Cost Accounting in Local Government

Should Development Impact Fees be Standardized?

An RCS client recently relayed a conversation he had with an analyst from the Housing Policy Division of the State’s Department of Housing and Community Development. It seems there was a question regarding the City’s Housing Element and the HCD analyst expressed a general comment that the City’s Development Impact Fees (DIFs) would have a negative effect on affordable housing and a complaint that there was no reason that DIFs weren’t uniform from city to city. Given that part of the HCD’s mission statement is to promote the Administration’s housing policies and programs by testifying before the legislative committees, we all should always be vigilant for red flags. Admittedly, any increase to the total cost of a dwelling unit will have a negative impact on affordable housing. It is also true that the actual cost of a private development project is the combination of the actual construction costs of the structure along with the reasonable cost of the infrastructure the local public agencies must construct to accommodate that privately-owned structure.

So, why do DIFs vary so much from city to city?

Simply stated, every city is different in terms of revenue structure, residential and business community wants, needs and desires, geographic and geologic factors, service area, nearby services. These are all usually defined within the City’s General Plan and its many service-based elements. Any agency’s combined DIFs total is also a function of land acquisition. Consider the difference in the costs of parkland acquisition in a dense beach community versus a remote desert community.

Public Safety Services
Most police DIFs do not differ a great deal but differences occur and are usually based upon the policy decisions regarding how many police officers their City will have. A single-company fire station has a defined area based upon a fairly typical five-minute response time policy. But the development density constructed within that station’s response area will vary, generating differing DIFs.

Circulation Systems Some cities require expensive bridges because of railroad tracks, freeways, deep canyons, inlets and rivers. One client city had a Circulation DIF of nearly $30,000 per detached dwelling resulting from a premier Circulation Master Plan that included a raised busway that was due to the General Plan containing numerous high density residential dwellings. Some cities need only a fairly simple grid system.

Storm Drainage Systems Rainfall amounts, soil absorption capability, slope, rivers and canyons all combine to create varying demands, and thus differing DIFs. Central Valley cites often need to build large detention basins due to limited amounts of slope.

Social Service Infrastructure Libraries, Aquatics Centers, Public Use Facilities and Parks or Open Space These DIFs differ primarily because of sheer policy issues adopted by the individual City Councils. What LOS (level of service) does the City wish to have? Do they even wish to have these facilities? These questions create different DIFs.

I don’t predict any problems with interference by the State or the HCD Department given the US Constitution conveyed police powers to provide for the health, safety and welfare of its citizens upon cities. Standardizing DIFs on affordable projects by the State could create an unfunded state mandate. And the State is in no position to pick up that tab.

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