Sales taxes drop. Traffic fees rise. Wednesday night at the city council - City Beat - citybeat's Blog - Bakersfield.com

Jun 24, 2009 at 07:06 PM : They're...

They're back...it's 7:21.

Closed session action:

Nothing to report.

Now, traffic impact fees. Lots of homebuilders here...David Cates, Matt Towery, Roger McIntosh (consultant), Bob Decker (of the local homebuilder's association, the group angling like it's gonna sue), etc

Jun 24, 2009 at 07:06 PM : Also here: Craig Pope...

Also here: Craig Pope (county roads-master) and some other government types.

Tandy is presenting the by-now-familiar history of the fees....will pass baton to Raul Rojas for another now-familiar review of the proposal. Everyone here has been through this mutliple times by now.

Jun 24, 2009 at 07:06 PM : Again, the most...

Again, the most interesting dynamic underlying the fee issue is that it puts the Thomas/Abernathy clan at odds with developers.

It is written (yes, you can pronounce that in deep movie-voice style) that the council will pass these tonight. The city and county need the plan in place to get the federal Thomas roads money...$630 mill for Bakersfield.

And again, the arguments on both sides are already public.

The fallout, if any, will be down the road (no pun): with a possible lawsuit. And, more, could developers turn against Scrivner/Weir/Sullivan in future elections?

Jun 24, 2009 at 07:06 PM : Rojas: The impact-fee...

Rojas: The impact-fee program is expected to provide 61 percent of the region's $3 billion transportation network.

More than $1.9 billion, in other words, from the traffic-impact fees.

That's by far the single largest source of funds.

I've written previous on the fees, but if you missed it, in brief they'll go to $12,870 per house. Builders pay these when they pull the permit, so that's paid in advance. Current fee levels stand around $7k-$9k in the city. The county already adopted the new rates, so tonight is the final step to get everything in place for the metro area.

Jun 24, 2009 at 07:06 PM : Rojas finishing up:...

Rojas finishing up: Without the plan, hundreds of millions in federal road moneys at risk, including stimulus funds and money already spent (about $200 mill).

Now the public hearing.

Bob Decker, HBA, is first, in opposition.

Decker: Building industry being asked to fund $2 billion in road funds for the city...there is no Plan B...you're gambling on a housing recovery while simultaneously standing in its way...

Decker says the 35,000 lots vested under the old fees...will expire...(editorial note: he's not specific as to why...those lots have roughly 8 to 10 years at old levels)...

Now Decker is reciting the things the HBA has been saying in its letters, public records requests, comments, etc: The nexus is messed up, accounting for the fee program is flawed, the list of projects is flawed, it needs an oversight body...

(editorial note: the accounting issue is interesting; Decker got 2 inches of paperwork from city when he requested required annual accounting of the fee fund. The county, by contrast, gave him a tidy 3-page document)

Walt McNeil, (sp?) the HBA's attorney, is now up

Jun 24, 2009 at 07:06 PM : McNeil bombshell...

McNeil bombshell accusation:

Let me be candid: Your impact fees have been mismanaged for 17 years.

That was after he told them, referring to his request for the required annual accounting, that what he got back was "basically junk."

Two inches of miscellaneous pieces and parts of financial reports...

None of it meets the legal requirements for annual accounting, he told the council.

The legal penalty for improper accounting is having to pay back all of the fees collected over 17 years..,.roughly $50 million so far, he says...

Can you say lawsuit?

Matt Towery, local homebuilder, now up.

Jun 24, 2009 at 07:06 PM : Towery has lost all of...

Towery has lost all of the equity in his land. Socialist government. New campaign to compete with foreclosures is working.

Now you want to raise fees...raise taxes...he tells them.

The big rich developers...look around...they're all gone...

You could triple the fees and still not raise enough...

You will break us if you double fees now...

Jun 24, 2009 at 08:06 PM : The 15-minute comment...

The 15-minute comment period is up. Council grants another 15 minutes.

Doug Hunter of McMillin Homes up.

Towery, the local face, presents probably the most wrenching face for the mostly Republican council. They're going to raise taxes on a local businessman. Raise taxes! And put him out of business. Towery is a compelling and sympathetic character they probably all know from Rotary.

Now Jerry Pledger (sp?), a local contractor. Decisions you guys make...you're in a tough spot...but so are we...at least look at it from our eyes again...people trying to hold on for all we're worth...

Jun 24, 2009 at 08:06 PM : Now a local concrete...

Now a local concrete contractor...missed his name...says he's never seen it as bad as it is now.

