Foster City considers development fees

A development impact fee is a one-time charge levied by a city on a development project, like a new housing complex, so the city can expand public services like transportation, parks and utilities nearby to offset the project’s impacts. It is not considered a tax and is not a fee charged to residents.

Councilman Jon Froomin’s initial concern was the fee would be an ongoing expense spent on personnel. He said the city would have to pay attention to the fee’s long-term implications and its effect on the surrounding areas. He was cautious about hurting construction demand.

“The potential, depending on how high these fees are, is a deterrence to desired development. There is certain type of development that we want to encourage and others we want to discourage at times. We don’t want to fee ourselves right out of development,” Froomin said.

He cited building a single-family residence in Millbrae, saying it would cost around $61,800 before putting a shovel in the ground. He said while the meeting was not the time for a lengthy discussion, the city should consider concerns after the survey. He suggested some exceptions for affordable housing developments, as buying the land and development are expensive.

“We have to really think about that. If we want to encourage certain types of development, but we make it so expensive to do it, they go someplace else. That’s a concern,” Froomin said.

The developers’ added costs could deter some developers or cause the developers to make substandard design choices to make up the costs, city staff said.

Councilman Sam Hindi asked if the impact fees going to the city would have to be used within a few years or would revert back to the developer, which city staff said was true for impact development fees.

Foster City said fewer opportunities to generate revenue and increased needs make development fees necessary to offset costs. State laws like Prop. 13 limit how much revenue cities can collect. With an additional revenue stream, the city would prioritize aging infrastructure needs and fund a range of programs to address development impacts. The primary revenue sources for Foster City are property and sales taxes, along with various fees.

The fee is for capital projects only and would be paid during the permitting stage. The city must also demonstrate the benefit to the development itself and the immediate area. For example, the city can’t charge a development fee for a park and then put it on the other side of town, but it could for a citywide system if it shows the development would create strain on the system, city staff said.

The city held a February long-term goal meeting that identified development and development impact fees as a key initiative to pursue. Population growth, more jobs and aging infrastructure have led to the need for more revenue streams. The state has also imposed several new requirements regarding the services local governments must provide, including infrastructure, housing, energy efficiency and housing production, all while financial state and federal financial report has declined.

The city is looking for a consultant to identify the development fee’s uses, the amount of money involved, how it affects developments and final results. The process will take a couple of months, with the study findings brought back at a later City Council meeting, followed by public hearings for adoption. The fee would be added to the city’s master fee schedule. Foster City would have to provide an annual report on the use of funding.

curtis@smdailyjournal.com

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