County passes transportation impact fees

Unless any legal challenge is successful, the County of San Diego will have a transportation impact fee as of June 19.

A 4-1 San Diego County Board of Supervisors vote April 13 approved the TIF fees for each community planning area which are based on the anticipated cost of future area road improvements due to growth and the expected future growth in a community before buildout occurs.

The fee is actually an option rather than a requirement. “This is an additional choice,” said Supervisor Dianne Jacob. “People need to know they have several options. The fee is one option. There are others that can be pursued.”

The opposition by Supervisor Ron Roberts, as well as by representatives of the building industry, focuses on the amount of the fees rather than the concept itself. Following the passage of the fee ordinance, representatives of the development industry indicated that they were exploring legal options including a possible legal challenge.

Jacob had been the lone vote against a continuance during the January 12 Board of Supervisors meeting. While she expressed concern about the high amount for the commercial and industrial fees, she also noted the need for the option which is favored by many small developers since a single fair-share check saves small developers the process of identifying cumulative impacts for their individual projects.

“It’s a tough pill to swallow; none of us like it. But I believe at the same time we must move forward and do something,” Jacob said. “I don’t think we have any choice but to adopt this today.”

In September 2003 the supervisors received a report on the feasibility of using development transportation impact fees for funding future road improvements necessitated by development in Ramona. The report concluded that establishing impact fees was feasible but that issues needed to be considered when developing a program. The supervisors directed county staff to work with the Ramona Community Planning Group and other stakeholders to develop basic details of an impact fee.

Those details were brought to the supervisors in February 2004, but at the request of the Ramona Community Planning Group the agenda item was continued for 60 days to provide additional information. The Fallbrook Community Planning Group had requested a similar program, and Supervisor Bill Horn used the continuance to add an amendment to the motion which directed county staff to work with the Fallbrook planning group on details for a Fallbrook impact fee program.

The supervisors authorized development of the Fallbrook and Ramona programs on May 5, 2004, commencing a process which was expected to take eight months. The eight-month timeframe was accurate, and the estimated cost for future transportation needs of Fallbrook and Ramona were calculated along with the estimated future growth. Fees of $9,937 per Fallbrook equivalent dwelling unit (based on a single-family house equating to 1.0 equivalent dwelling units with EDUs for other uses based on trip generation) and $7,980 per Ramona EDU were determined to constitute the fair-share payment for future transportation growth.

Although the Ramona and Fallbrook programs were anticipated to be pilot programs, other communities also expressed interest in impact fees. During development of the Fallbrook and Ramona programs it also became evident that certain roads crossing those two towns function as regional in nature and offer transportation benefits beyond the boundaries of individual community plan areas. Since limiting the cost allocation of those regional roads to development within individual communities would disproportionately burden those communities, as the nature of regional and local road networks were further analyzed county staff felt that a countywide impact fee program could offer a solution to communities other than Ramona and Fallbrook.

Thus the biggest controversy switched from whether or not to include the North Bypass in Ramona’s future road costs to whether or not the commercial fees were appropriate. Concerns from South Bay speakers focused on fears that the fee schedule presented would make the unincorporated area uncompetitive with incorporated cities. The continuance allowed the community input process which took place in Fallbrook and Ramona to be brought to the other communities affected by the countywide fee.

Jacob voted against the continuance so that small developers would have the fee option available as soon as possible, but she noted that the extra time was helpful. “The 90 days did provide, I think, some better options in the plan,” she said. “There is a lot that has been added to it.”

The revenue-neutral formula in the revised proposal reduced the fees for commercial development while increasing residential, industrial, office, and recreation fees. The fee for a Fallbrook single-family home was increased to $10,255 although the reversal of the decision to include the North Bypass reduced Ramona’s fee to $7,973.

DPW staff estimates the total cost of present and future road needs in county jurisdiction areas to be $1.59 billion for approximately 395 additional lane-miles, which breaks down into $953 million for regional facilities and $638 million for local roads. “The County of San Diego consistently has unmet road improvement needs,” Christopher said.

The cost of those future road needs is $909 million, while $682 million of those needs are attributed to existing deficiencies. The impact fee only covers the road needs attributable to new development. “It would ensure development pays its fair share for future road costs,” Christopher said. “The effort will also help implement changes in state CEQA.”

All five supervisors cited concern about the commercial and industrial fees, but four of them supported immediate adoption to relieve the residential builders of their burden. “The residential portion of it seems to be the most critical concern right now,” said Supervisor Greg Cox, whose district includes the Bonita, Lincoln Acres, and Otay Mesa unincorporated areas.

The fee program also includes credit for designated roads built as part of a project, and some roads not on the list could be approved as alternative roads for credit.