He's saying he wished the $630 million had never come. If it hadn't we wouldn't be here right now, he says.

I buy steel concrete, plastics, sand,...tons of things that keep our economy moving.

If it wasn't there we wouldn't miss it (the Thomas money). Can you do with $400 million? Save the housing industry in Bakersfield.

He hires his workers to mow his lawn so they can buy food...these are concrete workers...I feel horrible...I bend over backwards to make sure my men can pay their bills..

Help us pay our bills. That's all I ask.

Now anyone in favor?

Seeing none, public hearing is closed. Council comment, Scrivner first

Jun 24, 2009 at 08:06 PM : Scriv asks Tandy if...

Scriv asks Tandy if staff wants to respond to comments...Tandy asks for more direction...back to Scriv...

(Tandy was mentioned in anger by Matt Towery, who said essentially if Towery wasn't able to build under the new fee plan someone else would figure out a way to do it).

Scriv: It's been a grueling process for us...this issue and these decisions have only become more and more difficult...

(this is so not going to cut it...)

Scriv: Agonized more over committee decision than when we passed fee in 2008 ...

He says most difficult piece: why are we raising fee in down economy?

And, it really comes down to our ability to provide the fed gov with a plan that works so we can receive federal funds. Not just Thomas Roads...which is about $400 mill...

I would like Mr Rojas or Mr Tandy once again to convey to public why this action is necessary now...

Tandy: First, under environment increasinly subject to CEQA challenges (environmental lawsuits...)

We have to have transportation plan and mitigation program so when those challenges are raised we can say, no, we've done our due diligence etc

(this argument: we're raising fees to help you! is also so not flying)

Tandy: We are rapidly advancing through with our freeway and roads program...state and Thomas monies...those actually reduce (development's share)...

Jun 24, 2009 at 08:06 PM : Tandy still: In about...

Tandy still:

In about 4 years will need to issue bonds to match the majority of the program...history of long-term collections...will eventually be restored

In the short term there are in fact 35,000 lots that can be built on (with old fees)

At 2,500 units per year, significant number that can be built on...

Now Rojas: My comments more technical...

In all years since doing programs, since 1992, this is probably the best look that we've taken at the program...what's going to happen to our road system

KernCOG, CalTRANS, two conusltants involved...

Most complete look at our trafffic model we've ever done...might be disputed by others...but it really is very complete.

Couldn't mitigate traffic with the old program...

It does integrate all the funding from the federal program..and realistic view of state funding in the future...

Jun 24, 2009 at 08:06 PM : Ginny Gennaro, city...

Ginny Gennaro, city attorney:

New fee is legally defensible. Old fee not adequate.

We have not had adequate TIF, which means our environmental document is deficient...

Scriv now back to 35k lots..at end of year 2015, roughly half will still have old fee locked in?

Rojas: Yes that's correct. (if they request extensions)

Scriv: regarding Mr Towery...go after big developer make them pay for it....Scriv brings up the PG&E surcharge on everyone...that vote was as difficult as the traffic impact fee vote...every citizen is paying

(this is prior ground...again, no sympathy points being scored here)

Jun 24, 2009 at 08:06 PM : Tandy is again back to...

Tandy is again back to the annual accounting awards the city gets...

Now he is saying the HBA kept asking for more and more and ended up with what they got.

25 years of financial excellence award...

(This still begs the question of whether the city prepared the required annual accounting specifically for the impact fee program, as required by law; this can be met in a few ways but so far it appears this could be one stinky mess)

Ginny G: says she has copies of county's response to McNeil's letter which was about the same as the city's

Jun 24, 2009 at 08:06 PM : Couch now making...

Couch now making comments.

A couple comments go to absolute heart of issue...Mr Decker said....gambling on housing rebound while standing in way of it...Tandy said something to effect of...need 5 yrs of collection data...or underwriters do...

So, we ought to try everything we can to have high level of revenue collection,.

HBA has opinoin, staff has opinion, don't think we'll ever get closer...

Couch wants to talk about ways to increase revenue...wants council to consider...12,870 fee...if you divide into thirds...4,290 dollars...if allow builder to pay when pull permit..third at certificate of occupancy...take a third, some type of assessment on home paid over time plus some interest?

(By the way, Sue Benham is absent tonight...so could this possibly be split vote or require Mayor Hall's tie-breaker? Unlikely...just wondering)

Jun 24, 2009 at 08:06 PM : Irma Carson... Agree...

Irma Carson...

