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APPROVE STOCKTON ECONOMIC STIMULUS PROGRAM TIME EXTENSION AND INCREASE THE PERMIT LIMITATIONS FOR PROJECTS IN NON-DISADVANTAGED AREAS
recommended action
RECOMMENDATION
Per City Council request to the City Manager, the Building Industry Association of the Greater Valley (BIA) proposal to consider changes to the Stockton Economic Stimulus Plan (SESP) is placed on the agenda for discussion and potential action.
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Summary
The BIA submitted a written request to the City Council on May 18, 2018 requesting consideration of changes to the existing program. Specifically, the BIA requested to:
1. Extend the expiration date of the SESP from December 31, 2018 to December 31, 2020; and
2. Increase the numerical permit limitations on a per subdivision basis from 20 to 30 and increase the numerical permit limitations per builder on a citywide basis from 40 to 80.
On November 17, 2015, the City Council adopted the SESP to stimulate economic growth by lowering the cost of residential 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 7 of the 13 Public Facilities Fees, totaling $19,997. Any larger reduction would have impacted fees which are obligated by bonds or would have resulted in a cost to the General Fund. The program’s duration was set for 36 months from the date of Council 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.
It was hoped that the economic benefits of home construction would offset the lost PFF revenue intended to provide community amenities. Although the waiver program was not expected to overcome prevailing economic forces, it was speculated that it could accelerate development activities that were likely to occur. An update regarding program outcomes was provided to Council on November 3, 2017 consistent with the requirement to provide information 18 months after program adoption, and more recent information is presented here. With approximately six months remaining in the program, approximately half of the single-family fee waivers and none of the multi-family fee waivers were utilized. There was a slight increase in the annual construction rate of new single-family homes, but the goal of accelerating the construction of 1,000 new homes is far from realized. Furthermore, it is not possible to say definitively whether the increase in construction was due to the SESP or if builders took advantage of the fee reduction for already planned construction. As of May 31, 2018, the SESP reduced fee collections by approximately $8.3 million since the adoption of the program in January 2016. If continued, the reduced PFF collections will further delay public infrastructure until resources become available. Council requested that the BIA request be presented for consideration and potential action.
DISCUSSION
Background
On November 17, 2015, the City Council adopted the SESP program (Attachment A - Resolution No. 2015-11-17-1602). The adopted program reduced certain 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. The specific fees reduced include:
• 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 Building Industry Association of the Greater Valley (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.
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.
Present Situation
City Council requested that this item be presented in response to a request by the BIA (Attachment C). The BIA’s request includes (1) Extending the expiration date of the Stockton Economic Stimulus Program which reduces certain public facilities fees from December 31, 2018 to December 31, 2020; and increasing the developer’s permit limitations in non-disadvantaged areas to 30 per subdivision and 80 citywide.
The following statistical data was prepared to inform on the current program. The information provided are statistics from January 2016 through May 2018.
Counts: A total of 561 single-family residential permits and 254 units of 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, 507 single-family units 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 29 months, 90 percent were issued under the SESP program. With approximately six months left of the program, 51 percent of the SESP fee reductions were utilized. Comparing the last full fiscal year before the SESP program (FY 2015-16) to the current numbers for FY16-17 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 if builders took advantage of the fee reduction for already planned construction.
Table 1.
SESP vs. Non-SESP Permit Unit Counts
|
|
SESP |
Non-SESP |
Total |
|
Single Family |
507 |
54 |
561 |
|
Multi-Family |
0 |
254 |
254 |
Table 2.
SESP Counts by Council District
|
|
SESP |
|
Council District 1 |
200 |
|
Council District 2 |
0 |
|
Council District 3 |
36 |
|
Council District 4 |
204 |
|
Council District 5 |
3 |
|
Council District 6 |
64 |
|
Total |
507 |
Summary of Distribution: The developers/builders are largely composed of the following: KB Home North Bay Inc., KB Home Sacramento Inc., and DBFA California (Florsheim Homes). About 70% 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 May 31, 2018.
SESP Credits: The total amount of fee reductions issued thus far is $8,302,922. Below is a breakdown, by PFF, of the total reductions granted through May 31, 2018.
Table 3
|
Fee Description |
Credit Amount |
|
City Office Space |
$ (201,044) |
|
Community Recreation Centers |
$ (207,071) |
|
Fire Stations |
$ (336,611) |
|
Libraries |
$ (388,311) |
|
Parkland |
$ (1,208,736) |
|
Police Station Expansion |
$ (254,130) |
|
Street Improvements |
$ (5,707,019) |
|
Grand Total |
$ (8,302,922) |
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 507 single-family residential permits issued, 176 units were in the Disadvantaged Areas as designated by the California Environmental Protection Agency, Office of Environmental Health and Hazards (OEHHA).
FINANCIAL SUMMARY
As of May 31, 2018, the SESP resulted in reduction of fees by approximately $8.3 million since the adoption of the program in January 2016. If continued, the reduced PFF collections will further delay public infrastructure (facilities identified in table 3) until resources become available.
The current Fee Schedule includes a category for participants of the SESP that indicates the exempt fees. If no action is approved and the program expires at the end of year, the Fee Schedule will be restored to the original categories prior to the inception of the SESP, per Resolution number 2015-11-17-1602. Regardless, if the SESP is continued or not, the 50% PFF reduction to the non-residential sector will remain in the fee schedule and is not included in the request from the BIA.
Attachment A - Resolution No. 2015-11-17-1602
Attachment B - SESP Summary Unit Counts for Issued Residential Permits
Attachment C - Building Industry Association of the Greater Valley Letter