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ACCEPT PUBLIC FACILITY FEE ANNUAL REPORTS FOR FISCAL YEAR 2017-18
recommended action
RECOMMENDATION
It is recommended that the City Council accept by motion the Public Facility Fee Program Annual Reports for Fiscal Year 2017-18 (Attachment A) to comply with State reporting requirements.
It is further 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 to finance public facilities, collected for specific purposes and intended to mitigate the impact of development. State law also 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 2017-18 Annual Report was filed with the City Clerk’s Office on December 28, 2018, and made available for public review.
The combined available PFF fund balance as of June 30, 2018, is $37,404,224 as provided in Attachment B. The City programs PFF funds in its five-year Capital Improvement Plan (CIP) for projects that meet the local infrastructure commitments. The available fund balances are insufficient to cover all infrastructure commitments due to the low level of collections, and future collections will be required.
DISCUSSION
Background
California Government Code section 66006, known as the Mitigation Fee Act (“the Act”), 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 City is also required to review the information at the next regularly scheduled public meeting, not less than 15 days after the information is made public.
The Act provides that PFFs may be enacted and imposed on development projects. The City has 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 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 public facilities and collected for specific purposes.
Per the City’s settlement agreement with the Business Industry Association of the Delta, staff presented the PFF Annual Report to the Development Oversight Committee on January 17, 2019. Edits were implemented into the report based on feedback received at the meeting.
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 2017-18. This report provides additional information (balance sheet and the previous years’ data) to be transparent and comprehensive.
Revenue
Attachment C summarizes the total PFF fee revenue received in fiscal years 2016-17 and 2017-18 by fee type.
The City received $14.7 million in total revenues in FY 2017-18; an increase of $8.3 million over the $6.4 million collected in FY 2016-17. The increase is due to increased construction activity, particularly in the industrial sector. Nearly all categories of PFF fees were up by more than 37% from FY 2016-17.
The largest fee types by source in FY 2017-18 were Street Improvements at $3.8 million and Wastewater Connection fees at $2.4 million.
Expenditures in FY 2017-18 totaled $7,428,662 as compared to $1,471,163 in FY 2016-17 (Attachment D). The increased spending is primarily due to the acquisition of the Waterfront Towers office building ($1 million PFF contribution) and $5.7 million in transfers out to the Debt Service Fund by the Delta Water Supply Surface Water Connection fee to pay debt service on water bonds.
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 2017-18, revenues into the Street Improvement Impact Fee Fund totaled $3.8 million, and expenditures totaled $230,225. The Fund also received $1.1 million in loan repayments. In FY 2016-17 revenues totaled $1.2 million, and expenditures totaled $281,534. The ending fund balance at the end of FY 2017-18 was $23.2 million.
Through the end of FY 2017-18, the City had entered into five different Street Improvement Reimbursement Agreements with outstanding balances as of June 30, 2018, of $10,395,873 for future infrastructure projects. The Street Improvements Impact Fee section of this document contains the pertinent details.
Community Recreation Centers
The Community Recreation Center Impact Fee provides for the construction and expansion of community centers as required by new development.
At the end of the FY 2016-17, this Fund owed $3,898,508 to the Street Improvement Fund and Capital Improvements Fund. Over the last five years, this Fund generated average annual revenue of approximately $36,000. In August 2018, City Council approved a loan repayment plan via Resolution #2018-08-21-1107. The plan included payment of $308,442 to the Street Improvement Fund using the available fund balance and wrote off the Capital Improvements Fund loan of $991,738. At June 30, 2018, the outstanding interfund loan balance was $2,622,257. The remainder will be repaid over the next 20 years using all available revenues in the Fund.
Fire Stations
The Fire Station Impact Fee provides for new or expanded fire stations as driven by new development.
The Fire Impact Fee showed improvement in FY 2017-18 with total revenues of $243,555 compared to $121,327 in FY 2016-17. In FY 2017-18, total expenditures were $33,999. Annual revenues have averaged approximately $173,433 over the last five years.
This Fund has outstanding interfund loans to the Street Improvement Fund and the Libraries Fund in the amount of $1,886,490 after the repayment approved by Council resolution #2018-08-21-1 107, which totaled $703,899. Of this amount, the Fund paid $563,616 to the Street Improvements Fund, and $140,283 to the Libraries Fund. The remaining interfund loans payable balance as of June 30, 2018, is $1,886,490. Of this amount, the Fund owes $40,165 to the Street Improvement Fund and $1,846,325 to the Libraries Fund. The repayment of these loans will be made over the next 20 years using all available revenues in the Fund.
Library Facilities
The Libraries Facility Impact fee provides for new libraries as required by growth and new development.
In FY 2017-18 the Fund had collections of $288,657 and capital project expenditures of $29,996. The Fund also received loan repayments of $143,283 (discussed above). At the end of the 2017-18 fiscal year, the fund balance was $9,370,062. The Fund is owed $1,846,325 from the Fire Stations Fund that will be repaid over the next 20 years.
The CIP earmarks most of the fund balance to construct a new Northwest Branch Library.
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 revenues of $251,960 in FY 2017-18 and had expenditures of $14,146. Annual revenues have averaged nearly $152,000 over the last five years.
This Fund has an outstanding interfund loan of $1,028,032 to the Street Improvement Fund after repaying $234,284. Repayment will occur over the next 20 years using all available revenues in the Fund.
Parklands
The Parkland Impact fee provides for the acquisition of land and the development of regional and neighborhood parks.
In FY 2017-18 the Fund had collections of $174,907 as compared to $283,074 in FY 2016-2017. There were no expenditures in FY 2017-18. The fund at June 30, 2018, was $6,880,827. The CIP commits this balance to several future park projects.
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.
Air Quality Impact Fees total revenues in FY 2017-18 were $1,392,069 as compared to $164,813 in FY 2016-17. In FY 2017-18, total expenditures were $219,842. At the end of FY 2017-18 fiscal year, the fund balance was $3,779,400.
Deferred Impact Fees and Interfund Loans
The “Supplemental Reports” section of the attached Annual Report contains information regarding deferred PFFs (accounts receivable balances) and interfund loans representing borrowing between City government funds. Per the City’s Administrative Guidelines for the PFF Program, the City has a fee deferral program and the total fees deferred under this program as of June 30, 2018, were $204,678.
FINANCIAL SUMMARY
This report is an informational item only. There is no financial impact associated with accepting the 2017-18 Annual PFF Report.
Attachment A - PFF Annual Report FY17-18
Attachment B - PFF Available Fund Balances
Attachment C - Total Impact Fee Revenues
Attachment D - Total Impact Fee Expenditures