A hefty increase in developer fees proposed by Oxnard's city planners has created an uproar in the city's development community. Builders go as far as predicting that approval of the fee hikes will ruin the city's finances.
But the city officials who drafted the new schedule--which includes a 127% increase in fees to ease traffic problems--aren't backing down. They say that the fee increases are fair and that developers are simply crying wolf.
Oxnard, with the largest population of any city in the county, already has the highest development fees in the county. The proposed increases would make the cost of building there prohibitive, developers say.
Moreover, they say, the cash-strapped city has become so dependent on developers that, in its attempt to get more money out of them, it is killing the goose that laid the golden egg.
One developer has threatened to sue the city if the new fees are adopted, and several others said they will take their business elsewhere if the city doesn't back off. The Oxnard Chamber of Commerce officially opposes the fees, and about 20 developers have met at the chamber's offices twice this week to map a strategy to fight the city proposal.
The new fees will be considered Tuesday by the City Council. City Manager Vernon G. Hazen, in an attempt to avoid an early showdown with the development community, has recommended that the council postpone action on the most disputed fees, including the traffic fee, until after a July 2 public hearing on the subject.
But unless a compromise is worked out, council members said they could be placed in the difficult position of choosing between their staff's recommendations and the desires of the community that financed much of their political careers.
Under the city proposal, landscaping plan checks and inspection fees would go up 27.5%. Planning division fees would be raised 36.2%, water-connection fees 29.6% and waste-water connection fees 30%. Building fees would go up 17.7%, development processing fees 27% and storm-drain improvement fees 9.9%.
Perhaps more than any other city in Ventura County, Oxnard depends on sustained growth. Oxnard, one of the county's fastest-growing cities, penciled in almost $8 million in expected developer fees on the 1991 budget.
About half of the developer fees will be used to support the city's $63-million general fund budget. The rest will be used to pay for infrastructure additions, such as water pipes and utility lines, as part of a six-year, $41-million plan approved by the council in 1990, said Julie Hernandez, the city's management analyst.
Developer fees are especially important in this pro-growth city, because other sources of revenue are drying up, city officials acknowledge. For the past five years, the city has had to dip into its dwindling reserve fund to overcome a chronic operating deficit.
Earlier this year, the City Council made drastic cuts in city services and eliminated about 70 positions to reduce expenditures. Still, more than $1 million in reserves will be needed to balance the budget this year, city analysts predict. City officials expect to balance their books in fiscal 1992.
But developers say the city won't get anywhere close to raising the kind of revenues it needs to overcome its fiscal problems if the new fee schedule is approved as proposed.
"At a time when the city is in great need of revenue from developer fees, they are pricing themselves out of the market," said Aaron Raznick, a longtime Oxnard developer.
"If the city needs more money from developer fees, the correct response is to lower them or leave them alone," Raznick said, adding that all future development his company had planned in the city has been put on hold as a result of the proposed increases.
"With the new fees, they're going to drive away what few developers are left in the city," said Monte Risvold, senior marketing consultant with Grubb & Ellis, a leading commercial brokerage firm.
"The City Council says it wants affordable housing, but by raising fees, they are making it that much harder," he added.
Zelman Development Co. controls 85 acres in northeast Oxnard and had planned to build about 1,000 moderate-income units on them targeted at employees from the nearby industrial park. But when the city unveiled its plan to raise fees, those plans were put on hold. The company has retained local attorney Kenneth M. High Jr. to look into suing the city over the proposed fee hikes.
"You just won't have any construction with these new fees," High said. "You just can't support the additional fees. In the low- and moderate-income housing, they would eat up the entire profit margin."
High said he believes that the fee increases are illegal, because the city is asking developers to upgrade faulty infrastructure that is already in place, as opposed to building new infrastructure to accommodate new growth.
"New development is perfectly willing to pay its way, but it is not willing to pay for the upgrade of the city," he said.
Steve Molhart, president of the Oxnard Chamber of Commerce, said the fee increases would be felt throughout the city.
"It's gotten to the point where the business community at large is very concerned," he said. "As the recession runs deeper, these costs will be passed on to the buyer or the property user. We'd like to see lower fees."
But city officials said developers routinely complain about fee increases and predicted that the protests will die down once the developers fully understand what they are paying for.
"Developers are not being asked to pay for infrastructure that affects the entire city. They are being asked to pay for the impact of new development," said Bob Weithofer, Oxnard's traffic and transportation manager.
Weithofer came up with the proposed 127% traffic fee increase, which will be used to build new roads and expand existing ones. The traffic fee has been singled out by developers as the most troublesome in the entire package.
"Oxnard charges more than other cities because it does more with the fees," Weithofer said. While other cities require that developers make city improvements at their own expense to get a building permit, Oxnard routinely reimburses developers for installing a traffic signal or expanding a right-of-way in the city, he said.
Moreover, Hernandez, the city's management analyst, said part of the reason that Oxnard's fees appear to be high is that other cities may be shifting some of the development costs to the taxpayers.
"We received strong direction from our council that development pay its own way," she said. "Other cities may not be recovering the full cost of development."
Hazen said the developers' claims may be misdirected. Booming real estate prices--not developer fees--are causing development costs to skyrocket, he said.
"If you really want to know what makes housing expensive in the city, you should look at what people are asking for a piece of property," he said. "I just bought a house in Oxnard, and they charged me $75 a square foot for the property alone. So who's getting the money?"
Marlin Buirge, president of the Oxnard Board of Realtors, dismissed Hazen's comments as outrageous. "He's trying to shift the blame on us, but it's not our fault that the market is in the condition it is in."
In the end, the responsibility for adopting or repealing the new fees will fall on the City Council, a body that has been heavily dependent on developer contributions to finance its election campaigns.
Mayor Nao Takasugi, who raised a record $160,000 in campaign contributions--many of them from developers--in last year's mayoral race, said he is hoping for a compromise between his staff and his main contributors.
"I hope we can come up with something palatable to both sides," he said. Takasugi favors lowering the proposed traffic fees.
"If we come up with a sufficient reduction in the traffic fees, my gut feeling is that developers will live with the rest of the fee increases," he said.
But Councilwoman Dorothy S. Maron--who campaigned unsuccessfully against Takasugi on a slow-growth platform in last year's race--said she believes that the proposed hikes are reasonable and developers can afford them.
"I don't want to antagonize developers, because I depend on them for contributions, but development costs are going up, and somebody has to pay for them," she said.
"It used to be that businesses and residents subsidized growth, but with the recession, we don't have that luxury anymore. I understand that developers are unhappy to see their costs go up, but I don't think the fee increases are going to slow anything down in this city."
Developer Fees in Ventura County Ventura: $13,600 Moorpark: $14,000 Camarillo: $16,500 Thousand Oaks: $19,000 Oxnard: $21,000 / Proposed: $26,500 Estimates based on 2,000 sq. ft. single family house, subject to minor variations. Source: Building Industry Assn. Greater Los Angeles / Ventura Region