DEVELOPERS OBJECT TO NEW FEES

Proposed increase on new houses would add nearly $10,000 to each home

A proposal by the city of Escondido to raise development fees on new homes by about $9,300 per home — as well as increase fees for new apartments, commercial and industrial buildings — has drawn objections from home builders, Realtors and others.

In deference to those who said they needed more time to study the proposal, the City Council earlier this month agreed to postpone consideration of the proposed fee increase until Oct. 21.

Developer impact fees are charged by cities to recoup the costs of infrastructure improvements needed to serve new development, such as parks, police and fire stations, libraries, drainage, roads and senior centers. Currently, Escondido charges $32,374 per new home in development impact fees, and under the proposed increase, the fees would rise to $41,662, according to a city staff report.

The money is needed, said the report, because the current fees only cover about 74 percent of the estimated infrastructure costs needed to serve new development. The report said based on development expected between now and 2035, the city’s anticipated infrastructure costs for new development are estimated at $247.2 million. Current fees would leave the city short of that total by $64.7 million.

In addition, the city is grappling with a projected deficit in its annual general fund budget totaling $176 million over the next 18 years. City Manager Jeff Epp said the city is facing a potential $8 million shortfall for the fiscal year that begins June 1, 2021.

Under the proposal, development impact fees would also be raised for apartments, commercial and industrial buildings.

Currently, Escondido’s development impact fees are among the lowest when compared with other cities along the state Route 78 corridor, such as San Marcos, Vista,

Oceanside and Carlsbad, said the report. Even with the proposed increase, the city’s fees for a singlefamily home would still be fourth among the five neighboring cities.

The proposed fee increase didn’t sit well with home builders or North County Realtors.

“The proposed increase of almost $10,000 per home, and the percentage equivalent, for all new home residential is unprecedented… On behalf of Lennar Homes, we strongly encourage the City of Escondido to table any discussions for at least the next 24 months, allow the proper analysis to take place, and be reviewed and accepted by all stakeholder groups and impacted parties,” wrote Ryan Green and Alex Plishner of Lennar Homes,

which is developing the former Escondido Country Club property.

“We are in a housing crisis and raising fees that burden down residential development in times like these seems counterintuitive,” wrote Taylor Thompson of the North San Diego County Association of Realtors. “We urge the City Council not to take action on the fee increase and find other creative ways to address the recession and city budget.”

However, the Escondido Chamber of Citizens wrote in support of the proposed fees, which the group said, “will fully offset infrastructure costs and will ref lect the true cost of new development, thus minimizing negative impacts to the General Fund.”

Also at a meeting held last month, the council discussed the city’s Community Facilities District, which the council established in May. The CFD allows the city to collect a special tax on new development to pay for ongoing city services.

At issue was whether projects that were already under review by the city when the CFD was established should be required to join the district or be granted an exemption.

After a discussion, Mayor Paul Mcnamara and council members Olga Diaz and Consuelo Martinez said they favored the staff recommendation, which is to require that all projects receiving final approval after the CFD was established must join the CFD. Councilman Mike Morasco said he would grant an exemption to projects that were already in the development pipeline when the CFD was approved.

Among those objecting to paying the special tax were the developers of three planned apartment projects, the 510-unit Palomar Heights (on the site of the old Palomar Hospital building), the 120-unit Casa Mercado

at Second Avenue and Pine Street, and the 15-unit Villa Portafino on South Escondido Boulevard.

Casa Mercado developer Paul Mayer wrote that inclusion in the CFD “will kill the project and eliminate several million dollars of impact fee income as well as very substantial ongoing real estate tax revenue for the city and also eliminate the ancillary economic stimulus the project would create.”

In a letter on behalf of Integral Communities, the developer of Palomar Heights, attorney David Lanferman wrote of the proposed hike in development impact fees and the CFD, “Together these two proposed new

“governmental constraints” on housing would be a ‘double tap’ — with lethal impacts on the production of housing (especially “affordable” housing).

Mcnamara said he was sympathetic to the developers’ concerns, but for years the city did not have a CFD, unlike nearby cities such as San Marcos and Poway.

“In fact, we gave developers breaks,” said Mcnamara. Now, “there’s no free lunch. We need the CFD to bring in revenue to maintain the infrastructure.”

Both Mcnamara and Diaz said if the city had been able to pass a proposed onepercent sales tax increase, it might have more flexibility on such issues as the development impact fees and CFD. However, at a meeting in July, the council was unable to reach the required threshold of four votes to put the sales tax measure on the November ballot when Morasco voted against the proposal.

“The city needs resources to maintain services and support our residents in a proper manner. It’s the only fair thing to do,” Diaz said. Regarding the proposed sales tax increase, she said, “That ship has sunk and we have to deal with the consequences.”