Sitting on a Gold Mine : Critics Say Unusually Low Developer Fees Are Undermining Fresno’s Public Services

As it slices through the heart of this city, California 41 laces a decade of gung-ho growth--fig orchards turned into terra cotta mini-malls, subdivisions rimming fake lakes, and a new uptown mushrooming 10 miles north of the dying downtown.

But beneath boom’s gilt are signs of rot. Air quality is among the worst in the nation, and the unemployment and crime rates rank among the highest in the state. Not a single community park or library branch has been built since the 1970s, and even tree-lined streets seem rare.

Now, some officials in the state’s fastest-growing urban area are expressing doubts about the golden goose of growth. And increasingly they point to the unusually low fees that builders and developers pay.

“When you look at the long-term gains in this community from growth, they just aren’t there,” said Richard Welton, Fresno County director of public works and development services. “No real money is being generated. . . . We’re giving away the store.”

In many California cities, developers must pay hefty fees that help fund new parks and libraries, as well as courthouses, police stations, low-cost housing, major streets, air cleanup and even trees. These fees are intended to soften the less-desirable results of growth.

But in Fresno, city and county elected officials have granted the construction and real estate lobby--their chief campaign contributors--some of the lowest fees in the state. As a result, tens of millions of dollars that might have been used to build new infrastructure were lost.

“The fees that we collect per project are barely enough to provide the streets, sewer and water for that project,” said Rick Sommerville, the city of Fresno’s fee coordinator. “We’re collecting a lot less than other cities, and the quality of life here is suffering.”

To grasp how low developer fees are in Fresno, one needs only look at Modesto, another San Joaquin Valley boom town 120 miles north. To build a basic four-story office complex, a Modesto developer must pay $520,000 to help fund everything from a new expressway loop to an expansion of City Hall.

In Fresno, the same building would cost the developer $90,000 in fees--by far the lowest contribution in any of 15 cities surveyed last year by the California Real Estate Journal.

Ever since this town sprouted from a railroad stop in the 1870s, real estate interests and developers have held sway. Of the five men who made up the first City Council, one was a real estate man and two were land developers.

Former City Manager Ralph Hanley, who imposed this city’s first development impact fees in the mid-1970s, was frustrated by what he saw as widespread building industry graft. When he left office in 1978, he blasted the major local newspaper, the Fresno Bee, for ignoring the “pervasive corruption in municipal affairs.”

These days, critics say, developer influence is exerted through political donations. More than half the money that courses through city and county elections comes from builders, developers, real estate interests and three industry lobbyists, according to official filings.

“It’s hard fighting against that kind of money,” said Selma Layne, one of the few slow-growth advocates here and an official with the Woodward Park Homeowners Assn. “The developers almost always get their way.”

When Fresno imposed fees on developers in the mid-1970s, the city was viewed as being ahead of its time. But the fee structure was never revised during the years when rapid growth transformed Fresno from a raisin town into California’s sixth-largest city, with a population of more than 400,000.

“It wasn’t that we kept fees low to attract growth--it’s just that it never came up as a subject of debate,” said former Mayor Dale Doig, who served on the City Council from 1973 to 1989. “Frankly, I’m surprised that the fees are as low as they are. I had no idea.”

Current Fresno Councilman Tom Bohigian, who has encouraged higher fees, said he recently proposed that new development contribute to a kitty for the city’s dying downtown--a fee some bigger cities now impose.

“It kind of fell with a thud,” he said. “Anyone who tells you developers don’t have influence in this town is blowing smoke.”

Bohigian pointed out that the City Council has approved several fee hikes since 1989 over the protest of the building industry. But these were modest hikes by comparison, and Fresno continues to lag far behind other cities, he said.

“The building industry has got to recognize that over the long run the fees are going to change,” Bohigian said. “But right now, with the recession and all, we’re kind of reluctant to yank the lion’s tail.”

Urban economist Richard Recht estimated that low developer fees have cost Fresno about $230 million that could have helped improve the city over the past five years. To serve the growth that has taken place in that time, Fresno should have raised $270 million in developer fees for capital projects, said Recht, who is based in San Francisco and helps local governments formulate developer fees. Instead, the city generated $39 million.

“Most cities raise at least half of what they need,” Recht said. “Some, like Modesto, are close to 100%. Fresno is way below the average.”

As new subdivisions have pushed the city limits outward, Fresno has slipped to near the bottom of California cities in park acreage per 1,000 residents. The city has grown by 160,000 people since the last community park was built in 1978. Only one high school has been built in 20 years.

The county library system owns just seven of its 32 branch buildings. The money spent on rent could be used for more books and staff if developers were required to help build new branches, librarians said. Money could also be freed to add police if developer fees were collected to help pay for new vehicles and equipment, police officials said.

Jeff Harris, a spokesman for the local Building Industry Assn., denied that developers have kept fees artificially low by manipulating the political process. “It certainly has that perception,” Harris said. “But we’re not buying votes.”

Developer fees are lower in Fresno, he said, because people here earn less--and low fees mean more inexpensive homes. “We’re not a Los Angeles or a San Diego or even a San Jose,” Harris said. “The issue is affordable housing.”

But several recent surveys show that Fresno collects far less from developers than comparable cities and even less than some of its smaller neighbors.

The builder of a three-bedroom tract home in north Fresno pays $3,700 in fees. That same home would cost the builder $5,600 in Tulare, $6,000 in Sacramento, $9,000 in Stockton, $11,000 in Modesto, $16,000 in Vacaville and $23,000 in San Jose.

The gap is wider for office and commercial development. On the theory that leapfrog growth should pay more, Fresno does impose higher fees in fringe areas. But not even these fees begin to address the capital needs, planners say.

“Our fees are higher in the new areas, but we’re still taking a very conservative approach for a city insulated from much of the recession,” said Steve Whittenberg of the city’s development department.

“Developers whine and whimper and go on about ‘affordable housing,’ ” Whittenberg said. “That’s the game. But they wink too. They know they’ve got one of the sweetest deals in the state.”

One reason for the building industry power, Whittenberg and others say, is the community’s complacency about growth issues. There are no strong homeowner associations with a slow-growth bent, and little outrage has been directed at politicians for the declining air quality and public services.

Arguing that Fresno’s future is being squandered, several city officials recently proposed new fees for major street improvements and landscaped medians. But the building industry objected, and the City Council has postponed action.

“The council asked us to meet with the building industry again to work out an acceptable fee,” said a frustrated Ron Anderson, assistant public utilities director. “We call it the ‘Fresno factor.’ It’s the way business has been done around here since the 1950s.”