City Retreating on Developer Fees : Growth: A council committee rules that the recently approved fee plan combined with the economic downturn would be too much for the city to bear.

Fearful that a new development fee that it approved only last month could seriously damage San Diego’s economy by discouraging business investment, a City Council committee Thursday retreated from the plan, sending a 1 1/2-year debate over how to pay for new roads, libraries and other public facilities back to square one.

By a unanimous vote, the council’s Transportation and Land Use Committee delivered, if not a death blow to the “citywide impact fees” passed in October, at least a blow sufficiently severe as to leave the fees clinging to political life support at City Hall.

Although the fees are scheduled to take effect Dec. 1, Thursday’s committee action, combined with earlier backpedaling from the council on the volatile issue, left little doubt that the fees will be placed on indefinite hold when the matter comes before the full council later this month.

“The council basically sealed the coffin on impact fees and closed the door on growth management,” said a disappointed Peter Navarro, chairman of the slow-growth group Prevent Los Angelization Now, known as PLAN. “All the rhetoric we’re hearing from the council now originated with the developers, and they’re just convenient puppets for the status quo.”

Not surprisingly, the committee’s members offered a different perspective on Thursday’s action.

With the nation’s economic downturn already acting as a brake on development--thereby minimizing the immediate need for tougher growth restrictions--some council members argued that the additional burden of the new fees could simply drive up housing costs and discourage businesses from locating or expanding here. Though that concern was expressed throughout the months-long debate that preceded last month’s council action, the growing signs that the nation might be entering a recession have exacerbated those fears.

“Increasingly, companies that are here and want to expand are not opting for San Diego,” said Councilman Ron Roberts, the committee’s chairman. “If you’re a business (executive), not only do you have . . . an economy that is forcing you to deal with some ifs, buts and maybes, but you have also have to deal with a local government that is throwing you some of the biggest curves imaginable.”

Under Thursday’s committee action, the city manager’s office will again review the entire issue of public facility financing over the next two months. Among other issues, the questions to be examined include the availability of other revenue sources beyond the impact fees and a so-called “city form” concept in which the fees would vary from area to area, according to the level of city services received.

For example, fees assessed on development that occurs along major transportation corridors conceivably could be lower than those in outlying suburban areas, on the grounds that the former helps reduce traffic congestion.

The absence of “frenzied activity” in the development community because of the shaky economic outlook, Councilman Bob Filner argued, gives the council more time to analyze how any potential impact fees might fit into an overall financing package for public facilities such as police stations, a central library and open space that serve the entire city.

“Maybe it’s time to redefine . . . what we want to do as a city,” Filner said.

Another philosophical objection to the impact fees--at least in the form in which they were approved last month--is that they would heavily assess new development to pay for public needs that would exist even if, as Roberts noted, “we have zero growth.”

“Many of these things are going to have to be done regardless,” Roberts said. “There are major portions of open space we want, even if not a single new person comes. We want a City Hall, a library. All of these are a backlog . . . not necessarily related to new development.”

The program that the council approved last month called for the impact fees to be phased in over a three-year period, with the charges being discounted 75% the first year, 50% the second year and 25% the third year.

During the first year, the fees, which would be imposed both on residential and commercial development, would cost an estimated $1,100 for single-family homes and 95 cents per square foot for industrial development. When the full fee level was reached in late 1993, the cost would been equal to about $4,400 and $3.95 per square foot, respectively.

Mac Strobl, who represents a coalition of business groups seeking reduction of the fees, said Thursday he believes that the committee’s action will eventually achieve that goal, as well as focus more attention on the fees’ overriding policy implications.

“What does this do to our ability to generate jobs? What about housing?” Strobl asked rhetorically. “This was an issue in a vacuum. We built the program (before) analyzing the policy implications. Now we’re going back to square one and doing it the way it should have been done in the first place.”

PLAN’s Navarro, however, angrily dismissed the council committee’s decision as a “total capitulation to the developers” that could lead to higher taxes by reducing or eliminating revenue that otherwise would have been generated by the impact fees.

“What they’ve done is effectively vote the people of San Diego a $1-billion tax hike,” Navarro said. “By making the developers happy, they may make a lot more people unhappy.”