Study on Proposed New City Fees Contains Few Surprises

There are few surprises in a long-awaited study that San Diego City Council will use to help determine the economic consequences of proposed citywide impact fees the council is considering to help pay for $3.6 billion in infrastructure that San Diego will need by 2010.

The $70,000 report, which was paid for by the Coalition for San Diego, a group with business and development interests, suggests that the $911 million in proposed fees would increase the cost of building homes, industrial developments and commercial and office space to the point that many projects would no longer be economically viable.

According to the report, the increased fees would:

* Cause the Gross Regional Product, one way of measuring the city’s economic health, to stall or slip.

* Prompt more employers--both out-of-town firms considering San Diego for relocation and existing San Diego companies considering expansion--to consider other, less-expensive locations.

* Increase unemployment, especially among construction industry workers, and reduce the average San Diegan’s annual income.

Business and development executives hope that the report will steer the growth-control debate away from “symptoms, so to speak . . . to talk about the (economic) consequences,” said Mac Strobl, an executive with TCS Governmental Services, a local firm that is managing the coalition’s business affairs.

According to the report, fees or general obligation bonds backed by increased property taxes would prompt “slower economic, employment and population growth, lower labor demand, higher prices and lower incomes.”

“There are unacceptable economic impacts,” Strobl said. “Anyone who has followed (growth-control issues) for the past 15 years ought not to be surprised” by the report, Strobl said.

Strobl said the report underscores the need to “find a prudent and appropriate balance . . . that addresses the needs of the city without damaging the economic health of the community.”

The report suggests that the city’s proposed fees, when coupled with regional fees being proposed by the San Diego Assn. of Governments and other government agencies, would have a dramatic impact on non-residential construction.

The average existing fees for a single family home in an “urbanizing” area such as Rancho Bernardo or Carmel Mountains, is now $16,804. With the proposed citywide fees, new sewer and water fees and regional fees, that total would jump to $27,142, according to the report.

High-priced residential projects would be the least affected by the proposed citywide fees and the regional fees being considered, but the impact on non-residential development would be “more severe,” according to Strobl.

Although high-end residential construction would probably continue, “lower-priced single-family as well as multifamily would be impacted” by the fees, Strobl said.

“If you look at commercial and industrial, the consequences are fairly severe” unless developers can eliminate land-acquisition costs or dramatically increase rents, Strobl said. “The reality is that you are going to severely curtail the nature of that kind of development,” Strobl said.

The fees are part of the council’s proposed 20-year capital facilities plan to maintain San Diego’s quality of life. According to best estimates, the city needs to invest $2.3 billion in citywide infrastructure and $1.3 million in community facilities.

Council members have identified sources they believe will provide $1.3 billion in revenue. In addition, they are seeking $911.7 million in the form of citywide fees and hundreds of millions in other types of fees.