Gilroy
– After months of multiple consultant studies and hearing
comments from developers, the city council decided to raise
Gilroy’s development impact fees, though not as high as some had
initially feared.
The revised fees will go into effect the first of the year.
Impact fees are the up-front costs that residential, commercial
and industrial developers must pay for future capital improvements
that are listed in and based on the city’s General Plan. Those
projects include improvements to traffic, sewer, water, police,
fire, storm drain and public facilities.
Gilroy – After months of multiple consultant studies and hearing comments from developers, the city council decided to raise Gilroy’s development impact fees, though not as high as some had initially feared.
The revised fees will go into effect the first of the year.
Impact fees are the up-front costs that residential, commercial and industrial developers must pay for future capital improvements that are listed in and based on the city’s General Plan. Those projects include improvements to traffic, sewer, water, police, fire, storm drain and public facilities.
Traffic impact fees
One of the biggest changes between the current impact fee system and the new one is the increase in what developers will pay for the city’s future traffic-related projects.
The most drastic increase will go to builders of high-density commercial developments, whose traffic impact fees will go up $7,924 per thousand square feet. The least drastic increase will go to developers of industrial warehouses, whose traffic impact fees will go up $1,125 per thousand square feet.
Council learned two weeks ago that traffic impact fees could be reduced 25 percent from what an initial study showed.
At Monday’s meeting, city staff presented council with a new study showing that the fees could be reduced an additional 3 percent if the construction costs of each listed city project were reviewed every five years.
Additionally, the new study showed, the traffic impact fees could be reduced another 9 percent – 37 percent in total – if those costs were reviewed annually. Council voted unanimously to adopt the annual review update.
For home builders, the decision to review the projects annually is good news. Home builders, whose projects usually don’t take five years to complete, will be able to adjust their traffic impact fees on a yearly basis. If the costs of construction for city-related projects go down, so will the traffic impact fees.
But a five-year review would be better for commercial and industrial developers, because builders of those types of buildings are more likely to want to come to Gilroy if they know their fees won’t fluctuate while they are building their projects.
The council’s decision came as a mixed bag to Bill Lindsteadt, executive director of the Gilroy Economic Development Corp., who has warned the city repeatedly over the past few months that the high impact fees could chase away potential developments.
Additionally, Lindsteadt has said, commercial developers should not have to pay high fees for traffic impacts because they don’t cause as much traffic as other developments.
“The costs are still high,” he said. “I’m concerned that we’re still almost double in traffic impact fees for commercial and industrial developments.”
He added that the revised traffic impact fees, while lower than what’s been proposed twice before in the traffic impact fee study, might still be high enough to drive away new development.
Beverley Bryant, executive director with the local Home Builders Association chapter, said the association is happy with council’s decision.
“We’ve been pleased to work with the city on this over a multi-year period,” she said. “We’re pleased the council was willing to work with us, especially on the traffic impact fees.”
The Home Builders Association in 2002 challenged the city’s fee structure, claiming builders were paying more than their fair share for the public infrastructure. The group threatened to sue the city if the impact fees were not justified or revised.
Bryant also asked council Monday to take another look at the proposed sewer impact fees, which help pay for improvements to sewer systems. The proposed sewer impact fees for a low-density residential unit are about $4,300 more than the current system.
Mayor Al Pinheiro agreed the city should reexamine the sewer impact fees.
Further reductions possible?
The traffic impact fees have gone down a total of 37 percent since the initial study. That has councilman Craig Gartman wondering how many of the other impact fees could be whittled down, and by how much.
“Why don’t we take a look at those other fees and see what we could do?” he said. “I don’t see the rush. Let’s take our time and really look at the other fees. If we were able to take off this much for traffic, who’s to say we couldn’t do the same for the others? Maybe that’s nitpicky, but that’s council’s job, to be nitpicky.”
Susan Jacobson, a residential real estate agent and Gilroy resident, echoed Gartman’s concerns, adding she didn’t want Gilroy to lose valuable commercial and industrial development that could better the community.
“Let’s not be in a rush with this,” she said. “I do not want to see Gilroy become a bedroom community … Let’s agree on something that we can really live with.”
Economic incentives
But there is light at the end of the tunnel, Lindsteadt said. The city said it will consider restructuring its economic incentive program for industrial businesses, which provides incentives to builders depending on how many jobs the new businesses provide.
If the incentive program is reworked to include more industrial developments, that could help offset the increased development impact fees, Lindsteadt said.
Craig Filice, a commercial developer with the Glen Loma Group in Gilroy, said he’s encouraged that the city seems sympathetic to the burden the new fees would place on commercial and industrial developers.
“From the commercial side … (the council’s decision) is a compromise, but it’s still painful,” Filice said. “But this mayor and this city council are very interested in creating jobs, and they seem very willing to work with us … If they are able to liberalize the (economic incentive) policy, it should help ease the burden for commercial and industrial developers.”
Lump-sum fee
Another change in the revised impact fee system is the consolidation of some of the fees.
Under the current system, the city charges five separate fees for future upgrades to parks, libraries, the police services, fire services and general public facilities such as City Hall.
Under the new system, approved 6-1 by council, the five fees will be consolidated into one lump sum, called a public facilities impact fee.
Gartman, the dissenting voter, said he didn’t think consolidating the five fees was a good idea, an opinion he has had since the study on restructuring the city’s impact fees began.
Dollars that are collected for specific improvements should go toward the projects they’re intended for, he said.
“My problem is that if we’re collecting it for a specific reason, that’s where the money should be spent,” he said.
But the other council members and Mayor Al Pinheiro did not agree with Gartman, saying the lump-sum fee will give future councils more room to spend the money where they see fit.
“(The consolidated fees) give future councils the flexibility to be more creative, meaning they will have more options to be better able to set priorities on where to spend that money,” Pinheiro said.
The cost to build in Gilroy
Beginning Jan. 1, developers will pay more in traffic impact fees. Traffic impact fees have been the most hotly contested of the seven categories of impact fees: traffic, sewer, water, police, fire, storm drain and public facilities.
Type Current traffic fee Adopted traffic fee
Low-density res. $5,560 per unit $9,108 per unit
High-density res. $4,510 per unit $7,383 per unit
Low-traffic com. $6,150 per 1,000 sq. ft. $10,076 per tsf
High-traffic com. $12,430 per tsf $20,354 per tsf
General ind. $2,400 per tsf $3,994 per tsf
Warehouse ind. $1,770 per tsf $2,895 per tsf