Agree with Couch...if some way to ? plan...some relief to our builders (spread out payments)

A question regarding accounting of impact fee...simple report or not?

Tandy: If you want to know what fees have been spent on over the life of their collection, yes.

(Still not clear about annual reporting requirements)

Carson: I know this is not a good time...but we all know that there's been a lot of time put in (studies etc) She also knows committee has spent numerous hours..I don't think you'd come here with a recommedation if it wasn't proper

Ken Weir

First of all I want to mention I rec'd a letter from Castle & Cooke...they want to make sure projects included in impact fee list are included in that list...

(My comments now...sounds like Carson and Couch will go along...even if they don't only Hanson could be a third nay, but that's unlikely as he's on committee overseeing this and he's cozy with Abernathy camp)

Jun 24, 2009 at 08:06 PM : Weir: I would like...

Weir: I would like kind of a point-blank answer. If we don't approve increase to TIF fee, what happens to...building in this town?

Gennaro: If council doesn't adopt in immediate future...consider postponing general plan amendment cycle...consider moratorium on zone changes, maps etc until TIF adopted

Weir: so no TIF, no development

GG: Correct.

Weir: this is very uncomfortable for me. You're correct when [you say it's a tax].

Weir says state and fed govs pass mandates without providing funding...exactly what's happening w TIF...difficult for me..something I don't relish.

What are the alternatives, he wonders. It's been 8 months...

Tandy jumps in: we have very actively sought out every state or fed grant etc

Developers in the audience are long in the face. They see where this is going.

Jun 24, 2009 at 08:06 PM : Relief to the...

Relief to the builders? You've got to be freaking kidding me.

Move on, builders, developers, and elected officials who fit neatly in the pockets of the aforementioned.

Jun 24, 2009 at 08:06 PM : Weir: Since Couch...

Weir: Since Couch brought up...we have discussed (in committee) ways to lessen impact of fee...I'd be interested in staff's comments regarding his comments...

Tandy: We have looked at possibility of collecting at cert of occu..problems for third parties (Note: this came up in committee discussion...builders say new closing procedures make it impossible to close if all fees aren't paid) assessment idea hasn't been explored...

Rojas: Only time you're allowed to lien property for permits is through Mello-Roos...only one to try was McAllister Ranch...(it wasn't finished) That's the only way we can collect..we know how successful McA Ranch was...

Weir: Builder owns property; can't he lien?

GG: (yes...)

Jun 24, 2009 at 09:06 PM : Tandy: Your ability to...

Tandy: Your ability to turn the money into a street improvement is delayed...less ability to respond to demands of need of transportation system...(he obviously doesn't like assessment idea)

OK, this is going to drag on....Weir is asking about life of building permit

It's 9 p.m.

Even if the council finds a way to split up the fee....well, the builders look unhappy. I don't know that any increase, even if broken into thirds, is palatable to them.

Hanson now.

Oh no more Mello-Roos. We have fallen into a dreaded crevasse.

Jun 24, 2009 at 09:06 PM : Weir:...

Weir: "what happens to...building in this town?"

Um ... really? REALLY? Do you people see the half-built developments on every side of town? Do you see the vandalism, the graffiti, the dying trees, the stubbed lots that sit empty?

If anyone on the City Council or the Board of Supervisors had even just an ounce of integrity they would impose a moratorium on development.

Jun 24, 2009 at 09:06 PM : In the back of the...

In the back of the room, McIntosh, the ice man, eyes Hanson as he goes on about bonding Mello-Roos...he's calculating something...he can probably do all the calculations in his head...

Here at the media desk my fellow reporters are probably climbing the wall. Poor TV...how are they going to get a shot and edit before 11 p.m.?

Scriv is back. We have looked at the tiered fee..would have to backload some amount...ultimate fee would be higher etc...

Jun 24, 2009 at 09:06 PM : Oh no...the...

Oh no...the possibility of a postponement has come up. Reporters groan.

If it is delayed city lawyer says postpone your general plan cycle.

Weir wants to pursue staggering the fee...not sure how this will go down.

(My take: They're getting sued no matter what...staggered or not. That's not the issue)

Oh this is getting weird...Scriv wants to approve but then explore phasing it in...

HBA lawyer shaking his head.

Jun 24, 2009 at 09:06 PM : A short recess is...

A short recess is called.

Like they'll figure out Mello-Roos in five minutes...

ugh

Jun 24, 2009 at 09:06 PM : They need to grow a...

