The Huntington Beach City Council voted Monday to establish new development impact fees and adjust existing ones, a move that a local business leader said could lead developers to shy away from building in the city.
The new fees are expected to generate $154.8 million if the entire city is built out, including a $20-million increase from the current impact fees, according to a city staff report.
Impact fees are paid by developers to allow cities to offset additional public service costs stemming from new developments. The one-time fee pays for services such as water and sewer systems, roads, libraries, and parks and recreation facilities needed due to the increase of residents in the area.
For many years, the system Huntington Beach had in place for impact fees was not as easy for developers. Fees were due at different stages of the project, and the entire cost was not known from the beginning.
The new system provides developers with their total cost up front, and the money will not be due until later in the process, said Mayor Don Hansen.
The development impact fees in Huntington Beach traditionally focused on single-family residential developments.
The economic downturn has shifted development conditions from building homes to building rental units such as apartments. Development impact fees for building rentals in the city was too low and needed to be adjusted, Hansen said.
Likewise, the single-family residential development impact fee was too high and has been lowered.
"The idea was that we needed to balance the equation," Hansen said.
There were also two new development impact fees added to pay for fire-suppression facilities and law enforcement facilities.
Huntington Beach sought the help of Revenue & Cost Specialist, L.L.C., which calculated and came up with fees for the city.
Coming up with the fees was the easy part.
Getting the council to agree on how to implement them and phase the old ones out was a long and sometimes contentious process over several City Council meetings.
Hansen proposed not imposing the new fees until the fall of 2014. Councilman Devin Dwyer wanted an incremental increase of 25% for the next four to five years to reach 100% of the cost specialist's recommendation. Councilman Joe Carchio wanted an incremental increase of 30% for the next three years to reach 90% of the recommendation.
Carchio's proposal passed in a 4-3 vote, with Hansen, Dwyer and Councilman Matthew Harper opposing.
On one hand, council members were aware of the city's need to adjust and increase development impact fees to keep up with the demand and generate additional revenues. But on the other hand, the council was sensitive to developers and wanted Huntington Beach to remain business-friendly.
"We're open for business if you pay your fair share of the impact your development will have on our city," said Councilwoman Connie Boardman.
Huntington Beach Chamber of Commerce President Jerry Wheeler urged the city not to hike the fees on developers, but rather come up with alternatives to continue to provide services in a cost-effective manner.
"It is the chamber's position that raising development fees or any fee in order to simply continue conducting business as usual is a disservice to the community," Wheeler said.