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HomeMy WebLinkAbout2010-05-25 CC Item No. 9CITY OF LADE CLSIIYORT ` DREAM EXTREME- REPORT TO CITY COUNCIL TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM ROBERT A. BRADY CITY MANAGER DATE: MAY 25, 2010 SUBJECT: DISCUSSION TO RECONSIDER TEMPORARY TUMF REDUCTION Background The City of Lake Elsinore is a member agency of the Western Riverside Council of Governments ("WRCOG"), a joint powers agency comprised of the County of Riverside and sixteen (16) cities located in Western Riverside County. Acting in concert, the WRCOG member agencies developed a plan whereby the shortfall in funds needed to enlarge the capacity of the Regional System of Highways and Arterials due to new development in Western Riverside County could be made up in part by a Transportation Uniform Mitigation Fee ("TUMF") on future residential, commercial and industrial development. Fees in the TUMF program are updated on a regular basis through a nexus study which reviews and adjusts the costs to construct the items identified in the program. Between September and October of 2009, the WRCOG Executive Committee reviewed the 2009 Nexus Study and TUMF Program. In addition to the fee update, the Executive Committee also authorized a temporary 50% reduction in fees in hopes that such reduction might spur economic development within the region. On December 8, 2009, at their regularly scheduled meeting, the City Council considered the temporary, 50% fee reduction in the TUMF program and after careful consideration determined the benefits of maintaining the full fee outweighed the potential to draw development into action. Discussion City Staff has been approached by the Building Industry Association (BIA) to reconsider the temporary 50% fee reduction of the TUMF program. In order to present an overall picture of the issue, City staff contacted both BIA and WRCOG staff. The BIA is in favor of the temporary reduction because they believe the incentive will stimulate residential AGENDA ITEM NO. 9 Page 1 of 9 Proposed Ordinance Amending TUMF May 25, 2010 Page 2 of 3 development in the City. This belief is based on their discussions with the development community. Mr. Mark Knorringa, Chief Executive Officer of Southern California BIA - Riverside Chapter, indicated that the primary interest in the 50% temporary reduction would reduce unemployment through stimulation of the housing market. Alternatively, through discussions with WRCOG staff, the two major impacts to the City will be tracking, by jurisdiction, of lost revenue to the TUMF program when 100% of the fee is not collected. The zone Technical Advisory Committee will apply the deficit to the jurisdiction on future Transportation Improvement Plan (TIP) projects. Secondly, the Zone TIP is required to be balanced for the 5-fiscal year program so the jurisdictions will be responsible to identify how any shortfall in revenue will be reconciled. The WRCOG staff report has been attached for reference. After reviewing the WRCOG staff report and discussions with the BIA, staffs basic concern is that there will be a definite cost to the City's interchange project budget versus an undetermined benefit of increased new development. The risk to the City would be the design cost for the 1-15/Railroad Canyon Road interchange. The cost of design is estimated to be $3,000,000; the impact of the temporary reduction to the City could be in the range of $150,000. This theoretical amount of $150,000 is an example between now and December 31, 2010 (the assumed sunset of the temporary reduction), if the design has billed 10% of the estimated budget or $300,000, the City would be responsible for half the amount or $150,000. Mr. Knorringa also indicated that the BIA is interested in the extending of the temporary TUMF reduction which will increase the interchange project costs to the City. Fiscal Impact Adoption of the temporary TUMF reduction period will result in decreased revenues for TUMF eligible projects in Lake Elsinore. However, the extent that developers will take advantage of the fee reduction is unknown. Consequently, the full extent of the fiscal impact cannot be calculated at this time. Recommendation 1) Receive and file the report and take no action to adopt the revision to the City's TUMF Ordinance; Or 2) Direct Staff to prepare a resolution for City Council consideration establishing a revised fee schedule applicable under the Western Riverside County Transportation Uniform Mitigation Fee (TUMF) Program identifying the temporary TUMF reduction. Page 2 of 9 Proposed Ordinance Amending TUMF May 25, 2010 Page 3 of 3 Prepared by: Ken Seumalo lo< Director of Public Works Approved by: Robert A. Brady City Manager i Attachment: WRCOG Staff Report Page 3 of 9 Page 4 of 9 Item 6.B Western Riverside Council of Governments Executive Committee Staff Report Subject: TUMF Program Activities Update Contact: Ruthanne Taylor Berger, Deputy Executive Director (berger(a-wrcog.cog.ca.us), (951) 955-8304 Date: March 1, 2010 Requested Actions: 1. Approve the recommendations for Private and Public Sector credit/reimbursement regarding reduced TUMF and direct WRCOG staff to bring back the final policy and documentation to the WRCOG Executive Committee meeting in April. 2. Deny appeal filed by Pacific Communities regarding TUMF payment. 