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HomeMy WebLinkAbout12/20/2011 City Council Members: Rhonda Smiley, Assistant to the City Manager David Couch, Chair Harold Hanson Ken Weir AGENDA SUMMARY REPORT Special Meeting of the HOUSING INCENTIVE TASK FORCE Tuesday, December 20, 2011 - 12:00 p.m. City Hall North First Floor – Conference Room A 1600 Truxtun Avenue, Bakersfield, CA 93301 The meeting was called to order at 12:00 PM. 1. ROLL CALL Present: Councilmember David Couch, Chair Councilmember Harold Hanson Councilmember Ken Weir Staff Present: Alan Tandy, City Manager Ginny Gennaro, City Attorney Rhonda Smiley, Asst. to the City Manager Nelson Smith, Finance Director Steven Teglia, Asst. to the City Manager Jim Eggert, Planning Director Chris Huot, Administrative Analyst Phil Burns, Building Director Raul Rojas, Public Works Director Dianne Hoover, Recreation and Parks Director Marian Shaw, Civil Engineer Housing Incentive Task Force Agenda Summary Report December 29, 2011 Page 2 Others Present: Scott Lott, The Gas Company David Cates, Lenox Homes Donna Carpenter, Association of Realtors Matt Towery, Towery Homes Roger McIntosh, McIntosh & Associates Scott Thayer, Castle & Cooke Shannon King, HIS Fire Jeanne Radsick, Association of Realtors Eileen Carroll, DCS Fred Porter, Porter & Associates 2. PUBLIC STATEMENTS None 3. NEW BUSINESS A. Discussion and Recommendations To Stimulate the Building of New Homes: Gennaro / Smith / Burns / Tandy City Attorney Ginny Gennaro reported that discussions took place at several previous Planning and Development Committee meetings to discuss stimulating the revitalization of the construction industry. Council formed the Housing Incentive Task Force hoping to find additional ways and creative concepts, other than reducing or eliminating the transportation impact fee (TIF), to help stimulate the revitalization of the construction industry. Any adjustments, including a temporary or permanent reduction applied to the property tax, and any form of pilot program related to the TIF, exposes the City to liability. Any concept requiring a change to the TIF would have to be presented and approved by Council. Upon approval, Council would direct the City Attorney’s office to prepare an ordinance to amend the original ordinance. The amendment would then be presented to Council, followed by a public hearing, first and second hearing, and followed by a 30 day waiting period for implementation. This process would expose the City to two different kinds of litigation, by those challenging the fee and the nexus document, and by those challenging a violation of the Fourteenth Amendment to the United States Constitution and Article I, Section 7 of the California Constitution (illegal for a governmental entity to deny any person equal protection of the law). Committeemember Ken Weir stated that he agreed amending the TIF in any way would carry risks. However, there are various kinds of risk. He suggested that eliminating the TIF would be a high risk, but amending it would decrease the risk and could be acceptable. If the TIF were reduced for a period of time and back filled later over a period of time, the full amount of TIF could be paid. City Attorney Gennaro stated if the Task Force or the Council decides to take any action with the fee, from all the possibilities discussed, amending the ordinance would be the least risky. Housing Incentive Task Force Agenda Summary Report December 29, 2011 Page 3 City Manager Alan Tandy stated there would be a level of risk with any action taken. The City went through a three year comprehensive process to determine and establish the fee. Litigation with the HBA to invalidate the fee was unsuccessful and the Court validated the fee. During the same time, many projects were in process and environmentally approved based, in part, on the validity of the fee. The City does support the home building industry, but there is a larger national economic problem, and not just a local problem caused by the TIF. Finance Director Nelson Smith presented a report that included various calculations based on several concepts that resulted from discussions at the November 29, 2011 Task Force meeting. There are multiple variations, including term amounts and sources, but staff concentrated on the three most discussed scenarios to determine the benefit each would have to a home buyer. In conclusion, it was determined that, from the home buyer’s perspective, none of the scenarios made a significant difference to the home buyer. In fact, some of them make it worse in the earlier part of the term years for the home buyer to make their payment. Based on this analysis, changing the method of charging the TIF does not result in an incentive. Using the scenarios previously mentioned, the bonding capacity would also be impacted. It is measured in a complex manner and includes a review of revenue history for the immediate five years prior to the issuance of a bond. Any delay to receiving revenues past the five year period will reduce the bonding capacity. In addition, the coverage ratio provided by the bonding company may also change and be impacted by any changes made to the TIF. Committeemember Ken Weir asked if the bonding scenarios included any revenue from the PG&E surcharge. Finance Director Smith stated they did not because it is legally