Developer ready?
Town Council considers slashing housing fees to encourage development.
The Town of Mammoth Lakes is considering cuts to its affordable housing mitigation fees as part of a larger strategy to become “developer ready.” These mitigation fees are required by law (AB 1600), charged to developers with the intention of defraying all or a portion of the cost of public improvements, services, and/or amenities.
In Mammoth’s case, affordable housing mitigation fees go specifically toward providing housing for residents at or below 60 percent Area Median Income (AMI).
The Town contracted with consultant AECOM Technical Services, Inc. to complete a Workforce Housing Nexus Fee study earlier this year. After completing the study, AECOM recommended reducing most of the current housing fees by about 70 percent.
For instance, the Town’s current housing mitigation fee for hotels of 19 or fewer rooms is $11,611; the new fee would be $3,700 per room, a roughly 69 percent reduction.
Similarly, the Town’s current housing mitigation fee for commercial developments is $14.99 per square foot, except for retail and restaurant uses, which are exempt. The new recommended fee is $2 per square foot, about an 87 percent reduction.
The mitigation fee for industrial developments would also drop from $3.93 per square foot to $1 per square foot, about a 75 percent decrease.
The Town’s current housing impact fee for residential projects of nine or fewer units is $23,222; the new fee would be $7,300 per unit, a 69 percent reduction. Here AECOM’s recommendation gets slightly more complicated, as single family homes of less than 2,500 square feet are currently exempt from housing fees, while single family homes greater than 2,500 square feet pay $2.68 per square foot for the area above 2,500 square feet.
AECOM recommended an across-the-board fee of $7,300 per unit, regardless of square footage.
According to AECOM Project Manager Lance Harris at Wednesday’s Town Council meeting, a major factor in the recommendation to reduce housing mitigation fees is the assumption that the Town and Mammoth Lakes Housing (MLH) will provide for 70 percent of the housing need for households below 60 percent AMI. Therefore the recommended fees need only cover the remaining 30 percent of the housing need generated by new development.
Councilmembers were largely receptive to the changes, although they hesitated to raise the fee for single family homes to $7,300. Currently, most single family home pay about $2,000-$4,000 in housing mitigation fees.
Others received the fee reduction with greater trepidation.
MLH Grant and Financial Associate Patricia Robertson argued that in spite of MLH’s successes in providing workforce housing using both mitigation fees and Town funds, “The Town’s resources and grants are addressing only a portion of the workforce housing need.” Robertson urged the Town to review the fees every two years to account for changes in need depending on changes in development.
If the reduction in fees encourages development, noted MLH Board member Bill Taylor, that increase will also require an increase in affordable housing options. “[Housing] resources are not geared up to accelerate along with accelerated development,” he said.
Taylor also pointed out that “one of the predicates for lowering the fee is the use of Measure 2002A funds,” which amount to about $330,000. However, those funds are currently going to other General Fund purposes.
Taylor urged Council to fully allocate those Measure 2002A funds, which are intended to go toward housing, should the Town cut housing fees as proposed.
Unsurprisingly, developers didn’t feel the recommended fee changes went far enough.
Attorney Mark Carney spoke on behalf of his developer clients: “We do think that there need to be additional reductions,” he said. “… We’re conscious that unless something changes dramatically, we’re going to be mired in the Great Recession.”
Carney recommended that in addition to cutting fees further, the Town also suspend the fees altogether for two to three years “in order to incentivize development.”
“If we’re going down that line, how do we meet the [affordable housing] need?” asked Mayor Jo Bacon.
Carney argued that the Town is already meeting that affordable housing need, although he didn’t address what might happen if that need grew with a growth in development.
Mammoth Mountain Ski Area (MMSA) Vice President Tom Hodges agreed. He, as MMSA CEO Rusty Gregory has many times before him, advocated for the Town collecting Transient Occupancy Tax (TOT) after a development is built, and using that money to help fund affordable housing, rather than relying on “up front” mitigation fees.
But Town Manager Dan Holler noted that if the Town reduces fees further, or even suspend them altogether, the Town would be obligated to cover the difference as part of a “best practice.”
“It’s not like that fee goes away and no one has to pay it,” he said.
Councilmembers concluded that more conversation was necessary before approving the recommended fees. Council will discuss the housing mitigation fees, as well as proposed reductions to Development Impact Fees (DIF), at its July 1 meeting.
