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HomeMy WebLinkAboutItem 5.1 Public Facility Fee Overview or nU,�� 19 82 STAFF REPORT CITY CLERK ` CITY COUNCIL File #600-70 DATE: July 21, 2015 TO: Honorable Mayor and City Councilmembers FROM: Christopher L. Foss, City Manager " SUBJECT: Public Facility Fee Program Overview Prepared by Roger Bradley, Assistant to the City Manager and Paul McCreary, Parks and Community Services Director EXECUTIVE SUMMARY: The City Council will receive an informational report on the City's Public Facility Fee program. FINANCIAL IMPACT: None. RECOMMENDATION: Staff recommends the City Council receive the report and direct Staff to prepare a policy for reimbursement for General Fund loans to the Public Facilities Fee Program. Reviewed By Assistant City Manager DESCRIPTION: The City Council has received requests from the public to provide an informational overview of the City's Public Facilities Fee (PFF) Program. In response, the City Council asked Staff to make a presentation at a future City Council Meeting regarding the PFF. Staff has prepared an informational report to help answer questions about the impact fee program, such as what the program is designed to accomplish, how fees are collected, what expenses are eligible, as well as provide a discussion of the current fund balance and project priorities. In addition, Staff is seeking direction from the City Council on the development of a policy to ensure the General Fund is reimbursed for any loans made to the program. With the anticipated projects approved in the Capital Improvement Program (CIP), the City Council has authorized borrowing from the General Fund in order to construct facilities included in the PFF Program. Page 1 of 5 ITEM NO. 5.1 What is a Public Facility Fee Program? The Public Facility Fee is one of the City's development impact fees. Development impact fees are fees charged to developers for the purpose of paying all or a portion of the cost of public facilities needed to serve future residents of the development project. Development impact fees are subject to strict requirements. If a development impact fee does not relate to the impact created by development or exceeds the reasonable cost of providing the public facility, then the fee may be declared a special tax and would then be subject to a two-thirds voter approval. In addition, the revenues generated from a development impact fee may only be used for the purpose for which they were collected. In the case of the Public Facilities Fee, this means that the revenues can only be used to fund the proposed public facilities that were used to justify the fee. In 1996, the City of Dublin adopted a Public Facilities Impact Fee program as one means of paying for infrastructure needs due to new development. As part of the program adoption, the City developed a comprehensive public facilities financing plan for public improvements that are necessary through buildout. The objective is to ensure that adequate public facilities will be available to meet the projected needs of the City as it grows and to further ensure that the facilities planned are consistent with the adopted General Plan. It is important to note that the Public Facility Fee is only used for the acquisition or construction of facilities, any maintenance or operational costs associated with such facilities must be borne by other sources of funding, such as the General Fund. Therefore, prior to building new facilities funded by the PFF, the City needs to have a sufficient amount of development to generate the property taxes needed to help fund ongoing operations and maintenance. What Development Impact Fees Does the City Collect from New Development? The City can collect impact fees can to fund many types of public facilities. The State law defines public facilities (Government Code section 66000(d)) fairly broadly. For example, public facilities can include public improvements such as fire stations, libraries, sewer plants, traffic improvements, and city administrative buildings, but does not include schools. The City of Dublin collects various impact fees including the Public Facility Fee, Fire Impact Fee, Eastern Dublin Traffic Impact Fee, Downtown Traffic Impact Fee, Tri-Valley Transportation Development Fee, Freeway Interchange Fee, Noise Mitigation Fee, Affordable Housing In-lieu Fee (residential & nonresidential) and Dublin Ranch West & East Side Storm Drain Benefit Districts. This report focuses solely on the City's PFF Program, which collects fees from new development to build parks, recreational, and administrative facilities within the City of Dublin. Currently, the PFF funds five facility types: Parks, Civic Center, Library, Community Buildings, and Aquatics. The parks category is further broken down into four components, with two additional components being proposed as part of the Public Facility Fee Program Update, which the City Council will consider under another agenda item at a separate time. The park fee categories are as follows: Neighborhood Parkland Acquisition Fee, Neighborhood Park Improvement Fee, Community Parkland Acquisition Fee, Community Park Improvement Fee, Natural Community Parkland Acquisition Fee (new), and Natural Community Park Improvement Fee (new). Various studies and plans provide standards for the amount or size of the facilities the City needs to have available to provide adequate services to the population within the community. For example, the Parks and Recreation Master Plan established a standard that for every 1,000 residents, the City will provide five-acres of parkland to provide sufficient recreational and cultural opportunities. As a result, for every new residential unit built within the City the increase in population from that new residential unit has an impact on the City's ability to provide Page 2 of 5 adequate facilities. To mitigate the cumulative impact, the City is justified in charging a public facilities fee so that the new development, both residential and commercial, bears its fair share of the increase in service demands on its facilities. Without this fee, existing Dublin residents would be left to bear the cost of a development's impact otherwise the community's facilities would be overburdened by the expanded population if existing facilities were not expanded. What are Eligible Expenditures? As indicated above, different fee categories have been established to mitigate the impact of new development on the City's public facilities. The City can use the fees to design and construct the facilities identified in the program. This includes construction costs, as well as soft-costs such as staff time for project management; contract services for design, engineering, testing, etc.; furnishings, fixtures and equipment; as well as miscellaneous costs such as printing, legal noticing, etc. What Has the Program Funded? Since the adoption of the Public Facilities Fee Program in 1996, the City has acquired 175-acres of parkland, improved 