required for pledged revenues to have a nexus between the type of revenue used for repayment of the bonds and the purpose of the bond. The utility surcharge is general revenue and is not specific to a road project, compared to the gas tax revenues that are clearly designated for road funding. The surcharge revenue cannot be used for the bonding capacity but can be used for repayment of the debt. Committee Chair Couch agreed that the scenarios showed that extending the fees over a period of time on a property made it more expensive in the first five years, but over the 30 year period it becomes less expensive. In addition, if the property owner pays their tax bill on time the first five years, the City gains all the revenue, plus 1.5%. Finance Director Smith and City Manager Tandy both concurred that if the homeowner pays more of the costs earlier they will save money over the 30 year period, but this will still impact the City’s bonding capacity. Housing Incentive Task Force Agenda Summary Report December 29, 2011 Page 4 Referring to a report from Building Director Phil Burns, Committee member Weir asked why 647 permits paying the $7,343 fee amount changed to the $12,870 fee amount in 2010. Building Director Burns stated the reason was the expiration of vesting rights on the maps. Developers will prepay for as many permits as they believe they can build and sell ahead of the expiration date, and any left over are carried over to the current fee amount. Committee Chair Couch asked how many lots are remaining in each of the phases and paying the appropriate phase fee. Public Works Director Raul Rojas stated that information would have to be generated. Calculations would also be different as it would include the extension of the vesting rights on some maps and would include the extension of tentative maps by the State. Committee Chair Couch asked staff to prepare the information to include the current expiration date on each remaining map. City Manager Tandy stated that an additional concept discussed at the November 29, 2011 Task Force meeting was that of providing credits to developers if they can provide documentation of improvements. A blended fee concept is legally and practically problematic, and has an effect on the bonding capacity, as previously discussed. He suggested that another concept would be to extend the vesting rights of maps that have not expired for another year. Committee member Weir made a motion to have a resolution prepared to extend the vesting rights of maps for one more year. The motion was unanimously approved. Matt Towery, representing Towery Homes, stated developers building in existing subdivisions had fees doubled at the worst possible time. There are several thousand lots that are the subject of these discussions. Mr. Towery also mentioned that he conducted a survey of cities in California who have reduced or suspended their fees, and no entity has been sued. Fred Porter of Porter and Associates stated that when the government provided the $8,000 tax incentive to first time home buyers many new homes were built. Scott Thayer, representing Castle and Cooke, asked if, as a result of the economic decline in the last few years, the assumptions in the nexus report are still valid and if the improvements contained in the documents are needed now or can be extended over a longer period of time. If the fees and assumptions are reviewed today, the fee could possibly be reduced. Housing Incentive Task Force Agenda Summary Report December 29, 2011 Page 5 Public Works Director Rojas stated that a new nexus document would have to be prepared. This could cause EIRs for other projects to be invalidated, which would bring other risks with larger construction projects. The nexus document is reviewed every three to five years. City Manager Tandy stated the model used to prepare the nexus document includes a projected growth rate of the City and a grid system which includes the area in discussion generated by computer. Roger McIntosh, representing McIntosh and Associates, stated the draft resolution is not detailed enough; it only states that the previous extension on vesting rights will be extended until April 2013. Mr. McIntosh stated it would be better if maps that record during that time period be extended the two years, and this would require an ordinance. Committee member Weir asked City Attorney Gennaro to look into the matter and asked Mr. McIntosh to provide her the site which would indicate that the City would have the jurisdiction to revive an expired map. Committee Chair Couch asked staff to prepare a scenario targeting the 2,000 – 3,000 lots that have significant improvements already in the tract to determine if the City’s bonding capacity would be affected if the fees were paid 50% up front and the remaining 50% spread out over the property tax bill for five years. Committee member Harold Hanson asked if a program was put into a place and a lawsuit was brought forward, would the lawsuit be stopped if the program was stopped. City Attorney Gennaro stated it possibly would, but the City would be required to pay Attorney fees. 4. COMMITTEE COMMENTS Committee member Harold Hanson made a motion to approve the agenda summary from the November 29, 2011. Approved and adopted as submitted. 5. ADJOURNMENT The meeting adjourned at 1:24 cc: Honorable Mayor and City Council