HollisterFreelance.com | Marty: Reduced fees would boost the economy

Marty: Reduced fees would boost the economy

Jun 23, 2009
By Marty Richman

Hollister's park and recreation impact fees were recently upped to $4,375, a whopping $3,250 increase for each new single-family residential unit. City impact fees alone can easily reach $50,000 for a modest home.

That staggering total is not a viable strategy for residential development in this economic climate. The planners and council have lost the view of the forest in the trees of political convenience and it's having a devastating effect on our ability to advance as a community. Even with the Measure T tax increase, skeleton staffing and reduced hours, we are bleeding red ink for as far as the eye can see.

The scope of the problem was driven home with the presentation of the Vista Park Hill Master Plan. Added fees and all, the sobering estimate was that it would take 7 to 10 years of robust residential development just to fund Phase I of that project. The heart of the problem is that the leveling of the housing market and the explosion of impact fees ensures that we will not meet our residential growth projections unless we change something.

Without growth, there will be insufficient economic activity to fuel the motor of government and provide the things the residents need and want. If there were no outside influences, we could just shrink our expectations and obligations, but that is not the situation. We have legal and moral obligations to provide services to our citizens. Economic activity, often driven by population and their disposable income, makes most of those things possible.

You know, intuitively, that for most items there is a relationship between price and demand, the term for that is price elasticity. Some items, like Ferraris, are not very price sensitive. If Ferrari raises the price of a 205mph GTB $20,000 it's probably not going to change the number they sell - if you have to ask what it costs, you can't afford it.

Then there are things like candy bars. Raise the price 25 cents at one time and you may find your sales plummeting and losses mounting. New homes, typically, fall somewhere in between, but potential buyers concentrate on the total cost, not every fee. If the total is too high, the value or the loan won't pencil out and they have to walk away.

You might say, "so what?" However, a complicating factor is that current residents are often paying some of those fees in advance. That's exactly the situation with the wastewater treatment plant and will be for Sunnyslope water users if the expensive groundwater treatment plant is built. Those projects have many years of planned growth factored into them. If the growth doesn't occur, the bonds still have to be paid.

At one time, each new home was scheduled to contribute $13,000 to the wastewater plant's construction costs. Until the planned homes are built, the current wastewater customers must make up the difference every month.

Finally, there is the loss of direct and potential economic stimulus. The city estimates that a major home improvement center alone might bring in an added $600,000 a year in taxes, money that now leaves town. That would help offset our on-going budget deficits. If you had to invest in a project that size, where would you put it first, in a growing, prosperous, community or in a stagnant one? The answer is obvious.

It's time for the city government to look at the forest as well as the trees and make us competitive by offering well-planned, affordable, residential development. Reducing impact fees now will speed up and stimulate economic development. The development would allow us to capture the hundreds of millions in spending that currently goes elsewhere. In the end, we would be much better off because 50 percent of good growth beats 100 percent of almost nothing.

Marty Richman is a Hollister resident. His column runs Tuesdays. Reach him at cwo4mgr@yahoo.com.

Marty Richman
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