By Kirk Stapp
On May 5, the Town Council voted unanimously to lower Development Impact Fees (DIF) from $195 million to $105 million to incentivize new development which will compete with existing lodging, restaurants and retail spaces without helping the town create more visitation demand. The percentage DIF funding reduction went from funding 54 percent of the Town’s $390 million in capital facilities to 27 percent.
The adoption of the lower DIF was predicated on a not yet adopted “Community Investment Strategy” (CIS) which will replace the 2007 DIF ordinance. The 2007 DIF essentially divides the responsibility for funding the Town’s $390 million in capital facilities between 1) new development impacts 54 percent, and 2) the Town’s funding responsibility of 46 percent through the Town’s general fund, grants, TOT, etc.
When the Council voted to reduce DIF, they effectively adopted the CIS which hasn’t been discussed and won’t be discussed, according to Town staff’s “Workplan Priorities” schedule, until June 2011. In other words, the Council adopted its $90 million DIF reduction based on a financial plan, the viability of which won’t be discussed until next year.
The new “Community Investment Strategy” (CIS) outlines a financial scheme to replace the 2007 adopted DIF funding strategy. The new funding scheme recommends that the Town’s $390 million in capital facilities be funded through five sources:
1) General Fund: The CIS proposes that the Town, over time, commit an additional 1.5 percent of its TOT dollars to capital projects. The President of the Chamber of Commerce and transition board members of the newly formed Destination Marketing Organization (DMO) apparently believe that this is a better use of TOT dollars than providing additional marketing dollars to support existing businesses. Their silence was disconcerting.
2) Grants: Historically, grant funding supported the Town’s side of financing capital facilities. In the initial CIS draft report, both Measure R and U were identified as grant funding sources for specific projects which, according to staff, won’t be built if not funded. The Town is now proposing that the Town submit proposals and compete for Measure R and U funds. In other words, the Town is going to compete with local groups for Measure R and U funds, asking permission to use those funds to supplant DIF reductions and CBIZ trade-offs.
3) Partnerships: Partnerships is a polite way of the Town asking other public agencies or third parties to pay for a larger share of a capital facilities. Partnership also includes assessment districts in which costs are passed onto property owners.
4) General Obligation (GO) Bonds: A GO bond is a property tax that requires a 67 percent voter approval. So if the Town wants a recreation center, field house, parks, etc. the voters need to pass a GO bond. If the voters don’t approve a bond measure, the projects won’t be built. (Note: The 2008 school district’s high school GO bond failed, achieving only 48% of voter approval.)
5) DIF: The 2010 DIF will provide 27 percent of the funds for community facilities. As background, the 2007 DIF was predicated on a model that looked at the community’s General Plan’s vision: “…providing the very highest quality of life for our residents and the highest quality of experiences for our visitors.” To achieve and fund the Town’s vision, the Town identified $390 million in capital facilities that needed to be build to achieve the vision: storm drains, roads, trails, recreation center, conference facilities; it’s a long list. Everything on the capital facilities list was sized for a 20-year buildout: a base population increased from 8,000 to 11,000, increase visitation, and most importantly, the list was created recognizing that Mammoth Lakes competes with other destination resorts which have recreation/aquatic centers, ice rinks, miles of walking and biking trails, etc. The thinking underpinning the 2007 DIF was that developer fees (DIF) would help fund the Town’s vision and those costs would be passed onto new buyers who would not only be purchasing property but the Town’s vision: recreation center, trails, child care center, street lighting, (again, the same long capital facilities list).
The 2010 DIF is predicated on a different model for achieving the Town’s vision. This model began by identifying new developments’ direct and indirect impacts within proximity of a development project. New development will be exempted from funding much of the Town’s vision. For example, the CIS draft report suggests that Snowcreek, Hillside, One Hotel and the development around the Sierra Star Golf Course will contribute 2 percent toward a civic center, 1 percent toward the cost of a recreation center, and 0% toward athletic fields and a field house. The community and buyers of new development will now bear the financial responsibility of these projects and achieving the Town’s vision to become a “premier, year-round resort community.”
The fundamental difference between the 2007 DIF and the 2010 is holding the developers financially responsible, not new buyers, for achieving the Town’s vision which includes amenities for residents and visitors, and being competitive with other resorts. The 2007 DIF model was adopted because new development would benefit from the facilities as much as, or more than, the rest of the community.
The arguments in support of reducing DIF were spun across a wide spectrum. Mayor McCarroll continues to proclaim that capital markets look at Mammoth as if we are fools for having DIF that require new development to pay its fair-share of Mammoth’s vision. Of Course, Mayor McCarroll completely ignores “supply and demand” and argues along with Town staff, subsidize it, build it, and they will come. Perhaps a community that loses sight of its vision is the fool.
Another convoluted rationale for reducing DIF and shifting DIF costs to the Town’s side of the DIF ledger is: There hasn’t been any development for three years, no DIF. Oh, MY; zero development means zero DIF, which means no new capital facilities. It’s ironic that the Town’s consultant first suggests that there are no assurances that the Town’s revenue sources are secure and then proposes a community investment scheme that relies on the Town’s unsecured funding sources to backfill the reduction in DIF.
Three years ago, the Town staff argued that a Recreation Center, Ice Rink/Multi-use Facility, Parks and a Field House were needed to compete with other resort communities. Today, the same Town staff is arguing that these facilities are “truly discretionary” and if the community wants them, then the community needs to pass a GO bond.
Developers have also argued that recreation facilities benefit the whole community; therefore, the whole community should pay for them, via GO bonds. The response question is: why should developers be exempted from supporting the Town’s vision by having lower DIF and passing the cost of the Town’s vision onto their buyers?
From a developer’s economic point of view, what the Council did, is the best of all worlds. His DIF has been reduced, his profit margins go up and the hidden cost of the community’s recreations facilities is passed onto the purchasers of the developer’s condos and homes, as well as locals. Of course, if the community and new condo and homeowners don’t vote to tax themselves sometime in the future, the Town’s vision becomes a delusion.
One thing for certain, by reducing the DIF the Town Council has put out a siren call for drive-by developers to visit Mammoth.
Finally, to be blunt, the DIF needs to be readdressed. First, the Town Council, Tourism and Recreation, and the public need to realistically go through the capital facilities list and eliminate projects that overwhelming support locals. For example, the field house should be removed because it was put on the list so local kids wouldn’t have to travel to Bishop to practice their sport. Second, the Town should explore a Tax Incremental Financing strategy (TIF) with the county for addressing capital projects in Mammoth. Put simply, the county could shift some of the Town’s property taxes (currently going to the county) back to the Town to fund capital projects in Mammoth. Third, the Town Council needs to lead a community discussion evaluating the viability of the funding sources identified in the Community Investment Strategy. Forth, the Town Council needs to explain to developers that they have an enlightened self-interest in funding community amenities; their sales might benefit.
There are no easy solutions, but new development without new facilities is likely to exacerbate the peaks and valleys that have always plagued businesses in Mammoth Lakes.