3. Authorize the Executive Director to execute an agreement with the County of Riverside for the Magnolia Grade Separation project. Credit for TUMF Facilities Construction: The Building Industry Association (BIA) took exception to the methodology used to calculate the maximum TUMF share available for the network in the 2009 Nexus Addendum, which was prepared for those jurisdictions that were going to adopt a 50 percent reduction in TUMF. The maximum TUMF share is that portion of any TUMF project that is eligible for credit and reimbursement; the agreements are held to the Nexus Study that was in effect at the time for the duration of the transportation project. The BIA proposed an alternative approach to the way the maximum TUMF share for the network is calculated. The WRCOG Executive Committee forwarded the proposal to the WRCOG Public Works Committee (PWC) for consideration and to provide a recommendation to the WRCOG Technical Advisory Committee JAC) and WRCOG Executive Committee. On January 14, 2010, the WRCOG PWC met to review the proposal and chose not to support the BIA proposal. The Chairman set up a Subcommittee to further study the BIA's concerns and to research implications of modifying the Program. On February 5, 2010, the Subcommittee met to develop a set of recommendations in two parts: 1) The Private Sector: entitled to credit and reimbursement depending upon the fee paid (which is a function of the Nexus), the improvements required through the Conditions of Approval, and the timing of the project; and 2) The Public Sector: receives reimbursement depending upon available cash and the Nexus maximum share. Because the Public Sector does not pay fees, but draws from the pot of available funds, it is different and can be treated differently than the Private Sector in how projects are funded. On February 11, 2010, the WRCOG PWC reviewed and endorsed the recommendations of its Subcommittee. The recommendations are in two parts: Page 5 of 9 Private Sector: During a period of policy reduction when a development project is required to provide TUMF improvements, and those improvements are completed prior to all of the fees being paid on the tract: • The developer may amend the credit/reimbursement agreement with the local agency for a prorata share of the new higher maximum TUMF share associated with the adjusted fee; • The developer will have from January (when the revised Construction Cost Index (CCI) is determined) to the following February (13 months) when a new CCI is adopted by WRCOG to process and amend their credit/reimbursement agreement addendum; and • If the developer fails to process an amended agreement within the specified time frame the credit agreement in effect under the lower Nexus shall remain in place permanently. 2. Public Sector: When a local agency adds a new project to the Transportation Improvement Program (TIP) under a Program fee reduction, the project can receive additional TUMF funding if the maximum TUMF share increases while the project is still ongoing provided the following criteria are met: • The agreement will be for the maximum share identified in the reduced Nexus; • The TIP will program the full estimate for the project to avoid a potential short-fall to the TIP if the agreement is later amended to a higher amount; • If the fee increases, an ongoing project may amend their reimbursement agreement to receive additional funding; • WRCOG will track the loss of revenue to the TUMF Program due to a reduction in fees by jurisdictions; the Zone TAC will apply the deficit to the jurisdiction on future TIP projects; • Any project savings will be returned to the Zone revenue account and it will be used to reduce any project deficit. If there is more than one project deficit, the Zone TAC shall determine how the savings will be applied; • The Zone TIP is required to be balanced for the fiscal years identified (currently five years) or the local jurisdictions will identify how the shortfall will be made up from other funding sources for the duration of the TIP: and • The TIPS will no longer show an unfunded project list. The TIPs and Regional Program of Projects will prioritize TUMF projects to ensure the TUMF Network is delivered in a manner that facilitates regional mobility. WRCOG staff and legal counsel were directed to review and revise the TUMF Credit/Reimbursement Agreement as necessary and prepare a template addendum that can used to revise the agreement in order to receive additional credit/reimbursement if the fee goes up and the project development project is not built out. Legal counsel is in the process of researching any issue that might interfere or cause a revision to the above recommendations. WRCOG staff is to bring back the final documents to the WRCOG PWC and TAC meetings in March for recommendation to the WRCOG Executive Committee in April. Zone Activities: The 5-Year TIP Amendments for the Central, Hemet/San Jacinto and Northwest Zones are complete. The Riverside Transit Agency's 5-Year TIP has also been approved. The Southwest Zone Technical Advisory Committee is scheduled to meet on March 10, 2010, at 2:00 p.m. at the Murrieta City Hall to review the project list in accordance with the revised revenue forecast based on the recent actions by the jurisdictions in the Zone to remain at the full nexus value. Page 6 of 9 All adopted Zone and RTA TIPs were distributed to the Zone Committee members and jurisdictions during the week of February 1, 2010, and are now available on WRCOG's website. TUMF Program Model Ordinance and Resolution Update: All jurisdictions have adopted the 2009 Nexus Study TUMF Ordinance and Nexus Study; however, not all of the WRCOG jurisdictions are adopting the temporary 50 percent TUMF reduction as authorized by the WRCOG Executive Committee. The status of each jurisdiction is as follows: 50% Reduction • Banning - adopted • Calimesa - adopted • Corona - adopted • County of Riverside - adopted • Menifee - adopted • Moreno Valley - adopted • Norco - adopted • Perris - adopted • Riverside - adopted • San Jacinto - adopted Full Fee • Canyon Lake - adopted • Lake Elsinore - adopted • Murrieta - adopted • Wildomar - adopted • Temecula - adopted • Hemet' - adopted • March JPA - adopted Pending Hemet is waiting for a determination from the Riverside County Transportation Commission (RCTC) regarding the additional TUMF dollars that