COMMENTARY: Local Government Erroneously Blames Growth Problems On Others

The truth is that the majority of growth-related problems are public sector failures

Everyone is going crazy, again, over the pace of new housing construction and its potential impacts throughout San Benito County and they should, because we did not prepare the infrastructure for these events nor did we formulate and implement a plan that would support it. As usual, our growth curve has staggered from feast to famine and it will go back.  That's the worst way to do it, but who is the primary culprit?

As always, the politicians can’t wait to pass the buck and blame the “greedy” developers, but most of these developments have been on the books for many years. No one wakes up in the morning and decides to build a few hundred homes in our county by midnight. Getting all the ducks in line for a development of any size is a long and expensive process. How can one possibly sneak up on our government agencies?  They can't, the problem is that the public sector did not do its part.

The anti-growth lobby would have you believe that new growth is a economic burden to local government, but the truth is that it easily pays for itself and can actually improve things provided the government prepares properly, but government is not good at self-criticism and the politicians are worse.

There are three major income streams from new developments; one-time payments for capital impact fees, on-going property taxes and, if the local governments do their jobs correctly, periodic fees from Community Facilities Districts (CFD) and/or services from Homeowners Associations (HOA).

Impact Fees: A development impact fee is a monetary exaction charged by a local governmental agency to an applicant in connection with approval of a development project. Its purpose is to defray all or a portion of the cost of related public (capital) facilities. It is not a tax or special assessment and must be reasonably related to the cost of the service provided by the local agency. If the impact fee does not relate to the impact created by development or exceeds the reasonable cost of providing the public service, then the fee may be declared a special tax and must then be subject to a two-thirds voter approval.

That’s exactly what happened recently to the county and the Supervisors are mad as all get out.  They are appealing the court’s decision; meanwhile they are not shouldering the blame for failing to meet the legal justification for an added $11,000 annexation fee; they are blaming everyone else.  If the basis for the fee is justified, it would be child’s play to fix it for the future, if it’s not justified then it should never have existed.  As you'll see below the current impact fees are already substantial and. when properly documented, go unchallenged.

As of last May, government code allowed a unified school district to charge up to $3.36 per square foot of livable residential construction.  Locally, San Benito High School receives 35 percent of the levy — or $1.18 per square foot — the remaining $2.18 per square foot goes to the appropriate elementary school district, according to a Free Lance article.

Therefore, a 2,200-squre-foot home would generate $2,596 for the high school and $4,796 for the elementary school district in capital funds.

There are a raft of other impact fees for both the county and city. There is a drainage fee of $1,340 to $3,340 depending on the location; a traffic fee (varies by location) of $5,233 for a single family home in the Hollister area; a road equipment fee of $0.70 sq. ft. ($1,540 in the example); fire protection, $0.25 sq. ft. of covered space ($650 in the example with a 2-car garage); jail/juvenile hall $0.47 sq. ft. of covered space ($1,222 in the example); habitat conservation mitigation fee. $0.15 sq. ft. of living space plus $150 for lots under 1 acre ($480 in example); and parks and recreation $1.80 sq. ft. livable space ($3,960 in example).

That $14,425, does not include water ($10,200 for the Sunnyslope Water District ‘capacity fee’) or sewer ($13,600 for City of Hollister); that’s a total $38,225 up front for a single family residence. In capital support, they are certainly paying their own way because that is the definition of an impact fee

Annual Property Taxes: There is a lot of smoke and mirrors when it comes to property taxes because the allocation system is so complex it invites a ‘pick your number’ type of argument, but one can use the actual budget numbers and work backwards to establish relationships. Most importantly, new residential construction, typically, goes on the assessment roles at the sale price minus a small exemption whereas old property that has not been transacted for years is on the tax roles at a lower level until renovated or sold (that argument has to wait for another day – that’s just the way it is).

Adding up all the budgeted then current property tax take for 2013-2014, San Benito County nets $128 each for the 57,517 residents and Hollister nets $87 each for 36,676 residents. These funds, along with others, are used to pay ongoing public service costs – typically public safety and protection. The county is getting about 17-cents on the property tax dollar when you include the property tax in-lieu of VLF.  A county residential property assessed at $500,000 after exemption generates about $935 a year in property taxes to the county; a Hollister property instead would generate 10-cents on the dollar about $550 a year to Hollister excluding the RDA (our cities get smaller cuts of property taxes).

Much of the property tax revenue in San Benito County, as much as 65 percent, goes to education. The $500,000 hypothetical home sends about $3,575 a year to county schools and Gavilan Community College. Another twenty-something cents on the dollar goes to various support districts like the water districts, cemetery districts, fire districts, etc.  I'm not even going to include the special assessments such as the school bonds, the Blue Valve infrastructure or proposed Delta Water Project. 

Community Facilities Districts (CFD) and/or Homeowners Associations (HOA): The majority of new developments have CFDs or an HOA, or both. This means that the development’s residents acting together or by paying a special tax/fee offset many of the costs formerly borne by local government including, but not limited to, road maintenance, park maintenance, fire, police, lighting, landscaping, etc.; the costs can easily go to hundreds of dollars a month.

There are other non-regulatory benefits that are certainly real and important such as the increase in insured patients for our medical facilities, increased sales taxes, thriving real estate and insurance businesses, more potential local public employees, new impact fees for the library, etc.

The dirty little secret is that the new home buyers pay a lot more for almost everything, from capital to services, than long-time residents and their payments also widen the base of the cost structure pyramid which reduces the overhead costs for all. Additionally, sooner or later the increased population will draw more and better businesses and jobs. Those investing hundreds of thousands of dollars in a place to live, tens of thousands in capital to the agencies, full-boat on property taxes, and are paying  their own way for many services are less likely to be a drag on the local economy than someone living in a home they bought more than 20 years ago, like me.

The reason we are in trouble has almost nothing to do with what new development pays, it has to do with how local government and agencies failed to plan for and provide the infrastructure and services that these monies were designed to fund. Blaming others allows government to escape responsibility, don't fall for it.

Marty Richman

Born and raised in Brooklyn, NY, Marty (Martin G.) spent his teen years in northern New Jersey. He served more than 22 years on active military duty, mostly in Europe, and is a retired U.S. Army Chief Warrant Officer 4, Nuclear Weapons Technical Officer. Marty then worked 25 years in various engineering and management positions in the electronics and energetic materials industries supporting the communications, computer, aerospace, defense and automotive sectors. He is a graduate, summa cum laude, from The College of Hard Knocks, among his numerous awards and accomplishments. He was a regular weekly Op/Ed columnist and feature writer for The Hollister Free Lance for seven years and a member of its editorial board for five years. Marty is a frequent commentator and contributor to BenitoLink on a wide variety of local, state, national and international subjects.   Marty was elected to represent the City of Hollister District 4 on the City Council in November, 2018. Marty and his wife, Joyce, have been residents of Hollister since 1996.