Cost Accounting in Local Government

Development Impact Fees for Mature Cities

A little over two years ago I got a call from Chu Thai, the Management Services Director with the City of Monterey Park.  He called to ask me what I thought about development impact fees for the City.  I thought, what? Development Impact Fees (DIFs) for a built-out City?  I frankly didn’t see it.  I’m a San Gabriel Valley kid from way back and remember visiting friends in Monterey Park back in the 60’s and early 70’s and I knew full well that Monterey Park was a “built-out” city and proceeded to tell Chu that they probably didn’t need DIFs.  Most of my client cities have significant amounts of vacant raw acres and I am used to that. I just didn’t see it for “mature” cities.  Fortunately smarter heads prevailed (his) and I agreed to come over and meet with some of the City staff.

Chu and I met with the City’s Director of Community and Economic Development Michael Huntley and he outlined the City’s anticipated development.  Michael indicated that the City was expecting an increase of 155 new residential dwellings and 610,890 S.F. of future business uses to the City’s inventory from seventy-two acres of actually vacant raw land that had never been developed.  Surprising, but it seems that there are always a few parcels that stay vacant for a long time.  The City also expected a net increase of 638 residential dwellings, 704 upscale hotel rooms and 3.3 million square feet of business uses from existing, but under-developed land uses that were proposed to be redeveloped.

I agreed with Chu and Michael that the City could indeed benefit from a full set of development impact fees, and so we got started.  In the end we discovered that pretty much every direct service provided by the City required some increase in capital inventory and capacity in order to accommodate the new service demands from the City’s new residents, visitors and businesses.  Certainly increases were warranted in the hard-infrastructure areas.  Here is the way it worked out:

Law Enforcement – Police calls-for-service data indicated that the Department would need to add operational space, vehicles, and equipment for the nine full-time officers needed in order to maintain the existing Level of Service (LOS) in light of the 3,242 additional development-generated calls-for-service expected, a 12.4% increase over previous levels.  In the alternative, the City could do nothing and absorb a statistical decrease in the existing Level of Service (LOS) to the existing residents and businesses.

Fire Suppression/Medic Services – The story was much the same here, with an expected 12.0% increase in emergency calls-for-service.  The proposed method for dealing with this increase was the addition of two paramedic squads, which requires space, vehicles, and specialty equipment. Again, the City could have done nothing and increased the likelihood of simultaneous calls-for-service.

Circulation System – The increase of 252,907 daily trip-miles, a 17.9% increase, was the toughest demand increase to mitigate, as the City has very few opportunities for the widening of arterials. In short, they have already met their 1970’s era circulation plan in terms of arterial width.  Additional arterial lanes miles could only be considered with far-reaching rights-of-way acquisition that would eliminate entire blocks of contiguous development.   The best alternative was to signalize the few remaining non-signalized intersections and wire a traffic signal inter-connection system to be managed from the engineering office to control signals in such a manner as to maximize the street capacity during different times of the day.  If no action had been taken, the already difficult heavy drive times would have gotten worse.  The inter-connection system will make a difference.

Public Utilities – Water demands would increase 617,859 gallons per day, a 9.2% increase, and wastewater by 477,440 gallons per day, a 9.5% increase.  In this case, the City could not simply ignore the anticipated increase in demand and let the LOS decrease.  There were capacity problems, and additional water and sewer capacity was needed to be constructed at a considerable cost, costs that the existing users should not have to bear.  No argument can be made that the existing utility rate payers subsidize future users by using utility rates to construct that additional capacity.

Quality of Life Services – The existing library (1.0 S.F. per resident), library collection (2.775 collection items per resident), public use facilities (1.272 S.F. per resident), and aquatics centers (0.263 S.F. of pool surface per resident), each enjoy a current LOS that is far better than most cities.  However, the actual park acres standard at 1.334 acres per 1,000 residents standard was a bit lower than what I usually see, but it appeared to meet the community’s needs

The City Council demonstrated a great understanding of DIFs, and each member took a strong hand in the adoption deliberations.  As I recall most of the hard infrastructure (public safety, streets and utilities) were adopted at nearly the maximum DIF schedule amounts, but it was decided that the quality of life services, already at very high levels, did not need quite the full financial support and received various approvals at lower percentages of the full DIF schedule.  Additionally, everyone agreed there was little land available suitable for parks available at any price, but a portion of the fee was adopted in order to make some limited park improvements to maximize the use of underperforming parkland.

So I stand corrected. Chu was right that “built-out” cities aren’t really “built-out,” but they are just more mature. This changes the manner of development from that of raw land to the redevelopment of acres that have greater potential over what currently exists.  It is a constant movement that every step of the way incurs cumulative increases in the demands upon City services.

Shortly afterwards I received calls from two finance managers in the “largely developed” 605 and 710 corridors cities to discuss the results.

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