Supervisors seek answers to TIF concerns

In April 2005 the San Diego County Board of Supervisors adopted a Transportation Impact Fee (TIF) ordinance in order to comply with state law and provide funding for the construction of transportation facilities needed to support the increased traffic generated by new development.

On November 7, the supervisors requested that county staff address specific issues and return to the board in 60 days with recommendations to change the TIF program to encourage

commercial and industrial development in unincorporated San Diego County.

“I think we all recognize that commercial and industrial development creates the tax base,” Jacob said.

In addition to specific questions outlined in a board letter, Jacob added a request to study whether remodeling of a business should trigger TIF charges. Retired Ramona businessman Jim Salvatore noted that the TIF payment requirements have hindered many Ramona businesses who wish to expand in order to serve local customers.

“You basically shut down Ramona,” Salvatore said. “I think it’s a big burden to everybody and the locals are having a tough time.”

The Transportation Impact Fee is actually an option rather than a requirement; developers may still perform an individual cumulative impact traffic study and make the appropriate mitigation.

The TIF ordinance was expected to help small developers who could address their projects’ impacts easier with a single check rather than with a comprehensive cumulative impact study.

Prior to a 2002 court case, the California Environmental Quality Act allowed exemptions for relatively small “de minimus” cumulative traffic impacts, but after the exemptions were declared invalid CEQA was changed to require all traffic impacts, no matter how minimal, to be addressed and mitigated. That eliminated the county’s ability to make “de minimus” findings, so all new projects now require mitigation for cumulative traffic impacts.

The change in the CEQA law held up approximately 300 projects in the county’s unincorporated area due to the difficulty of the smaller projects’ developers being able to fund the required traffic studies as well as the road improvements.

In some cases the road improvements on a project by project basis would have exceeded the actual cost of the project, and the TIF program was intended to allow the applicants to pay the fee as a “one-stop” process.

“We had no choice but to adopt what is called the TIF,” Jacob said. “The change in CEQA law created a de facto moratorium for many projects.”

Since the adoption of the TIF ordinance, citizens and local community groups as well as applicants and developers have expressed concern that the industrial and commercial fees are too high, producing a heavy strain on economic growth and development in unincorporated communities.

An assessment addressing those concerns is currently being prepared and is slated to be presented to the supervisors in January.

The November 7 action directed the county’s Chief Administrative Officer to address specific questions and incorporate those findings into the review.

“A lot of merchants up there would like to remodel their businesses,” said Salvatore. “They’re getting stuck with the TIF.”

Salvatore noted that increased gas prices have led Ramona residents to seek local merchants rather than shopping in other towns. “People don’t want to travel,” Salvatore said.

Ironically, such local travel decreases demand on the region’s roads. “We’re having a difficult time getting the Board of Supervisors to understand economics,” Salvatore said.

Brock Parry is a wholesale fuel distributor in Lakeside. His father started Buck Petroleum in 1952 and had five employees. The company now has 19 employees and Parry seeks to construct a 20,000 square foot building in Lakeside. His original TIF assessment was $1.4 million, although after he paid for a traffic study the fee was reduced to $700,000.

“They just need to be readjusted,” said East County Construction Council chair Ron Pennock. “They’re hurting our business end.”

Matt Adams, the vice president of government affairs for the Building Industry Association, also noted the need to avoid disincentives. “There comes a point where there’s diminished returns,” he said.

“We certainly recognized the position that we were all placed in through judicial actions,” Adams said. “I hope this exercise helps highlight what really would be fair for the industry.”

The questions the CAO will address focus on the impacts on commercial and industrial development, the amount of money collected under the program and how the fees have been used, whether the TIF has hurt commercial or industrial development in the unincorporated communities, whether other counties are handling the change in state law differently, why regional roads are included in TIF charges and whether the TransNet sales tax was intended to fund regional roads (the TIF assessment also covers state highways, and the question also addresses CalTrans’ responsibility for state highway improvements), why there has been subjectivity over the amount an applicant is required to pay, whether the reimbursement program has been successful and to what extent, whether procedures have been implemented to ensure that applicants receive correct TIF information during the early stages of their project, what the absolute minimum fee would be for the TIF program to achieve its goals of addressing a project’s cumulative impacts, what can be done to reduce commercial and industrial fees while still complying with state law, what the risk would be if the TIF were eliminated or reduced and whether other alternatives exist, whether the county can apply Proposition 42 funding (Proposition 42, passed by the state’s voters in 2002, dedicates the sales tax on gasoline to transportation) to reduce the TIF charges, how the credit or reimbursement value for road improvements is calculated, whether all road improvement costs including right-of-way acquisition are used to reduce TIF charges, why a TIF is required on each permit to build a new home or business where a legal lot already exists, why the TIF is required on each permit to build a new home or business which was created by an approved subdivision which already has a certified environmental document, why projects in process prior to the TIF did not include a grandfather clause, and when the “interim” period ends since the TIF was proposed as an interim measure to allow the delayed projects to proceed.