One other change from the January 12 proposal specifically exempts two subdivisions from the fee because the traffic impacts have been fully analyzed and mitigated. One of those is the Peppertree subdivision in Fallbrook, which has been responsible for improvements to Mission Road and Peppertree Lane.

The adopted fees do not include a separate impact fee for State Route 76 improvements east of Interstate 15, along with the south-serving freeway ramps. That fee will be brought to the board as a replacement for the initial impact fee for that area and is expected to be considered by the supervisors in June.

The impact fees will be in addition to fair-share costs of future traffic signals, which focus on the operational aspects of roads rather than capacity.

All of the speakers supported the concept of an impact fee even if the specifics were opposed. “It is a life or death issue for a lot of residential developers,” said Greg Garratt, an attorney for several development projects.

“We need this in place,” said Fallbrook resident Ivan Fox.

“Things are on hold. Nothing can happen,” said Jerry Winter, who is seeking a four-lot split in the Fallbrook area east of Interstate 15. “We need to get some determination and move forward.”

Fallbrook Development is a 28-house project in Fallbrook which has been stalled for the past six months and has already undertaken three traffic studies. “We fully urge you to approve the TIF today,” said Paul Dooley of Fallbrook Development. “One project makes or breaks our company.”

The fear of impact fees making commercial and industrial development uncompetitive in county jurisdiction areas includes not only the risk of driving those businesses to incorporated cities but also to tribal lands. Larry Glavinic, who spoke as an individual and not in his capacity as vice-chair of the Valley Center Community Planning Group, denounced the one-size-fits-all formula. “It is an insult and I think inconsistent with the goals of smart growth,” he said.

Deterring commercial development also runs the risk of that development not being built and thus not providing the revenue associated with the road development plan. “The lack of commercial development will have long-term and short-term impacts on the entire process,” said attorney William Schwartz, who represents several development projects.

“The process is not going to work because there won’t be the money that’s going to be generated by commercial development,” said planning consultant Jim Chagala.

James Hunter of Alpine noted that local jobs reduce traffic congestion by reducing commuting. “Implementation of this will make many projects unfeasible,” he said.

“The commercial industry is very competitive,” said Mike McNerney of the National Association of Office and Industrial Properties. “We are competing with other areas of the country and other jurisdictions.”

Most commercial building projects involve a profit of approximately 15 percent. “In most cases it would cost more to develop the project than what your profit would be,” McNerney said of the TIF.

The NAOIP and the Building Industry Association calculated that the TIF fees would raise the cost of a retail project by 54 percent, an industrial project by 17 percent, and an office project by 12 percent.

The retail fee under the TIF program would be $60.99 per square foot for Bonsall and $41.64 for Valley Center, while Oceanside’s retail fee is $2.09 per square foot. Office fees would be $17.43 per square foot for Bonsall compared to $1.41 per square foot for Vista and $1.15 for Oceanside. The industrial fee for Fallbrook would be $8.55 per square foot compared to $0.34 in Escondido and $0.33 in Carlsbad.

“We’re not talking about slight differences,” McNerney said. “These are dramatic differences in the numbers.”

“We make life kind of miserable for people,” Roberts said. “I think this is going to be disastrous for the County of San Diego.”

Building Industry Association president Scott Sandstrom called the fees overreaching and told the supervisors that they were in conflict with state law preventing developers from having to pay more than their fair share. “The BIA does not oppose the creation of a traffic impact fee,” he said. “What has been troubling is the means by which this fee has been developed.”

The BIA analysis of Fallbrook, Ramona, and Valley Center states that on the average the next 25 years of growth will only require about 30 to 35 percent of the newly-created capacity of the road network. Scott Molloy of the BIA cited two segments of Old Highway 395 in the Fallbrook planning area, both of which are slated to be upgraded from light collectors (two travel lanes plus a 12-foot median with a 60-foot right-of-way width and a 40-foot road surfacing width) to collectors (four travel lanes plus a 12-foot median with 84 feet of right of way and 64 feet of surfacing). The existing average daily traffic volume on the segment between Dulin Road and West Lilac Road is 3,000 vehicles while the existing volume between Tecalote Lane and Pala Mesa Drive is 6,000 vehicles. The predicted 2030 traffic volume is between 11,000 and 12,000 vehicles for the Dulin to West Lilac segment and 14,000 vehicles for the Tecalote to Pala Mesa segment. Level of Service D for a town collector (two travel lanes plus a 12-foot median with a 74-foot right-of-way width and 54 feet of surfacing) is 13,500 vehicles per day or fewer while Level of Service D for a collector is 30,800 vehicles or fewer. Level of Service D for a light collector is 10,900 vehicles or fewer. Changing the designation of those two segments, which total 4.89 miles, from collector to town collector would reduce the cost by $8.66 million.

