City officials believe they have found a way to hire 19 new police officers and add another fire engine crew without dimming a street light, cutting back library hours or leaving a pothole unfilled.
And best of all, they say, it won't add a dime to the tax burden of current residents.
It is a painless solution to Pomona's budget dilemma--except for developers, who stand to pay approximately $2 million a year to build in Pomona.
The City Council is expected to vote July 24 to impose a combination of a development tax and development impact fees. Council members disagreed at their meeting Wednesday night on the amounts to charge in fees and taxes, but all supported the concept.
By taxing development, the council can balance the city's $45-million budget, which includes a $3-million increase in funding for the Police and Fire departments, prompted by citizens' complaints of poor service. Earlier, Council members had considered a citywide hiring freeze and cuts in politically sensitive programs to pay for the public safety increases.
$1.3 Million in Fees
"The staff knew that we weren't going to raise taxes and we weren't going to cut services," said Councilman C.L. (Clay) Bryant, who proposed the tax on development last month. "We just had to find a way to do it. This will go a long way toward helping us with our general fund."
Under one proposal, based on development projections, developers would pay fees totaling $1.3 million to cover the cost of improving roads, installing traffic signals, buying additional police and fire equipment and purchasing or improving parks. A development tax would add a projected $700,000 to the city's general fund. Planners said the actual revenues could be higher or lower, depending on changes in the economy.
Revenue from fees may only be spent on the services for which they were collected. Taxes, on the other hand, go to the general fund and are spent at the council's discretion.
Council members said this week that they would prefer a higher tax combined with correspondingly lower fees to give them greater latitude in allocating funds. Bryant suggested doing away with the special fees altogether in favor of a larger tax.
Were such a schedule put into effect, it would increase the cost of building a 1,700-square-foot tract home by almost $1,800, add $61,000 to construction costs for a 40,000-square-foot office building and boost the cost of a 300-room hotel by more than $172,000. Council members acknowledge that these expenses will be borne ultimately by new homeowners and business people.
On the Backs of Consumers
"It has to be on the backs of the consumers, unfortunately," said Councilman Tomas Ursua, who works as a residential builder. "But looking at it both as a person who would build a house and as one who would buy a house, I think it's palatable."
Pomona is desperate for commercial development to bolster its sales tax revenue. However, supporters of the development tax said the city has been charging bargain-basement fees.
The only impact fee Pomona currently charges developers is $125 per housing unit to pay for city parks. Of 14 Southern California cities surveyed by Pomona planners, only Glendale--which has no park fee--charged less for parks. Neighboring Claremont charges $3,000 per unit.
"Obviously we don't want to price ourselves out of the market," said Mayor Donna Smith. "Many of the developers are used to paying the fees anyway. On the park fees, we rank the lowest. I don't want us to be higher than anyone else, but I don't want us to be on the bottom.... We want to be competitive."
So far, businesses haven't reacted to the proposed tax. Paul McClure, executive vice president of the Pomona Chamber of Commerce, said a chamber committee will decide later this month whether to take a position on the issue. McClure noted that chamber members have supported the city's increase of utility taxes for businesses and a 30% business license surcharge.
"They're concerned for the overall well-being of the community," McClure said. "It's not like the chamber takes a knee-jerk position against additional fees and taxes."
Under the city staff's initial proposal, developers would pay for traffic signals and road improvements based on the number of automobile trips generated by a project after it is completed and occupied. The public safety fee would be assessed according to square footage. Home builders would pay $675 per unit to buy and improve parks.
The proposed development tax, based on a project's total assessed value, would be 0.5% for a single-family home, 1% for a commercial or industrial project and 1.5% for an apartment or condominium.
Interim City Administrator Tom Fee said, however, at least some of the money from charges on development should be earmarked for needed public improvements.
"The flexibility's there with taxes, but the chance that that money could be used to balance the budget is even greater," Fee said. "Some of the programs that depend on that money could suffer." Other options requested by the council are a tax and fee combination in which two-thirds to three-fourths of the revenue raised would be in the form of taxes.
The only nearby city comparable in size to Pomona that charges a development tax is Pasadena. All new construction in that city is subject to a tax of 1.5% of a project's total assessed value. Pasadena also imposes impact fees for parks and road improvements.
By comparison, a developer who paid $3,306 to build a single-family home in Pasadena would pay $1,790 in Pomona. Taxes and fees for a 40,000-square-foot office building would be $120,995 instead of $61,018, and the cost of building a 300-room hotel would be $459,750 instead of $172,800.
Although the taxes and fees charged in Pomona could increase depending on the system the council chooses later this month, officials said the city will continue to be a cheaper place to build.
"Our objective at this point would be to be a little lower than the average, so we would be a little more attractive to developers," Fee said. "I don't think Pomona needs that edge. We've already got developers knocking at our door."