They need to grow a pair like San Luis Obispo did in the 80's. Stop with the zoning changes, stop with the development, and tell the local political "establishment" to kiss off. We could even go so far as to ban drive-thrus but a certain demographic would be inconvenienced if they actually had to park and walk.

Jun 24, 2009 at 09:06 PM : Aaaaaugh...they'v...

Aaaaaugh...they've postponed it to a special meeting July 7th at noon.

So, unfinished business again

Now the budget.

Jun 24, 2009 at 09:06 PM : OK, this is...

OK, this is substantially duller than the traffic fee discussion (sorry accountants).

But, regarding the sales tax drop: for the current fiscal year (the one that ends June 30) better-than-expected property tax revenues will offset the drop.

I've had to file by e-mail so missed discussion, if any, about sales tax expectations for the new fiscal year. Ah well

Jun 24, 2009 at 09:06 PM : Ok, the budget is...

Ok, the budget is about to be adopted.

So, the upwardly revised prop tax revenues will cover the downwardly revised sales tax revs in the new fiscal year as well.

And the budget is over.

Jun 24, 2009 at 10:06 PM : What is this bunch of...

What is this bunch of dummies thinking of.

Be realistic. This fee should have been adopted 10 years ago.

By the time the 35000 vested tracts are built out. The $13,000 fee will be inadequate due to inflation.

Here is a perfect example of the inadequacies of our local building industry. Record building and record profits where enjoyed for years.
Yet the building industry has no reserves to pay their way through the downturn.

Now they want those of us who have established themselves in Bakersfield. Those of us who have already paid their impact fees. To suffer horrific roads. So they can continue their mismanaged companies.

This city council complains about the States inability to pass a budget.
This city council hasn’t passed an adequate impacted fee in 50 years.

Good news fellow Bakerfieldians.
We have no new impact fee, But we’ve got another free concert at the River park.
Gosh, that’s such a nice family outing.

Jun 24, 2009 at 10:06 PM : Just filed the story...

Just filed the story for tomorrow...I'll be looking more into the fee accounting issue. (only a blurb for print on all that went down re: fee discussion)

Thanks for watching folks and thanks for your comments.

Oh, and tkozy: Yeah, enjoy those free concerts. The city had to cancel the rest of the season's free movies because of royalty fees, parks folks said tonight. But tthe concerts will go on!

Jun 25, 2009 at 09:06 AM : Unlike all other major...

Unlike all other major cities and counties in the state, Bakersfield and Kern refuse to become Self Help. I am no fan of many of the developers here in the community who have skated for a long time with extremely low fees compared to other markets. The developers here became addicted to an unsustainable model, which gave them enormous profits up until 2006 when their model collapsed because there was no real glue to hold it. The problem for everyone in the house building industry today who does business from Bakersfield to Sacramento is that the inventory of existing homes in foreclosure makes any construction unnecessary.

Bakersfield management needs to understand, however, their idea of trying to exclusively tap one industry for all the money needed to come up to state and federal requirements will never get them enough money to make the road projects happen. Not in this lifetime.

It is always enlightening to drive Highway 99 north through the valley and check the roads and what other communities have done. You will find smooth a multilane freeway through the major cities in the Central Valley that stand in very stark contrast to our battered excuse of highway, which is particularly bad north of the Highway 58/24th Street junction all the way to the southern outskirts of Delano. Curiously, Delano with its big prison population enjoys great highway road conditions. Fresno stands as a model of what should happen when it comes to Self Help. The freeways are always being improved and the interconnectedness of the city showcases what can happen if community leaders and the general population agree on targeted goals.

Bakersfield is all about selfish interest for the very few who have so much, and the multitudes who have so little. The gap in wealth distribution here makes reaching goal consensus impossible. The poor would prefer to strip away everything they believe they can from those who stand so far above them. The rich continue to talk out of both sides of their mouths when it comes to government- railing against taxes on the one side and then extorting cities for huge tax incentives to do the smallest thing on the other side. So many of the bigger companies here are not even California registered companies. To bypass taxes these pillars of the community incorporate in states where the terms of of incorporation and tax liability are less than California. This has helped to create our current budget crisis, credit crunch and deteriorating infrastructure.

So the question remains, who is going to step up and pay an equitable share to make something happen for the greater good?

Jun 25, 2009 at 09:06 AM : Observer, The...

Observer,

The explanation is as follows:

‘With extensions, if applied for’.

Nothing was said as to whether the extensions had to be approved.

Jun 25, 2009 at 11:06 AM : Observer- ...

Observer-

I can't believe you read the traffic-fee ordinance. In the morning. Gold star.