“This is massive oversizing,” Molloy said. “Development should not fund the oversizing of new roads.”

Bonsall has the highest TIF fee at $10,455 per equivalent dwelling unit, while Fallbrook has the second-highest fee at $10,255 per EDU and Rainbow’s $8,813 fee ranks third. Ramona’s $7,973 fee is the fourth-highest.

“Fallbrook and Bonsall are the highest in the county, primarily because that’s where the roads are needed,” Christopher said.

The lowest fees, at $2,709, are in the Central Mountain, Julian, Mountain Empire, and North Mountain planning areas. The Pendleton-DeLuz planning area, which includes roads west of the base as well as in DeLuz, has a $4,864 fee.

Fallbrook’s Mark Oatman notes that the passage of the TransNet sales tax provides some of the money for State Route 76 west of Interstate 15, which accounts for $112.1 million of the future road improvement cost used in calculating the TIF. “Our communities are facing an inordinate amount of fees,” he said.

Attorney Matt Peterson spoke on behalf of Gabriel Reyes, whose project is the complete remodeling and expansion of the Pala Mesa Shopping Center in the 3200 block of Old Highway 395. The existing shopping center is approximately 6,400 square feet and provides 25 jobs. The proposed expanded center will total 34,100 square feet, including a new 16,700 square foot grocery store, and up to 80 employees are expected after completion of the $3 million project. The application for the project was submitted in September 2002, but the environmental documentation has not been completed and the project has not been scheduled for hearings.

The $1.5 million TIF fee, based on 29,116 square feet of new construction at the Fallbrook neighborhood commercial rate of $51.28 per square foot, would make the project economically infeasible. “The TIF kills this project,” Peterson said. “Everyone’s going to have to continue driving five to seven miles down TIF-impacted Highway 76.”

The plans call for a 16,702 square foot grocery store, 8,443 square feet of food service, and 8,998 square feet of retail. Other than the existing Pala Mesa Market, the nearest grocery store is 4.3 miles away in Bonsall. While there are two restaurants within one mile in addition to the center’s existing Pala Taco Shop, the nearest fast-food restaurant is also 4.3 miles away in Bonsall. The nearest financial

service institution is 4.2 miles away, the nearest barber shop is 4.3 miles away, the nearest nail salon is 4.4 miles away, the nearest greeting card store is 5.9 miles away, and the nearest pet supplies store is 6.1 miles away.

“We would urge you to look at the public benefits closer,” Peterson said.

Christopher stressed the opt-out provision. “If somebody thinks they can comply with CEQA without this program, they can do that,” he said.

Since the purpose of the fee is to fund road needs created by the new development, the task of the county is to see that the road needs are met by the fees. “We have to be careful in drafting this that we don’t have holes in the program,” said deputy county counsel Thomas Harron.

“I think these fees are exorbitant,” said Supervisor Horn. “But I think we have to address this issue.”

Horn’s district includes Fallbrook. “Fallbrook’s been stymied,” he said. “You can only ask private enterprise to wait so long until we solve a problem.”

Horn had reservations about the specifics of the fee program. “Nobody likes to put on a new tax,” he said. “I think the commercial and industrial fees are almost prohibitive, and I have a hard time with that.”

The future board policy on credits for public benefits made support of the program more palatable to Horn. “I just can’t continue on with the moratorium,” he said. “We have to do something today.”

The approved motion included directing staff to continue to work on the fee schedule. “I hope that we find some better solutions,” Supervisor Jacob said. “I think the fees are too high, all of them, and particularly for commercial and industrial.”

An annual review of the fee structure is built into the ordinance. That review will allow both for cost-of-living increases and for changes in the planned road projects and planned future community development. An initial report on the fee program implementation is scheduled to be brought to the supervisors in October.

The fee structure is not the only option for an applicant, who can provide a traffic study to obtain a customized fee calculated on the exact traffic to be generated. The fees can also be appealed to the director of the county’s Department of Public Works, and the appeal process could also reach the Planning Commission and the Board of Supervisors if the project applicant desires.

The total TIF-eligible cost of North Region facilities is estimated at $286.94 million, or $4,857 per EDU. TIF-eligible Fallbrook local and regional roads total $157.27 million, Bonsall roads total $111.79 million, Pala-Pauma needs are currently assessed at $22.82 million, Rainbow’s needs total $9.2 million, and the Pendleton-DeLuz needs are $5.27 million. The calculations assume growth of 13,915 equivalent dwelling units in Fallbrook, 4,259 in Pala-Pauma, 2,920 in Bonsall, 2,384 in Rainbow, and 427 in Pendleton-DeLuz.