Council Puts $1-Billion Fee Plan on Hold : Government: A delay is ordered after business interests warn that the taxes on new development could devastate San Diego’s economic growth.

The City Council on Monday postponed a plan to impose about $1 billion in fees on new development after the business community warned the new taxes could crush San Diego’s economic growth.

In the face of intense lobbying from businesses, hospitals, developers and others considering expansion in San Diego, the council agreed to delay 90 days before debating the so-called “citywide impact fees” that would generate the money needed to build a new central library, some major roads and trolley improvements over the next 20 years.

The time lag will allow the council to hire a consultant to analyze the impact of the fees on the local economy and other sizable new assessments and fee increases being considered or recently adopted.

A coalition of business groups has tentatively agreed to pay for the study--which could cost more than $75,000--but Monday’s meeting bogged down over how much influence that group would have over the choice of the consultant.

The delay represents a victory for business and industry, which have argued that council proponents of the fees were not considering the cumulative costs of all the new assessments--levies that could, they say, cancel construction or expansion projects.

“It’s a start to pulling back and beginning at least a trend toward analysis of what they had been lurching forward into adopting,” said Wayne Raffesberger, executive director of San Diegans Inc., a downtown lobbying group that last week organized opposition to the fees.

“I think what we’re going to find out is that there needs to be a different way to raise revenue for the city,” said Julie Dillon, president of the Building Industry Assn., who believes that the council should consider a trash collection fee, increased business license fees and other assessments in order to lower the size of the proposed impact fees.

The leader of a citizens’ organization that favors growth management and the new fees decried the delay, predicting that the economic study will lead to lower fees and, consequently, an added burden on taxpayers to fund the facilities and services that new development does not.

“They clearly caved in to what was very intense pressure from the building industry,” said Peter Navarro, chairman of Prevent Los Angelization Now! “What they have done by caving in is perpetuate budget deficits that will require new taxes or budget cuts or both.”

Faced with a $1.93-billion shortage of funds for roads, parks, and other facilities and services, the council ordered development of the fees a year ago in the hope of forcing new projects to pay for some of the projects used by all San Diegans.

Fees on new development now generally pay for infrastructure and services only in the community that surrounds the project.

The variety of fees recommended by city staffers would generate, according to the latest revised estimates, about $921 million over the next 20 years.

In recent months, however, developers and businesses have become increasingly vocal about the burden the impact fees would impose on them when combined with increased sewer and water connection fees, a levy approved by the council to generate money for low-income housing, proposed regional transportation fees and the community fees already collected by the city.

At a news conference last week, San Diegans Inc. President Bob Lichter said the total fees for a 400,000-square-foot office building downtown could reach $10.1 million if all the recommendations being considered are adopted.

“When added to the costs of land and construction, the fees would take most projects over the edge into financial infeasibility,” a San Diegans Inc. report indicated. “If all the fees become reality, they would raise costs so high that business or institutional projects would simply never be initiated.”

In a separate report last week, Deputy City Manager Severo Esquivel estimated that total fees for a 26,544-square-foot office building in Center City would be $470,750. A 1.7-million-square-foot research and development project in North University City would have to pay $18.3 million; a 40,000-square-foot retail center in Kearny Mesa would generate $1.24 million.

The fate of Monday’s postponement was sealed Thursday, when council members Judy McCarty, Bob Filner, Linda Bernhardt and Wes Pratt issued a memo saying that they had “become concerned . . . that the proposed impact fees may work against” promotion of economic development and job creation.

The memo allied the council members with Mayor Maureen O’Connor and Councilman Ron Roberts, who had expressed hesitation about the size of the fees.

“It is a fact that at some point higher taxes and fees do not produce more revenue but rather produce less revenue because the taxes and fees inhibit economic activity,” the four council members wrote. “Such may be the case with the proposed impact fees.”

In calling for an economic analysis, the four proposed phasing in the fees over three to five years, instead of imposing them immediately.

Given the size of its deficit for needed infrastructure, however, the council was careful to warn businesses and developers Monday that some increase in fees is inevitable. Those who will pay responded that they are willing to bear a share of the costs of the new projects, but cannot pay the sizable levies now proposed.

“We know there are going to be some kind of fees,” O’Connor said. “We just don’t know what.”

Pratt warned that the city still faces the prospect of developing revenue to fund badly needed parks, roads and other facilities in inner-city communities, projects that the new impact fees would not pay for. Supplying such facilities and services is a key component of the growth-management plan approved by the council April 5.

“We’ve got to do something to fund our existing capital deficiencies. Without that (element) in the equation, none of this works,” Pratt said.