Here's the deal with the 35,000 lots thing. (The number, by the way, is from the city and the county and the developers don't dispute it).

There are essentially two clocks at play here.

The 35,000-lots clock regards paper lots. When those get approved by the council, they "vest" at the current fee rates (as far as I know all fees) for a certain number of years. (I forget, but I think in the city it's 5 years with a couple possible extensions of a year or two.) State lawmakers last year approved a bill automatically extending those vested rights another couple years because of the housing slump.

But when a developer actually starts work on a particular subdivision...records the tract map and pulls permits...a new clock starts ticking. He or she has a year in that subdivision under vested fee rates at the time work begins. (They can apply for an extension of a year or so; last night city officials said no one had applied, so a separate matter on the agenda of extending expired rights in those circumstances was moot.)

I hope that makes some kind of sense.

- Gretchen

Jun 25, 2009 at 12:06 PM : Observer, Well the...

Observer,

Well the failure to pass a fee last night made no sense.
The ability to vest for 15 or more years makes no sense.

Now consider what will happen if the 13 grand passes on the 15th.

What would stop developers from vesting another 35000 lots for another 15 years at 13 grand?

The impact fee would be perpetually inadequate.

If something is not done about the vesting. The fee must contain a cost of living increase. It would be the only way to have an adequate impact fee.

Also: the idea of attaching a third of the fee to the new home like a mello roos. Is insane.

If I would sell a house and carry a loan on a home that I would own. I would in fact be demoted to that of 2nd mortgage holder. I would be stuck with a bill for a product the original builder should have footed. It is also my understanding that things such of mello roos can not be paid in full after the permit is pulled. After the permit is pulled finance charges/fees and the like apply.

Don’t forget. Current Mello Roos in Bakersfield area are subject to the same 2% increase as property taxes. Resale on those homes will be made almost impossible compared to those homes not disabled by such a fee.

I just can’t figure out why the council believes a builder should be able to profit from the construction of homes or commercial property. If they can not afford to build the roads and other infrastructure. It would be like Ford building a car that will not run.

It should seem obvious that this is a duty they have too current residents of the community.

Jun 25, 2009 at 01:06 PM : A $5,000 increase in...

A $5,000 increase in the price of a home financed for 30 years at 6% would add $30 to the monthly payment. Most of that will be deductible on the homeowners income tax (because payments on the first third of the loan is essentially all interest). Any additional selling of the home over the years will stretch out the amortization of the $5,000 even more. Thirty bucks a month more --- ~ a dollar a day for the new homeowner.

So what's the problem? The developers try to make us think this is coming out of their pockets/profits. Whose to say other than them as they calculate the actual cost of building and figure what they can charge for a "market" price? It's the responsibility of the builder to add in the impact fees to the price of the home. If they don't want to add it in then that's their business' choice. They have duped the Council, by getting them to ignore sound fiscal judgement and to refuse to adequately raise impact fees into making the "choice" one of the government choosing to pass it on to taxpayers or to just accumulate monster infrastructure deficits.

If the economic impacts of development and growth aren't assessed on the buyer, then the taxpayer picks up the tab and the taxpayers end up subsidizing an "affordable" home, or better understood, subsidizing part of the builder/developer profits.

Millions of dollars in past private development profits and "affordable" housing prices have been subsidized by taxpayers creating the deficits and mess of today. Our City Council and Board of Supervisors could have made us "self-helpers" without the need for increased sales tax increases if they had had the guts and had done their homework and planning for growth. Instead, they ran willy nilly after the Development Machine money to keep them in office/power by greasing the palms of their political, service club, business/chamber/development community buddies. And now they don't have the integrity to finally serve the vast majority of us who will end up with the bill and poorly maintained existing transportation infrastructure, as well as the many other financial impacts of growth.

It's time for the Council to decide for the reasonable, calculatible economic impacts of development and growth instead of the hysterical cries of developers who made a bundle on each project/house during the boom, and who didn't plan for the lean years in which we now find ourselves. Sound future planning and growth depends on this moment. Lawsuits? Let 'em sue!

Jun 25, 2009 at 03:06 PM : Observer, thanks for...

Observer, thanks for the great op-ed by William Fulton! A clear concise take on the realities of our current situation, and the continuing fallout from Proposition 13. Also, thanks for your insightful commentary on this blog topic. Very informative, as usual.

Jun 25, 2009 at 08:06 PM : Just pass the dang...

Just pass the dang thing. And for good measure throw in a COLA. Maybe those developers will learn a lesson and become good neighbors to the community.