|A guy has gotta earn, you know.|
But what if I told you this isn't exactly true? Oh, there is a little bit of truth to be found there, all accomplished tall tales require at least an iota of verisimilitude to suck in the credulous. But the truth of the matter is that when it comes to Development Impact Fees, California is definitely an outlier. Not just that, but an exponential outlier. The impact fees we pay in this state are immensely higher than any other state in the nation. Nobody comes within 100 miles of us.
Joel Kotkin, in an opinion piece that ran in the Orange County Register, talks about the once Golden State's outrageously expensive impact fees. "California Homes Require Real Reach" is the title (link). Prepare to be a little stunned.
Beside regulatory restraints, California housing prices are driven up by the highest impact fees in the nation. An annual survey by Duncan and Associates shows that the average impact fee in California for single-family residence in 2012 was $31,100 per unit, nearly 90 percent higher than the next most expensive state and 265 percent higher than the norm among jurisdictions that levy such fees, which typically pay for capital improvements, like water and wastewater facilities, required by a new development. Many states and localities on the other side of the Sierras do not.
These fees also impact multifamily housing; the state's fees on multifamily units averaged $18,800, or 290 percent above the average outside the state.
Let me repeat that, just for the dramatic effect. California's Development Impact Fees are 90 percent higher than the next most expensive state. 290% higher for multifamily residences. These are outrageous figures, and the proclaimed need for them is in no way legitimate. If every other state in this country, with cities no different than ours, can hook up sewer and water lines at a cost of 10% or less than what we are being charged, then something is badly wrong.
What is the one thing Sierra Madre's City Hall wants out of development? Money, and lots of it. And because Development Impact Fees in California are the highest in the nation, and exponentially so, City Hall will reap millions of dollars in impact fees should the One Carter, Mater Dolorosa and other developments ever get built.
Why else would City Hall have dragged its feet for nearly half a decade over getting the new General Plan finished? Or have repeatedly attempted to thwart the desires of the people living here over community preservation and slow growth? Because they really like McMansions? Of course not. It's the money.
Since it is all they care about, high Development Impact Fees end up promoting more development. They enable government to get a lot more money than they in any way deserve from people who want something valuable from them.
In corrupt California vastly inflated Development Impact Fees are used by developers to influence city governments such as ours to grant them the permits required to build what they want. How else do you funnel tens or even hundreds of thousands of dollars to key local agency decision makers in order to get your plans approved?
Developers know that these impact fees costs are way above and beyond what it really costs cities such as Sierra Madre to hook up their new homes to sewers and water, but don't they always pay up without a peep of complaint? Of course they do. It's a pay to play state, and that works for them.
Another thing. When these Impact Fees are included in the cost of the house (naturally the developer never pays for them himself) then obviously the sale price is increased. A higher sale price translates into higher property taxes. Meaning the buyer gets to pay increased property taxes FOREVER because of those impact fees.
I'm pretty sure City Hall, and Los Angeles County for that matter, are wildly in love with this arrangement. But most new home buyers will never know what a crooked deal they got, and nobody in government is ever going to tell them.
I consulted with my financial guru, occasional Tattler contributor Captain Obvious. The guy does the numbers quite well, and a lot of the grist for this post came out of our conversations. Obvious then sent me the following information, and as usual it is great stuff.
The Captain Obvious take:
If you think about it, what is the one way a developer can pay a lot of money to a City Hall in exchange for being able to build what they want? Easy. The more units, the bigger the check to the city will be. These kinds of fees are the one thing that cities care about more than anything else; including the wants and desires of those whose taxes pay their way.
Captain Obvious’ thoughts: What we know now:
1. Each new Single Family Residence (SFR) makes about $45,000 of Development Impact Fees (DIFs) to Sierra Madre.
2. Each additional unit (such as an apartment or condo) is about $22,500.
3. Lot split application? Sure - approved! The additional unit is worth $45,000.
4. The Kensington paid over $750,000 in DIFs and permit fees in 2013.
5. Sierra Place condos would have been about $90,000 in DIFs.
6. EACH One Carter (Stonegate) house will be worth $45,000.
7. Goldberg (aka “Special Deal”) Park was purchased by “borrowing” General Fund monies that were to be paid back by DIFs from One Carter. The City Council figured since there were homes going in the DIFs would be a-flowing! I believe that there’s still a deficit of $100,000+ in the DIF Park fees subaccount. Otherwise, we’d already have new ADA-compliant restrooms at Memorial Park.
8. This is easy money for the City. It involves no pesky tax increases that the voters will shoot down, again.
The result? Voilà! More money is available for Platinum Pensions. How cool is that? Don’t use water department funds to repair leaky water mains. Pay for the water mains with the 50% of DIFs that are required to go to water department expansion for increased population. Just replace the 10” pipe with a 12” pipe.
Don’t use General Funds for a Police raise. Offset the current PD budget and buy improved equipment using the Public Safety Funds from DIFs. Better and bigger stuff, sure! We need it to protect a larger population.
Then, use the money freed up by DIFs for higher wages. That will result in higher and higher Platinum Pensions. No need to cut costs like the voters told them to, twice. You can pretend 2012 and 2014 never happened.
Oversight of the DIF slush fund (or lack thereof):
What if the Goldberg “Special Deal” Park deficit is paid off by DIFs? Who will be able to track if that money is ever paid back to the General Fund? Or will it get set aside in a special fund, Sacramento style, so the City can keep telling us how they poor they are? Who the hell knows?
Remember Rules Number One & Number Two:
1. It’s all about paying for Platinum Pensions.
2. Don’t agree? Read Rule Number One again.
Seems obvious, right?