Council Increases Impact Fees on New Developments
Jun 27, 2022 12:00AM ● By Story by Shaunna BoydCITRUS HEIGHTS, CA (MPG) - At the June 23 meeting, the Citrus Heights City Council held a Public Hearing regarding proposed increases to impact fees assessed on new development in the city. The fees help to mitigate the impact of new development and the associated population growth on the city’s services and resources.
The City collects Affordable Housing Impact Fees and Roadway/Transit Impact Fees. The City also collects and remits fees for Special Districts that serve the city: The Fire Capital Facilities Impact Fee supports the Sacramento Metropolitan Fire District, and the Park Impact Fee supports the Sunrise Recreation and Park District—both of which, as Special Districts, cannot levy any fees themselves.
Impact fees do not fully offset the impact of new development, but they are an important funding source that allows the City and Special Districts to use as matching funds for grant opportunities for major improvement projects. Studies on all four of these impact fees show the current revenues are insufficient since they have not been increased to keep up with inflation over the years.
The Affordable Housing Impact Fee is assessed on non-residential developments, like commercial and office buildings, which increase the need for affordable housing in the city. The fee is used to help increase the supply of affordable housing units, but it has not been updated since 1992. Currently, the highest end of the fee range is $0.97/sq. ft. for new development, and the City Council had three options for updating the fee: increase to current inflation at $2.39/sq. ft. at the highest range (146% increase), adjust to the regional average at $1.74/sq. ft. (79% increase), or match Sacramento County’s fee at $3.00/sq. ft (209% increase).
The Traffic/Roadway Impact Fee (now renamed as the Multimodal Impact Fee) offsets the impact on the Citrus Heights roadways as new development brings more cars onto those roads. Revenues from this fund can pay for roadway and transit improvements. This fee has not been updated since 1988. The current fee is up to $4.45/sq. ft for non-residential development and up to $1,434 per unit for residential development. The proposed increase would bring the highest range of the fee up to $7.88/sq. ft. for non-residential (77% increase) and up to $2,614 per residential unit (82% increase).
The Park Impact Fee from new development helps the Park District pay for improvements to meet the needs of a growing population and increased park usage. This fee was last updated in 1999. The current fee range is up to $1,078.50 per residential unit and up to $0.37/sq. ft. for non-residential. The proposed increase would be up to $6,089.00 for residential units (465% increase) and up to $0.56/sq. ft. for non-residential (51% increase).
The Fire Capital Facilities Impact Fee was updated as recently as 2014, however, Sac Metro Fire determined that the revenues are not sufficient to meet calls for service and needed facilities improvements to serve a growing population. The current fee is up to $1,478 per unit for residential and up to $1,293 per unit for non-residential. The proposed increase is up to $1,582 per residential unit (7% increase) and up to $1,664 for non-residential units (28% increase).
If the proposed increases are approved, all of the impact fees will be subject to an annual increase each January to keep pace with inflation, so that such dramatic increases won’t have to be implemented in the future.
During Public Comment, Oleg Shishko wrote that he opposed the fee increases. He pointed out high inflation and the possibility of a coming recession and said, “These fee increases will significantly hurt the little guy for whom a few hundred or thousand dollars will make a big difference. If you allow these fee increases to go through, many smaller projects may be significantly delayed or even canceled.”
Viktor Choban also wrote in opposition to the increases. He is a renter in Citrus Heights but hopes to purchase a vacant lot to build a home for his family. He said the fee increases would mean “people like me are discouraged from improving empty lots. Especially with the economy slowing down right now, this is not a good idea.”
Councilmember Bret Daniels said that rising mortgage rates already make it difficult for many people to find affordable housing, so he is very concerned about the increased fees and their potential impact. He said that he would support the Fire Facilities Impact Fee because it funds a “critical service,” but he wouldn’t approve any of the other increases.
“The problem here is that we haven’t done our job, and we haven’t kept up with increasing these fees along the way,” said Daniels, “and now all of a sudden, we’re going to ask for dramatic increases.”
Mayor Porsche Middleton said, “If you look at this from a regional approach, we are out of alignment.” She said that when people consider where to build new developments, they’re looking for good roads and attractive amenities. Without these fee increases, she feels Citrus Heights will fall farther behind and won’t be able to attract new development. “That’s what’s really holding Citrus Heights back. We can’t continue to fund these things out of our General Fund. … When you look at the history of our budget, that’s why we are where we are, because we keep putting this off rather than catching ourselves up.”
Councilmember Steve Miller said that new developments cause impacts to services, so those developments should help cover the costs. Otherwise, he said Citrus Heights will just end up with deteriorating roads, overcrowded parks, and services that are stretched too thin to meet the needs of the population.
Councilmember Jeannie Bruins suggested adjusting the Affordable Housing Impact Fee to the regional average, which was the lowest increase of the three options presented. She said that fee would be “easier to digest for anyone who wants to develop here in Citrus Heights.” She also stated, “It’s just kind of appalling to me that we waited 30 years to adjust on this one. … It’s fiscally prudent for us to pay closer attention to this going forward.”
Vice Mayor Tim Schaefer said, “The timing couldn’t possibly be worse, where we’re seeing inflation out of control, we’re seeing cost of living going up.” But he agreed that adjusting to the regional average for the Affordable Housing Impact Fee would be the “most palatable.” Schaefer also suggested phasing in the Park Impact Fees increases over a five-year period rather than implementing it all at once.
Councilmember Bruins agreed about the Park Impact Fee increase: “This one is really hard for me to support. … An increase of this magnitude is too much.” She supported Vice Mayor Schaefer’s idea, stating that they should split up the total increase and implement it at 20% increments over the next five years, “so it gets to where we want it to be but isn’t such a hard hit at this time.”
The Council approved the increase to the Affordable Housing Impact Fee adjusted to the regional average, the Multimodal Impact Fee increase, and the incremental Park Impact Fee increase. All three votes passed 4-1, with Councilmember Daniels dissenting.
The Council also voted 4-1 to increase the Fire Facilities Impact Fee, with Vice Mayor Schaefer dissenting.