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Developer/Builder Fees: The Return of Common Sense & Logic?

When cities and counties increase developer fees, logic suggests that new construction will decrease. Less homes and commercial property means fewer businesses and less tax revenues. Yet in some California areas the fee wars continue and in others, common sense is proving its worth.

According to Scott A. Mann and Darcy Kuenzi, members of the Menifee City Council in Southern California's Riverside County, since reducing impact fees, they have seen permit numbers explode and they have the records to prove it -- from a dismal 1 in January of this year to 265 by November. It's working out well for Menifee as well. Their building permit and plan check revenue has surpassed their 2009-10 budget.

Other fee cutters include the Willits Unified School District that has suspended developer fees on new building projects within district boundaries in hopes of encouraging new housing. Suspension of the fee begins January 1, 2010, and will remain suspended for two years. The fee, approximately $2.45 per square foot, increased the cost of building a 1500 square foor house to $3,700, payable to the school district, and no doubt, passed on to the home buyer not to forget the other imposed fees.

The city of Lompoc recently suspended AB1600 traffic impact fees for the next 15 months as the city council moves to stimulate the local economy. This is good news for the Lompac Healthcare District, which was facing $230,000 in traffic impact fees for the construction of its new hospital.

Fresno joins the trend deferring development fees in the city's downtown area between Highways 41 and 99, Fresno and Divisidaro streets, the alley between L and M streets and the Union Pacific Railroad. Waived fees include major infrastructure charges including roads and major streets, parks and recreation facilities and public service entities.
Contra Costa has changed affordable housing rules because of falling property values and lowered fees for developers to buy out of providing low-income housing. For the last three years, condominium builders were required to sell 12 percent of units to moderate income people and 3 percent to low incomes or be fined. Those fees are being eliminated. This sounds good but keep in mind that Contra Costa is raising fees for building inspections and other services.
Some media seems to be supporting fees including the Sacramento Bee saying in a recent editorial that unlimited fees on housing have no impact on its development or affordability. The Bee emphasized that the efforts of local governments in the Sacramento area to reduce those fees related to construction costs so that more housing can be built isn’t a good idea.

The North County Times serving North San Diego County, stated that reducing fees would hurt, not help, local road-building efforts even though the city of Menifee is in their own back yard.