“Stockton Economic Stimulus” for homebuilders gaining steam

A proposal crafted by developers to reduce fees that pay for vital city infrastructure took another step toward passage following a special study session of the Stockton City Council on Oct. 13.

The plan was written by the Building Industry Association (BIA), which represents the interests of Central Valley builders. If approved by the council at its Nov. 3 meeting, the plan would divert $22.5 million in developer fees that are supposed to supply a Public Facilities Fund that pays for future roads, utilities, parks, libraries, police and fire stations.

Mayor Anthony Silva has been the most vocal champion of the legislation, dubbed the Stockton Economic Stimulus Plan. Its supporters contend the proposal would stimulate local job growth by making it less costly for developers to start constructing homes, citing a recent report by the University of the Pacific. It would also address concerns that Stockton’s fees are out of line with those of surrounding communities and present a significant hurdle to building new housing.

But, as of now, the only clear benefits of this stimulus are that developers won’t have to pay as much to build houses, and developers can lock up building permits at cents on the dollar. This isn’t a surprise, since it was written by a builder advocate for builder benefit.

Despite several council discussions and community input, there remain significant flaws in the stimulus.

Though the plan stipulates 60 percent of the estimated 3,700-strong workforce that could be hired for stimulus-aided construction must come from within 25 miles of Stockton’s center, there is no guarantee those workers will actually live in Stockton. This clause also sets poor policy precedent by having contractors report proof of hiring practices to the BIA, rather than the city.

There is also no guarantee that the proposal will lower local housing prices. Those at the bottom end of the local income scale are being squeezed by a lack of affordable rental units, but there is hardly incentive in the current plan for builders to move forward with this most-needed housing. Instead, the most likely outcome of the stimulus as it is currently proposed is that developers will build market-rate, single-family homes that few local residents could afford even in the unlikely case that the fee savings are passed on to buyers.

Uncertain benefits seem a poor trade-off for shortchanging the Public Facilities Fund by $17.18 million. (According to city calculations, $17.18 million is how much less the fund would have compared to if those houses were built under the current fee structure. The figure also accounts for positive revenue from stimulus-prompted development.)

City Manager Kurt Wilson warned the council on Tuesday, Oct. 13, that cutting facility fees could force the city to use general fund revenue to close financial gaps. He also said the Public Facilities Fund could be fine in the long run under a best-case scenario of growth and prosperity.

Tuesday night, the Stockton City Council decided to schedule a study session to delve into the topic of reducing Public Facility Fees for single-family home development

Tuesday night, the Stockton City Council decided to schedule a study session to delve into the topic of reducing Public Facility Fees for single-family home development

But how many times has Stockton counted on the best-case scenario and been screwed? Trading dubious short-term benefits for long-term financial uncertainty is the same type of thinking that drove Stockton into bankruptcy. The City Council simply doesn’t have enough information about the stimulus’ impacts to approve it as-is.

Still, it appears that the idea of “doing something,” as Mayor Silva has said, is gathering steam. So if the City Council is set on passing a stimulus of some sort, it should at least be a stimulus that will benefit the city and be worth the financial risk.

Any stimulus should clearly favor the development of multi-family units that will ease the housing burdens on those with moderate and low incomes. To the extent that fees are discounted for single-family housing, they should be focused on existing areas of the city instead of expanding Stockton outward. And in both cases, fee reductions should be weighted to encourage building in disadvantaged neighborhoods throughout the city — the communities that would most benefit from new investment.

There are other factors to consider, such as ensuring one or two developers can’t stockpile reduced-fee permits or sell them to another company. But the most important aspect of any stimulus will be what type of housing it encourages, and where it is encouraged to build.

Changing the Stockton Economic Stimulus Plan to prioritize multi-family housing and disadvantaged communities would focus the city’s efforts squarely where they should be: Bringing life to neglected areas and encouraging the growth of affordable housing.

It’s now up to the members of the City Council to make the necessary amendments to direct development to where it will have the biggest benefit. And if they can’t do that, council members should protect Stockton’s financial future and reject the stimulus altogether.

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Categories: Development News, Smart Growth

Author:Jon Mendelson

Jon was born and raised in Stockton. He returned to the city following four years of college at Loyola Marymount University, in Los Angeles. He is an award-winning columnist and the former editor of the Tracy Press newspaper in Tracy. He currently is associate director of Central Valley Low Income Housing Crop., which assists homeless families and individuals. He lives in Stockton's Miracle Mile district.

2 Comments on ““Stockton Economic Stimulus” for homebuilders gaining steam”

  1. Kristine
    October 20, 2015 at 11:18 am #

    Not to mention the lack of connectivity to the recently passed Sustainable Community Strategy. What’s the point of passing a regional growth strategy if local officials don’t even connect their local plans? This needs more analysis, specifically on long term impacts.

  2. Ned Leiba
    October 20, 2015 at 11:45 am #

    Jon I agree with much of what you said. You recited the City manager’s concern about the threat to the general fund and the PFF, and you observe we do not have enough information.
    Well, let’s see.
    The PFF state-required reports were late for 5 years, recently received on a consent calendar and “rubber stamped’ approved without any analysis or discussion by the City Council. The City is very delinquent with its general fund reports, and the two reports released were profoundly misstated on a GAAP basis.
    As I said elsewhere, the prior CFO of the City promised timely financial reports, but she is gone. The last City financial statement was for 12/31/2014 released on 5/19 and it showed a general fund loss of $31.7m, which is profoundly misstated on a GAAP basis. In that awful report, the City was showing a fraction of its general funds. To make any sensible judgement about the BIA’s fee proposal; the library; police funding; pensions or any other fiscal issue facing the City, we need timely, reliable financial reports.

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