Agenda Item Wording:
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2023/24 AB 1600 Report - Request for City Council to receive, review, and file the 2023/24 Impact Fee Report as required by State Law.
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Deadline for Action: 12/3/2024
Submitting Department: Finance and Technology Services
Contact Name and Phone Number: Renee Nagel, 713-4375, renee.nagel@visalia.city <mailto:renee.nagel@visalia.city>
Amee Swearingen, 713-4170, amee.swearigen@visalia.ciy <mailto:amee.swearigen@visalia.ciy>
Department Recommendation:
The 2023/24 Impact Fee Report has been prepared and submitted in compliance with California Government Code Section 66006(a) and (b), and no Council action is required other than to receive, review, and file the report.
Background Discussion:
Development impact fees are a funding mechanism used by California cities to pay for the new or expanded infrastructure needed to serve growth and development. Impact fees are imposed by a local government on new development to pay for the proportionate costs attributable to providing public infrastructure to serve each new development. Impact fees are a charge on new development which helps fund and pay for the construction or needed expansion of offsite capital infrastructure improvements which include roads, parks, storm drains, public safety and other public facilities.
In the 2023-24 Fiscal Year, the Impact Fee funds received $19.3 million in revenues which is an increase of 32% ($6.2 million) from the previous year (FY 22/23 revenues $13.1 million). The $19.3 million consists current year impact fee revenue, prior year revenue adjustments, and interest earnings as shown in the table below. FY 23/24 investment earnings had a large increase mainly due to Government Accounting Standards Board (GASB) 31. GASB 31 requires the City to recognize all investments future gains and losses which inflates or deflates the actual amount received. Due to the investment market, FY 23/24 had unrealized investment gains which increases the revenues being reported for that fiscal year.
As shown in the Impact Fee report (Attachment 1), a total of $3.2 million was spent on impact fee related projects in the 23/24 Fiscal Year. The funds collectively hold $85.5 million in cash; however, these funds will need to collect an additional $201.5 million by FY 28/29 to fund the projects listed in the current 6-Year Capital Improvement Plan. Projects are planned based upon the resources projected to be available in each respective fund, and the Capital Improvement Plan is updated every two years with the biennial budget to make any necessary adjustments. Most Impact fees are used to fund large infrastructure projects that take several years to design and acquire land. For this reason, funding needed for construction must be programmed over multiple years as shown in the 6-Year Capital Plan (included in the Impact Fee Report attached), allowing cash to accumulate and fund these large projects.
In addition, there are Impact Fee funds that have been given an advance from the General Fund or have a debt payment obligation. All General Fund advances are charged interest which is calculated using the City of Visalia portfolio earnings rate plus 1%. The annual rate charged this last fiscal year on advances was 3.37%. The funds with advances or debt are listed in Table 1: Summary of Impact Fee Fund Advances and Debt, below.
These advances and debt were anticipated and are being managed as part of each fund’s capital program.
Past Impact Fee actions are summarized below for informational purposes.
• June 7, 2010, during the Great Recession, Council approved the reduction of the Transportation Impact Fees (TIF), Park Impact Fee, and Waterways Impact Fee by 15%. The Park Acquisition Fee and the Waterways Acquisition Fee were reduced based on the analysis that showed land acquisition costs had dropped.
• In March 2013, an increase was made to the TIF of 6.5% to reflect 09/10 Engineering News Record Construction Cost Index (ENRCCI) adjustment not taken in FY 09/10.
• June 6, 2015, Council approved the TIF fees to increase by 11%.
• In addition to the adjustments summarized above, the fees are adjusted each year by the ENRCCI rate as part of the City’s annual Rates and Fees process.
With ongoing increases in land and construction costs, staff will continue to review the capital needs of the impact fee funds and perform analysis in order to make recommendations on the adjustment of these fees. When based on a comprehensive plan and used in conjunction with a sound capital improvement plan, impact fees can be an effective tool for ensuring adequate infrastructure to accommodate growth where and when it is anticipated. It is important that communities rely on zoning and other land use regulations, consistent with a comprehensive plan, to influence patterns of growth and to accurately predict new infrastructure needs. However, in areas facing development postponement due to the lack of adequate public facilities, impact fees may be viewed not as growth controlling measures, but rather as growth facilitators when they provide needed funding for required infrastructure. Typically, impact fees are:
• Levied on an "up-front" or "front-end" basis, usually at the time of building permit issuance or subdivision approval; and
• Dedicated to a specific public use, such as transportation facilities, sewer facilities, water facilities, or parks and recreation facilities, etc.; and
• Calculated based upon the number of residents or bedrooms in a dwelling, the square footage of a building, the linear footage of the front property line, or as a flat fee per unit or building lot, or some other formulation; and
• Prescribed by ordinance.
