City Sitting on Millions in Unspent Builder Fees

Developers who were stunned by Mayor Maureen O’Connor’s and Councilman Ed Struiksma’s separate proposals to drastically limit San Diego’s growth say the city government is itself partly at fault for insufficient roads, sewers, parks and libraries in the fastest-growing neighborhoods.

The chief spokesman of that viewpoint is Kim Kilkenny, legislative counsel for the Construction Industry Federation, who says that developers have paid nearly $45 million in special fees since the early 1980s to help handle problems associated with rapid growth, but that the city has so far spent only about $1 million.

“If there are inadequate facilities, it’s the city’s fault for not spending the money, and now they’re trying to put it back on the building industry, and that’s not fair,” Kilkenny said. “The city should be held accountable. . . . Those are the facts and the reality.”

What Kilkenny is talking about are special funds, known in City Hall jargon as Facilities Benefit Assessment districts and development impact fees, that are to be used to pay for public amenities.

City officials admit the funds have continued to grow, but that a combination of factors, including a lawsuit, too much work and not enough people to do it, overly optimistic time schedules and a burdensome City Hall bureaucracy, has prevented more money from being spent.

To Be Spent in Next 2 Years

Much of the $45 million, city officials say, will be spent over the next two years, as preliminary work--such as design and engineering--on various projects has reached the point where construction can begin.

Even so, there is talk that the city will have to raise the fees paid by developers because rapid development has outstripped the city’s ability to keep up and the current fee rates are insufficient to close the gap.

There are 10 areas of the city--designated as those growing most rapidly--where developers must pay special fees to cover the cost of various off-site improvements such as sewers, roads and parks. Among those are communities most severely affected by growth, such as North City West, Mira Mesa, north University City and Rancho Penasquitos.

Although the city’s general plan and progress guide published in 1979 outlined how development would occur in these areas, including what fees were to be assessed developers, it wasn’t until 1982 that the city officially adopted its first Facilities Benefit Assessment area, according to Jim Fawcett, project officer in the facilities finance division of the city’s Engineering Department.

Fawcett was among the handful of city officials who helped create and implement the special funds. Almost as soon as the first districts were created, though, they were contested in court by developers.

While the litigation wound its way through the court system for two years, the city continued to collect money from developers but was unable to spend it. The legality of the special funds was upheld in late 1984.

“So nothing really started until January, 1985,” said Fawcett, noting that money accumulated for almost three years.

By then, he said, the city was beginning to be overwhelmed with construction and a shortage of personnel to administer the special funds.

“We just weren’t geared up to collect money, set up more districts, design the improvements and adequately track” when to spend the money, Fawcett said.

Staff Shortage, Bureaucracy

This was compounded, he said, by a staff shortage and a cumbersome city bureaucracy that was slow in such things as reviewing and approving building contracts and minority hiring quotas.

Then, Fawcett said, the California Department of Transportation made matters worse by giving the city most of the responsibility for designing several road projects that are in the state’s jurisdiction.

All of these things slowed the city down. “Everything has taken about 50% longer than anyone thought,” he said.

What has happened in an area like North University City, for example, is that the city collected about $11 million but has so far spent about $250,000.

According to Fawcett and other city officials, that is about to change, not only in North University City but also in other communities with special developer fund budgets. In part because the city now has a 12-person facilities finance division, much of the $45 million is now committed to specific projects and is scheduled to be spent over the next two years.

In North University City, the first of about $9 million worth of construction projects is set to begin next year.

In all, about $30 million to $40 million will probably be spent in the next two years on various public amenities such as new and widened roads, upgraded sewers, and new parks and libraries, Fawcett said.

“In one sense, it looks like we’re sitting on a lot of money but in the next year or two, we’ll be spending a lot of it and people will be able to see improvements,” he said. “The problems are being overcome.”

Many of the special funds are in Councilwoman Abbe Wolfsheimer’s district. The councilwoman was home ill Thursday and unavailable for comment, but one of her aides, who asked to remain anonymous, said that the developers’ criticism about the city sitting on money without spending it “is kind of a broad statement.”

The aide said that, because creation of the special funds is relatively new, there are still bugs to be worked out, and, more important, some of them are fundamentally flawed and in need of changes.