Applicants are encouraged to work with the BIA who will coordinate with the Stockton Branch of the National Association for the Advancement of Colored People (NAACP) to facilitate the hiring of disadvantaged Stockton residents where an individual or firm is a member of one of the groups listed within the City’s Public Works Disadvantaged Enterprise Program.
• Monthly reporting by applicants of the total number of lots in their project, permits issued, the number of homes under construction and number of homes with a final permit.
• Construction must begin within six months of permit issuance unless an extension, authorized by state law and the local ordinance is approved.
• Under the SESP, a builder may receive no more than 20 building permits at any given time for each final map, or 40 citywide for builders in more than one subdivision. The builder must start and receive the first inspection for each permit within six months of the permit issuance unless the builder receives an extension as provided by state law and local ordinance. Permits in SB 535 disadvantaged areas are exempt from this paragraph.
• Failure to comply with the requirements of the program will result in the developer reimbursing the City the equivalent reduction of 100 percent of the fees detailed above. The reimbursement will be for each issued permit that was in a stage before final permit inspection during the non-compliant period, and developer/builder shall not be eligible to further participation in the program.
• Additionally, if the program expires, or the numerical count of 1,000 single family unit permits and 500 multi family unit permits is reached, or a developer chooses to not participate in the SESP program, or a developer is no longer eligible to participate in the program due to noncompliance with the local hire requirement of the SESP, the city will require payment of the above PFF fees in the full, unabated amount.
Present Situation
Presented below and in the tables on the following page are statistics from program inception through July 31, 2017.
Counts: A total of 320 single-family residential permits and 88 multi-family residential building permits issued within the City of Stockton. A report showing the monthly counts is included as Attachment B (SESP Summary Unit Counts for Issued Residential Permits). In this period, 303 single-family units qualified and took advantage of the program while there were no Multi-Family units (Table 1). Table 2 shows a breakdown by council district.
Historical data, starting with FY 2011-12, shows an increase from a total of 107 single family units per year to 181 units in FY 2016-17. Of the total number of single family permits issued over 18 months, 96 percent were issued under the SESP program. With half of the program, time expired 31 percent of the SESP fee reductions were utilized. Comparing the last full fiscal year before the SESP program (FY 2015-16) to the first full year of the SESP program (FY 2016-17) shows that permits for single family construction increased from 109 to 181 annually. It is not possible to say definitively whether the increase in construction was due to the SESP or builders took advantage of the fee reduction for already planned construction.
Table 1.
SESP vs. Non-SESP Permit Counts
|
|
SESP |
Non-SESP |
Total |
|
Single Family |
303 |
17 |
320 |
|
Multi-Family |
0 |
88 |
88 |
Table 2.
SESP Counts by Council District
|
|
SESP |
Non-SESP |
Total |
|
Council District 1 |
126 |
1 |
127 |
|
Council District 2 |
0 |
1 |
1 |
|
Council District 3 |
1 |
0 |
1 |
|
Council District 4 |
154 |
5 |
159 |
|
Council District 5 |
1 |
8 |
9 |
|
Council District 6 |
21 |
2 |
23 |
|
Total |
303 |
17 |
320 |
Summary of Distribution: The developers/builders are largely composed of the following: KB Home North Bay Inc., KB Home Sacramento Inc., Caresco Builders, and DBFA California (Florsheim Homes). About 90% of the single-family homes were built by these developers, with the remainder mostly by individuals or small builders local to the region. Below is a chart that depicts the distribution of SESP homes built since inception to July 31, 2017.
SESP Credits: The total amount of fee reductions issued thus far is $5,820,187, averaging $19,208.54 per unit. Below is a breakdown, by PFF, of the total reductions granted through July 31, 2017.
|
Fee Description |
Credit Amount |
|
City Office Space |
$ (140,800.50) |
|
Community Recreation Centers |
$ (145,021.50) |
|
Fire Stations |
$ (235,862.00) |
|
Libraries |
$ (271,953.00) |
|
Parkland |
$ (847,794.00) |
|
Police Station Expansion |
$ (177,891.00) |
|
Street Improvements |
$ (4,000,865.00) |
|
Grand Total |
$ (5,820,187.00) |
Compliance: All participants are currently up to date in submitting the monthly and quarterly reports as stipulated in the program requirements. There have not been any violations of program requirements as detailed in the program guidelines. Of the 303 single family residential permits issued, 173 units were in the Disadvantaged Areas as designated by the California Environmental Protection Agency, Office of Environmental Health and Hazards (OEHHA).
FINANCIAL SUMMARY
There is no direct financial impact related to this update. However, as noted above, PFF revenues for infrastructure categories included in the SESP have been reduced by $5,820,187.00 as of July 31, 2017. The reduced PFF collections will cause delays in amenities until resources become available.
Attachment A - 2015-11-17-16-02 SESP Resolution
Attachment B - SESP Summary Unit Counts for Issued Residential Permits