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December 9, 2008

DHS City Council Study Session - Developer Impact Fees

The first public commenter was Russ Martin who came to clarify his comments made at the city council meeting last week. I think this may be new in Desert Hot Springs. Lots of people complain about being misquoted but don't make the effort to provide the correct info that they feel the public has missed. Anyway, Mr. Martin had commented on the city's buying up parcels. Some people took his comments to mean that he was opposed to the city buying up land in the downtown area. He came tonight to say that he is NOT opposed to the city buying land, but that he had thought the price for Haidet's parcels ($1.1 million) was too high. He went on to say that he thought the city should have a plan in place to deal with the land it buys up until the great designs come to fruition. Indeed, I hope our downtown never looks like the area around Cathedral City's civic center which sat for so many years as blank, dusty lots (and much of it still does).

My summary of Mr. Martin's comments last week were this: "Russ Martin spoke against the shutting down of functioning business in the downtown specific plan area. He said the city should encourage new businesses in the area."

The business of this afternoon's study session was to discuss new, higher development impact fees. Councilmember Baker started off by saying he thought the package presented to them by city staff and consultant Scott Thorpe should be approved by the council (after the 21-day comment period passes, of course) subject to the provision that it will only become effective when the economy picks up. He did not want a phase-in, but proposed that it be triggered by actual economic changes. He suggested the pulling of X number of building permits over Y consecutive months as an example.

Mayor Parks said she wanted a phase-in period until the economy is stronger. Councilmember Betts said that he thought it was premature for the council to discuss its position until the comment period runs out on December 19. Councilmember Schmidt said he preferred that the city should go ahead with the plan and that a phase-in period would be awkward.

Chris Canaday, a home builder and developer of Vista Hacienda, rose to say that he favors some sort of postponement of higher DIFs. He said that his position that Desert Hot Springs DIF's are at a high level compared to other cities in Coachella Valley is based on the biennial study conducted by the Rose Institute at Claremont McKenna College. He said that buyers do not perceive Desert Hot Springs as a high end market. Councilmember Betts asked Mr. Canaday how any study could say that our roughly $4,000 DIF could be considered as high as other cities where it exceeded $10,000. Mr. Canaday tried to pass off the question to another of his developer peers in the audience, but Mr. Betts insisted that since Mr. Canaday had stood up and made the assertion that he should justify it. Then Mr. Canaday explained that builders look at ALL fees incurred when building, not just the city's DIF. Whereupon Councilmember Baker asked him if he had also appeared before the MSWD or PSUSD in an attempt to get them to lower what must be their exorbitant fees. Mr. Canaday sort of stumbled and mumbled something like a "no&qout; and tried to change the subject. Mr. Baker went on to say that any possible lack of high-end image in Desert Hot Springs is likely due to years of neglect of the infrastructure partly due to low DIFs. Mayor Parks pointed out that during the recent building boom high end homes were being built and sold in Desert Hot Springs and that the unique setting of Desert Hot Springs should make it a very desirable location for high end homes again.

Brian Muse, resident of Desert Hot Springs and a Realtor®, who has worked for Canaday and other developers said that the city should tax the banks, since they are the ones responsible for the economic mess this nation is in. As a mechanism to accomplish that, he suggested a fee be assessed on any foreclosed home at the point that it was resold to a regular person (i.e., not another financial institution). While this idea is very appealing in a 1930s populist sort of way, later in the meeting attorney Ruben Duran ripped down this red banner of hope, saying that the city could not legally single out banks for a tax.

Fred Bell of the Building Industry Associaiton (BIA) got up and handed around copies of the Rose Institute study that Mr. Canaday had referred to originally. He said that it contained the information supporting Mr. Canaday's assertion that total builder fees in Desert Hot Springs were already high. A little later, after some study, Councilmember Baker said that the Rose Institute study did NOT support Mr. Canaday's assertions.

Councilmember Schmidt asked for an item-by-item comparison of fees in other cities of the valley. Mayor Parks said the city will increase the DIF (and Mr. Bell agreed that, yes, this was necessary), but that the effective date of the increase was something the city could make a compromise on.

There was some discussion of the dates for the current 21-day comment period. City staff said their report had been released on November 26, but Mr. Bell said the BIA had never received notification as it should have. He said the builders had gotten copies of the report only a few days ago and were having to go through it like detectives. This report is a revised and corrected report of one that was published last summer. The BIA submitted a 22-page comment on that earlier proposal, had never received a response to their comments, and the new proposal does not indicate which, if any, changes have been made in response to that long comment. They are reduced to comparing the two reports to each other item by item to try to find the changes.

Councilmember Betts said he favored putting the higher DIF into effect ASAP, so that whenever the economic turnaround begins the city would catch the benefit.

City Manager Daniels said that if the council did not want to immediately implement the DIF increase they could either phase it in over some prescribed period (in effect guessing when the economy might begin to improve) or they could write a rule that attempted to describe evidence of the economic turnaround, something like Councilmember Baker had suggested earlier.

Tommy Hernandez, a resident of Desert Hot Springs and an architectural designer, rose to say that the city could simply keep an eye on the quantity of available housing and this would be sufficient to let them know when the market was beginning to lift. This would still give the city the time to put the DIF into effect within the 60-day minimum that attorney Duran had said was required. Mr. Hernandez went on to say that eventually Desert Hot Springs should become the number one city in the valley due to the space it has for expansion, but that now is not the time to raise the DIF.

Scott Thorpe, the consultant who put together the massive report that was being discussed, got up to speak and said that the DIF can only be the source of money to maintain the infrastructure of the city. It cannot be raised in an attempt to get ahead. He clarified that there is a requirement that the money received from DIF must be dedicated within 5 years, but it doesn't have to be actually spent. He also explained that DIF money goes into about eight different accounts (police, fire, streets, parks, etc.) and that the city could, if it so chose, temporarily send more of the money one way (police, for instance) while allowing another area to languish (such as parks).

Councilmember Betts wanted detailed minutes of the meeting, saying he wasn't sure his noted covered everything discussed. City Manager Daniels said that all staff members present (except Chief Williams) had taken copious notes and that those would be available, but that the actual minutes would not be detailed.

The course of events now, as I understand them, will be to receive and review public comments until the 19th (which date might get extended if somebody decides the start date was not correct), then the DIF plan will probably get a little correction and revision. Fred Bell asked for one more study session on the subject, but I didn't hear any loud cries of assent from the council, so that may not happen. Then it will probably be presented to the city council with a couple of choices of implementation dates/methods.

Filed under Desert Hot Springs | permalink | December 9, 2008 at 08:54 AM


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