The purpose of this report is to disclose the City’s collection and use of impact fees and to demonstrate that these monies were appropriately spent on impact related projects. The 2023/24 Impact Fee Report is in compliance with Government Code Section 66006 which requires agencies to provide information on each fund or account established for the collection of impact fees. Within 180 days after the last day of each fiscal year this information must be made available to the public for the period covered by that fiscal year. The report must include the following:
1. A brief description of the type of fee in the fund.
2. The amount of the fee.
3. The beginning and ending balances of the fund.
4. The amount of fees collected, and the interest earned.
5. An identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement, including the total percentage of the improvement that was funded with fees.
6. An identification of an approximate date by which the construction of the public improvement will commence if the City determines that sufficient funds have collected to complete financing on an incomplete public improvement.
7. A description of each inter-fund transfer or loan made from the fund, including the public improvement on which the transferred or loaned fees will be expended, and in the case of an inter-fund loan, the date on which the loan will be repaid and the rate of interest that will be received on the loan.
8. The amount of refunds made per Government Code Section 66001 (e).
The availability of the 2023/24 Impact Fee Report was published in the Visalia Times Delta on November 13, 2024. Once the information is available to the public, but not less than 15 days from the date it is made available, the City Council must review the information at its next regularly scheduled meeting. A notice of the time and place of this meeting, including the address where the information may be reviewed, must be mailed at least 15 days prior to the meeting to any interested party who files a written request with the City for mailed notice of the meeting.
The 2023-24 Impact Fee Report provides information on the following Impact Fee Funds:
All Impact Funds are in compliance with the State Law, as shown below in Table 2: Summary Report 2023-24 Impact Fee Funds. This table is also provided in the report (attachment 1).
Table 2 is a summary of all the Impact Funds and shows the future revenue required in each fund to pay for both current projects and future projects included in the Capital Budget plan through 2028-29. As new development occurs, additional impact fees will be collected to fund the projects reflected in the “Future Revenue Required” column of Table 2. Four funds are shown as not needing future revenue at this time due to projects not being listed in the current 6 year plan. These funds are the Civic Center fund, Sewer Connection fund, Vehicle Miles Traveled fund and the Northeast Capital Improvement fund. Below is more detail on the funds:
• Civic Center-Public Facility Fees (102) and the Public Safety funds will be used to help fund Phase 2 of the Civic Center project which will construct the Public Safety Office Building, Evidence Building, and Council Chambers. In addition to impact fees, Civic Center Phase 2 will receive funding from other sources. This project will require a significant investment and in anticipation of this, impact fees are being accumulated to be used to help finance this project. Staff is anticipating awarding the construction contract in February 2025.
• Sewer Connection Fund (232) does not have any future projects due to the sewer master plan being updated. The plan is currently under contract and being updated by the Engineering Department. Once the plan is updated, staff will return to Council to increase the fee and fund several new projects.
• Vehicle Miles Traveled Fund (286) is a new fund with a new fee that was collected in FY 22/23. There are no projects currently identified for the fund and will be reviewed with the upcoming budget process.
• Northeast Capital Fund (291) has no future projects identified in this current 6-year plan to allow funds to accumulate to be able to fund additional projects. The fund currently has approximately $47,500 in cash available.
The Police (105) and Library Impact (104) Funds do not show any future capital improvement needs however, they are each repaying internal loans or debt financing which are discussed in more detail below.
• The Library Impact Fees (104) have contributed to a joint project with Tulare County for the rehabilitation and expansion of the Visalia branch of the Tulare County Library. The project converted the old unused library building which had been replaced by new construction in 1976, for use as a children’s library wing, and provided upgrades to the main library building. The rehabilitation project was completed in 2010 and the total amount of the loan from the General Fund to pay the impact fee portion of the project was $269,189. The loan was paid off in this fiscal year.
• The Police Impact Fund shares in the cost of the Visalia Emergency Communications Center by paying a portion of the debt payment. This debt was issued August 2015 for a total of $23.3 million (VECC and Convention Center renovation) to be paid back in 15 years (FY 29-30). This funds share is 26.25% or $6.1 million. This funds portion of the debt payment for FY 23/24 was $414,353 and the ending balance of the remaining obligation in this fund is $2,479,354.
The Impact Fee Report shows an amount required for future projects. This future project amount is taken from the 6-Year Capital Plan that was adopted with the City’s 2 Year Budget in June 2024. The Capital Plan is amended throughout the year as Council approves projects that need to move forward or as opportunities arise.
Fiscal Impact:
The Annual Impact Fee Report summarizes actual data from events that have already occurred. There is no fiscal Impact which will result from review and acceptance of the report.
Prior Council Action: The Annual Impact Fee Report is brought to Council within 180 of the last day of each fiscal year. The report was last reviewed by Council on December 18, 2023.
Other: N/A
Alternatives: N/A
Recommended Motion (and Alternative Motions if expected):
recommendation
I move that Council receives, reviews, and files the report.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: Attachment 1: City of Visalia Impact Fee Report for Fiscal Year 2023-24