Gilroy
– City schools want to triple developer fees to shore up a
dismal financial picture, expecting to generate an additional $20
million by 2015.
Gilroy – City schools want to triple developer fees to shore up a dismal financial picture, expecting to generate an additional $20 million by 2015.
District officials explained the fee hike – expected to take effect by July 1 – to more than 20 area developers at a joint meeting Friday. The two sides were brought together in large part after a ban on all construction was among the more draconian plans that school officials proposed in December.
While largely in agreement, the developers had reservations about the hikes.
“My only concern is if it’s too low,” said James Suner, developer for The James Group. “I would consider agreeing to an increased fee provided its not going to go up again in two years and I also want to know that it’s going to solve the problem.”
The extra $20 million would only address the current $14 million facilities deficit and projects outlined in a so-called Facilities Master Plan, said Steve Brinkman, assistant superintendent of business services. The master plan details construction and renovation efforts through 2027.
“From our standpoint, (increasing fees) is a zero-sum game,” he said. “This doesn’t pick up anything or add anything to the queue. To do that, we’d need to pass a bond.”
Although residents will not see the additional costs in their taxes, they might see it reflected in the cost of housing. The increased fees would increase the cost of developing a 2,500 square-foot single-family home by $9,950.
Rather than absorbing the additional costs and assume a lower profit margin, some builders implied they’ll simply pass it on to consumers.
“Ultimately, at the end of the day, who’s bearing that cost?” asked Tody Sudol of ACS Ventures. “The ones buying the house.”
A state law caps the amount a school district can levy against developer at $2.63 per square foot of residential development. As a result, the additional $3.98 asked for by the district would be voluntary.
Enforcement of the extra money from developers would be based on a peer pressure system, Brinkman said.
“No one wants to think someone’s not stepping up when they are,” he said.
The district would also be open to alternative types of contributions, Brinkman said. Those he suggested were donations of land, facilities or developer-built schools.
While this last option makes it possible for larger developers to ensure homebuyers have access to a new school, smaller developers worried that their extra contributions would go to schools on the other side of the district.
“Can I ensure that it gets used in the school that my future owners are going to go to,” asked Gerry de Young of Ruth and Going Inc. “Because if I can’t get that, I’m just giving money out.”
The money could not be earmarked for a particular school, Brinkman said, but developers could build facilities at schools of their choice.
The district’s financial woes largely stem from a legal settlement with Glen Loma Group, the developers of the massive 1,500-home Glen Loma Ranch in southwest Gilroy, in which GUSD had to pay significantly more money than they had anticipated for land on which they had once owned and had to buy back, and from spiraling construction costs to complete Christopher High School.
As a result, the district appreciates any type of giving, Brinkman said.
The developers would not agree on any fee increase at the meeting, but agreed to meet again on their own.
They said they expected to have a progress report ready for the district within a month.
As for increasing the fees by July 1, developers were skeptical.
“To tack (the fee increase) on to an existing project is really hard to stomach,” said Suner. “It could kill a project.”
Despite the concern, developers were intent on stating their support of additional funding for schools.
“I think basically we’re fundamentally supportive of the increase in fees,” said Young. “It’s important to support the local schools.”
“How to impose these additional fees on developers” is the question, said local developer Sal Akhter.
