A month ago, at the Nov. 18 Mammoth Lakes Town Council meeting, Mammoth Mountain Ski Area (MMSA) CEO Rusty Gregory spoke in favor of reducing or waiving the Town’s Development Impact Fees (DIF) altogether. Gregory urged Council to shift from taking money off the “front end” of development using DIF, to collecting money off the “back end” of development using Transient Occupancy Tax (TOT).
DIF, for those unfamiliar with the concept, is a bundle of Town fees charged to developers to mitigate a project’s environmental and service impacts. Fees include law enforcement, streets and traffic signals, transit and trails, storm drainage, parkland and recreation, general facilities, and airport.
The debate over DIF is hardly new. According to research undertaken by Interim Town Manager Dan Holler, Mammoth has charged DIF since the late 1990s. But the Mammoth housing bubble burst in 2008, and in 2010, the Town reduced DIF by 50% in an attempt to encourage development.
In August 2011, Council waived DIF altogether—for certain projects—at the request of the Mammoth Lakes Contractors Association (MLCA). DIF was waived for residential construction of up to four units, including new single family homes, duplexes, triplexes, and quadplexes; new commercial projects; and remodels of residential, commercial, or industrial projects. MLCA hoped a DIF waiver would encourage development through the economic recession.
According to Acting Community & Economic Development Director Sandra Moberly, 7 of 11 project applicants surveyed in Fiscal Year 2011/12 indicated that the DIF reduction influenced them to move forward with their building permit. One applicant was the Rock N Bowl project, whose permit accounted for $113,791 of the total $165,163 DIF fees waived that year.
Although Council had no conclusive evidence that the DIF waiver encouraged development during FY 2012/13, Council again extended the DIF waiver this year.
The total DIF charged to a development varies depending on the development size, location, and projected impact, explained Interim Town Manager Dan Holler. A single family dwelling unit of about 3,000 square feet would come with a DIF of about $30,000, he said. One of the impacts of such a resident might be to street traffic, with a potential impact mitigation (if you had enough new construction in a particular location) of a new traffic signal. “In lieu of [project proponents] building that, they pay an impact fee to offset the impact,” Holler said.
DIF is just one of many fees developers must pay before ever breaking ground. In addition to DIF, developers pay fees to the water district, school district, and fire district. “One argument [about DIF] is how did it get to be up to $20,000 to $30,000 per home?” Holler said. “That’s a legitimate question. Is [DIF] paying for dead service now?”
Holler was referring to long-gestating, and perhaps permanently stalled, Capital Improvement projects. DIF is intended to fund such Capital Improvement projects, yet Town staff are beginning a DIF study in part to identify what DIF funds have actually helped build.
Martin Kleinbard, owner of Mammoth Sierra Electric, referred to the DIF schedule, or “wish list” for Capital Improvement projects during the DIF heyday, as “tremendous.” He added, “My opinion from the beginning was, the DIF schedule had to be reasonable and proportionate to what’s going on in the community as a whole.” Because the “wish list” has been off the table since the 2011 DIF waiver, tracking down the actual projects intended for DIF funding presents a challenge.
Moreover, although the Government Code (66000) pertaining to DIF requires the local governing agency to “identify the use to which the fee is to be put,” it also creates a loophole by adding that the identification “may be made in applicable general or specific plan requirements, or may be made in other public documents that identify the public facilities for which the fee is charged.”
Tim Flynn of Tim Flynn Constructions expressed his frustration that this loophole often obfuscates the connection between a development and the impact its DIF is paying for. “There has to be a direct correlation,” he said; “a nexus between the project and the impact that it’s having. The fact of the matter is that, when you collect a fee for a project and then don’t use those fees for anything that directly correlates with that project, you owe the money back. That’s where it gets sticky.”
Kleinbard also pointed out that it took the Town so long to create its “wish list,” and to come up with a cost estimate for projects, that the Town never had the chance to implement the list before the housing bubble burst. “They need to implement the schedule, and ease it in as the markets are going up,” he said. Town Clerk Jamie Gray assured him at Thursday’s MLCA luncheon that “we’re trying to get ahead of the curve this time.”
To ensure that DIF fees are reasonable, and that the money goes toward necessary projects, Dan Holler said he aims to hire a consultant to assist with a DIF study and an update to the Capital Improvement Plan (CIP). “We may have something that’s no longer required,” Holler said, “or we might have a project that’s been completed.” He offered the example of funding set aside for law enforcement for the purchase of vehicles. “But if we have downsized the [Police] Department, we won’t be buying 55 vehicles over the next 25 years,” he said. “That could move out of the impact fees. It might change the fee by a couple hundred dollars.”
Thus far the moratorium on DIF has benefitted development in Town, Tim Flynn said. He pointed to the example of a remodel in the Knolls neighborhood that would have had to pay $8,816 in DIF for a 1,400 square foot addition to an existing home. “That remodel happened because of the moratorium,” he said.
In Flynn’s opinion, “Because of its real lack of teeth, I don’t see [DIF] coming back.” With DIF in the past, “even at a zero land value, even if you own the land right, it [a project] just doesn’t pencil,” he said. He pointed to the example of his own single family home. “I’m a business owner in Town; I’ve worked very hard to get where I’m at, and they’re charging me $22,000 in fees [including water and school district fees]. That’s my kitchen; that’s my excavation and foundation. It’s going to definitely put a dent in my budget.”
Between DIF, additional fees, architecture, engineering, and permit expenses, Flynn projected a cost of about $50,000 “before you touch the dirt. That’s why people live in Bishop and Crowley,” he said.
But while DIF might be waived for the time being, Holler said the Town wasn’t considering permanently doing away with the fees. “We want to get them more focused,” he said. “We still need them for mitigation. Does development over time impact our Police Department service [for instance]? The answer is yes.”
In the meantime, staff will be working on a comprehensive DIF study. Said Sandra Moberly. “The study would include an evaluation of the projects that are currently funded by DIF and whether the projects should be removed from the funding list or whether funding should continue,” she said.