Gilroy
– A laundry setting up shop downtown may need 2 million quarters
to pay off a tab at City Hall.
Gilroy – A laundry setting up shop downtown may need 2 million quarters to pay off a tab at City Hall.
Owners of the Laundry Room at 7777 Monterey St. are being asked to pay $581,303 in development fees before they can tap into the city’s sewer and water lines.
“We already spent $400,000 on laundry equipment,” said Bruce Rhett, one of the partners in the business. “We would have never bought the property if we knew this was going to happen.”
Rhett said he has a letter written in 2005 by former building official John Greenhut, promising that the project would not be charged “impact fees” under a program aimed at luring new businesses downtown. City officials have already freed the developers from $400,000-plus in fees, but staff members say the business is now seeking to expand its operations at the city’s expense. They are recommending that city council force the laundry to pay the fee and, more broadly, reconsider which businesses should qualify for the incentive program in the future.
“If we made a commitment to them that was used to justify them taking a particular action, then I think we need to stand by our original commitment,” Councilman Craig Gartman said.
The plight of the laundry, he added, raises a “red flag” about the fees the city charges developers. For instance, the laundry’s fees are assessed at the standard rate of $7,308 per 1,000 gallons of water per day, and $3,884 per 100 gallons of sewer water per day. Those fees represent the lion’s share of costs for the laundry, which Rhett said is seeking to use 22,444 gallons of both types of water each day.
Such fees are just one slice of the thousands – and often hundreds of thousands – of dollars normally levied against developers to offset the impact of their projects. The fees channeled into so-called “impact fees” help pave roads, upgrade the sewer plant and install new water mains, among other things.
The laundry may face an uphill battle as officials scramble to find ways to plug budget deficits stemming to a large extent from the “downtown fee waiver” program. Every dollar the city waives must be paid back using money from the general fund, which finances firefighter salaries, parks and recreation programs and other daily operations of the city. For the current fiscal year, officials are projecting a $2.7 million budget shortfall, with more than $2.1 million of that going to pay back waived development fees, according to City Administrator Jay Baksa.
Unlike other city incentive programs in which businesses pledge to provide a certain number of jobs or sales taxes, there is no “quid pro quo” in the downtown program, Baksa said.
“If we were going to give a fee waiver on something that requested enormous amounts of water, that money comes straight out of the general fund,” Baksa said. “And since there’s no revenue coming back, it makes the (budget) situation more difficult because there’s no revenue to back fill it.”
The situation is complicated by disagreement over the original request for water service. Rhett said he and his partner John Burks initially requested 32,250 gallons of water daily, but agreed to the lower figure of 22,444 at staff insistence.
A staff report suggests that the laundry’s 51 machines only require 450 gallons of water each per day. But that figure is pegged to a national average of four “turns” – or loads – per day, Rhett said. In practice, he said a more realistic figure is 10 loads a day.
Rhett based his figure on a study of the roughly 15 laundries in Watsonville. He predicted that machine usage in Gilroy would rival or exceed that of its similarly sized neighbor, especially since Gilroy now only has four laundries and none are located in downtown.
Mayor Al Pinheiro declined to comment on the laundry’s situation, but said it is time the city grew more selective in which businesses get to sidestep fees in downtown.
“We have a vision for downtown that was captured in the Downtown Specific Plan,” Pinheiro said. “It gives us certain types of businesses that we want downtown and we’ve given direction to our (economic development) director to get businesses that would fit in our downtown. I believe we should begin to do that.”
On Monday, council will review a list of businesses staff has recommended disqualifying from the fee waiver program. In addition to laundries, the list includes car washes, gas stations, tire shops and mortuaries. Businesses recommended to continue receiving fee waivers include antique shops, bars, gyms and restaurants.