are collected by the full fee going to regional projects within the Zone in which it was collected. Quantifying/Measuring the Impact of the TUMF Reduction in Creating Jobs Background: In October, the WRCOG Executive Committee authorized a one-year 50 percent reduction in TUMF based on the premise in the Red Team Report that reducing fees by 50 percent for one year will create jobs by stimulating the housing market. The 50 percent TUMF reduction is scheduled to sunset on December 31, 2010. WRCOG staff anticipates there may be requests for an analysis of the impact of the reduction on the new home construction market. The County of Riverside staff was instructed to also prepare an analysis of the impact (from a jobs stand point) of the County's action to reduce development impact fees. WRCOG staff has begun the process of thinking about how such an analysis might be conducted. One approach is to establish a series of benchmarks that can be use to quantify/measure the effectiveness of the reduction in TUMF to the creation of jobs. A second approach is to prepare an analysis that would attempt to correlate new home construction (added through reduced fees) to job creation. The final approach would be, on a macro scale, to review which jurisdictions in California reduced their fees in the past to stimulate the economy and what the results of the reduction were to that jurisdiction as a whole. Examples of benchmarks are as follows: • Construction Indexes; • Building Permit Activity; Page 7 of 9 • Property Tax Values; • Employment figures; • Sales Tax Revenue; and • Project Fiscal Analysis. Irrespective of what benchmarks are used, a baseline must be established in order to quantify the changes (such as the construction of a new single family home = xjobs (full time)). At the February 11, 2010, WRCOG PWC meeting, it was suggested that permit activity from the Southwest Zone be compared to other Zones adopting the 50 percent reduction since the Southwest elected not to reduce the fee. It is the hope that this will make it easier to evaluate whether permit activity differed between Zones that adopted the reduction and the Southwest Zone which elected to keep the full fee intact. TUMF Appeal: Pacific Communities has a project in the City of Moreno Valley which started prior to the 2003 effective date of the TUMF Program. As such, any building permits pulled prior to June 2003 were not subject to TUMF. Six lots for the project were not completed and the building permits expired. Approximately six years later the applicant is completing the project and new building permits are required. The City of Moreno Valley applied the TUMF in accordance with the Administrative Plan that requires TUMF to be paid when building permits have expired, with the issuance of new permits (either the differential if the fee had changed or the full amount if no TUMF had been paid). The applicant contends that since the TUMF did not apply to the original project building permits, it should not apply to the new building permits since it is the same project. The applicant has paid the TUMF for the six lots ($58,872.00) under protest and has followed the appeal process outlined in the Administrative Plan. The appeal has been denied by the Moreno Valley City Council. The applicant desires to appeal the Moreno Valley City Council action to the WRCOG Executive Committee. WRCOG staff has reviewed the documentation from the applicant and the City and concurs that the City followed the Administrative Plan requirements in assessing the TUMF for the new building permits. The TUMF appeal package is included with this report. The TUMF appeal was heard by the WRCOG Administration & Finance Committee on February 10, 2010. The Committee recommends that the WRCOG Executive Committee deny the TUMF appeal and concurs with the action taken by the Moreno Valley City Council. Annual Report: Fiscal Year 2008/2009 Annual Report: WRCOG staff is in the final stage of completing and printing the 2008/2009 TUMF Program Annual Report; the final report is anticipated to be distributed to the WRCOG Executive Committee in April. TUMF Agreements and Amendments: One agreement for a TUMF project is being forwarded to the WRCOG Executive Committee for consideration. County of Riverside • Magnolia Grade Separation Project for $648,000. Prior WRCOG Actions: February 18. 2010: The WRCOG Technical Advisory Committee approved the WRCOG PWC recommendations for Private and Public Sector credit/reimbursement policy relative to a WRCOG Executive Committee action which reduced TUMF by 50 percent, and directed WRCOG staff to bring back the final policy and documentation to the TAC meeting in March. February 11, 2010: The WRCOG PWC reviewed and approved its Subcommittee's recommendation regarding Private and Public Sector credit/reimbursement. February 10, 2010: The WRCOG Administration & Finance Committee recommended that the WRCOG Executive Committee deny the TUMF appeal submitted by Pacific Communities. Page 8 of 9 January 14, 2010: The WRCOG PWC reviewed the BIA proposal and took action to not support the proposal, to form a Subcommittee to further review the BIA's concerns, and research implications of modifying the Program and to bring back a recommendation (if appropriate) to the WRCOG Executive Committee in March. December 5. 2009: The WRCOG Executive Committee directed WRCOG staff to take the BIA proposal to the WRCOG PWC and WRCOG TAC for a recommendation to the WRCOG Executive Committee. WRCOG Fiscal Impact: None. Attachments: 1. TUMF Program Remittance Report Actuals for FY 2009/2010. 2. Summary of TUMF Program Revenues. 3. 2009 Nexus Update Ordinance and TUMF Resolution Fee Tracking. 4. The City of Moreno Valley TUMF Appeal Package for Pacific Communities. 5. Agreement with the County of Riverside for the Magnolia Grade Separation Project. Page 9 of 9