118-acres of parks, built the Senior Center, Library, Shannon Community Center, and began construction on the Emerald Glen Recreation and Aquatic Complex. Fund Balance and Project Priorities Funds received under the Public Facility Fee program must be segregated from the General Fund and used solely for the purposes of acquiring and developing new parks and public facilities. When a developer remits PFF fees to the City, the fees are deposited to the Public Facilities Fee Fund, for which the balance is reported in the City's Comprehensive Annual Financial Report. While the fees collected are held in this one fund, within the City's accounting system, Staff tracks the receipts and expenditures of fees by fee category (Library, Civic, Neighborhood Park, Community Park, Community Buildings, etc.). This ensures at build-out the City can account for how the fees were spent on the intended facilities. Since the City receives PFF revenues as development occurs, the PFF cash flow constrains the timeline for constructing facilities funded by the PFF. In some cases—as is detailed below—this has led to the City making loans from the General Fund to the PFF in order to expedite projects that would have otherwise been deferred until adequate PFF funds were collected. Additionally since the PFF is one fund, or pot of money, the nature of the program is such that funds being tracked in one fee category (i.e. parkland acquisition) are available to fund improvements in another category (i.e. community buildings) which is necessary to allow projects to be built throughout the life of the program, rather than at the latter part when the City has approached build-out. If the City waited until adequate funds were collected within each project's category before pursuing projects in that category, it would significantly delay the City's ability to construct many of the amenities that the Program is designed to fund. The City has used this process since the program's inception in order to timely deliver PFF projects. The larger facilities, such as the Library and the Senior Center, have been the most reliant on this mechanism, because, otherwise, residents would have had to wait until build-out occurs before the City would have collected the needed facility fees in that category. For example, in 2000, the City needed a new Library because the existing Library was too small to serve the needs of the community. The City had only begun collecting the PFF in 1998, and, therefore, there was insufficient funding in the library category of the PFF to fund the entire project. However, the sum of all the PFF fees from the various categories in the fund was sufficient to move forward with design and construction (including a $2.0 million gift from the Lin Page 3 of 5 Family). The library project expenditures were tracked in the accounting system and charged against the library fee (not to the other categories). As a result, the costs of the Library have been accurately accounted for in the PFF fund and the library category has been at a deficit balance ever since. As of June 30, 2014, the category had a negative balance of $1.8 million. At the build-out of Dublin, there will be no deficit in that category due to the payment of future PFF fees. The City Council made a similar policy decision when it authorized the Emerald Glen Recreation and Aquatics Complex (EGRAC) and development of the remainder of Emerald Glen Park. At the time, the Public Facilities Fund balance was $29.3 million. This amount included approximately $16.1 million within the project's categories: community park improvements, community buildings, and aquatics. This amount was $13.2 million less than the EGRAC project budget. Therefore, the City needed to use the additional PFF funds from other categories to pursue the project, with a significant portion coming from the neighborhood parks category. This decision was justified by the fact that, at the time, the City was exceeding its park acreage standard in this category and the community need for the aquatics facility (the existing Swim Center is over 40 years old and the water space it provides is insufficient for a community of Dublin's size). Why is the General Fund Making a Loan to the PFF? Project priorities are set by the City Council and are adopted as part of the City's Capital Improvement Program (CIP) on an annual basis at a noticed Public Hearing. The CIP includes projects that Staff recommends for funding and shows the timeline for when certain portions of a project will proceed. Staff recommends certain PFF projects based on the standards outlined within the Parks and Recreation Master Plan (MP) and available PFF funding. Importantly, it is a funding program that is designed to be self-sustaining and separate from the City's other sources of revenue. As reported to the City Council on February 3, 2015, Staff anticipates the total cost of all the projects identified in the current five-year CIP will exceed the PFF fund balance and fees collected. A loan upward of $6.0 million from the General Fund to the PFF will be necessary in order to keep the projects funded in the CIP moving forward. At the June 16, 2015 City Council meeting, the City Council approved the $6.0 million General Fund Reserve to cover that loan, if and when it is necessary. While the PFF program has been established to cover the costs of the impacts related to new development at build-out, cities can loan General Fund monies to advance the timeline to develop facilities. While it would not be prudent to loan large sums of money to the PFF, moderate loans that can be re-paid by development on the near horizon are justifiable because existing residents receive an incidental benefit from the new public improvements. As the City has committed to provide loans to the program from the General Fund to accelerate the development of certain projects, Staff believes it is prudent for the City to develop a reimbursement policy to ensure that the revenue that has been loaned to the program is returned to the General Fund in a responsible manner. Therefore, Staff is seeking direction from the City Council on the development of this policy and will bring back a recommended policy to the City Council at a future meeting for consideration and possible adoption. How is a Loan Different than a "Gift"? It should be noted that, in addition to the anticipated loan, the City Council has committed to allocating $4.8 million as a "gift" from the General Fund to two PFF projects to pay for Page 4 of 5 enhancements to the EGRAC ($3.0 million towards the natatorium) and Fallon Sports Park ($1.8 million toward synthetic turf and field lighting for the soccer fields) that were not anticipated in the PFF program. These contributions were characterized as "gifts" or "grants" because they paid for enhancements to projects in the PFF and, therefore, would not be eligible for repayment from the PFF in the future. NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: None. Page 5 of 5