In an effort to stimulate a stagnant business climate in Modesto, city leaders have considered a temporary suspension of the capital facility fee charged to commercial development.
City staff studied the idea and recommend no more than a six-month suspension. The city's economic development committee will discuss the fee waiver today.
A report from Brent Sinclair, community and economic development director, says the city could lose $375,000 if fees are discounted by 50 percent for six months. The city uses the fee revenue to pay for roads, parks, fire stations and police facilities.
The report says the suspension won't affect the funding of daily city operations but could delay projects that rely on development fees.
The economic development committee first considered the fee waiver in May after receiving a written proposal from real estate developer Niniv Tamimi. The developer thought it might encourage business expansions and create jobs in a county where the unemployment rate tops 17 percent.
At the same time, city officials are reviewing the fees charged to residential, commercial and industrial development, because of the economic downturn and declining land values.
The process could result in a 16 percent reduction in residential fees and 6 percent drop in retail project fees effective Aug. 22, based on the cheaper cost of buying land for parks and road improvements.
Further fee reductions could go into effect by Jan. 1. Sinclair's report says the development fees could be reduced by an additional 20 percent or more.
Suspending charges urged
He suggests that the city suspend the commercial charges until the capital facility fee program is revised.
Councilman Dave Geer, who serves on the economic development committee, said he wants to try the commercial fee suspension as an incentive for small businesses to expand.
"I am a fiscal conservative and believe taxes are too high, and that includes fees," Geer said. "I am comfortable with a six-month suspension. If it doesn't show an increase in business activity, then it would make sense to go back to the normal fees."
If it spurs business expansion, he said, he would support extending the waiver.
The move toward fee reductions makes some people nervous. The city's failure to collect enough development fees and taxes led to huge shortfalls in funding community facilities in Village I in northeast Modesto.
Taxpayer group wary
Eric Reimer of the Stanislaus Taxpayers Association said he was not familiar with the commercial fee waiver. But the city should not be giving a break to residential developers, he said.
"Once these things are put in place, those who receive the subsidies are very unhappy about giving them up again," he said. "The breaks are easy to provide and hard to get rid of."
Officials say the across-the-board reduction in development fees is justified by slower growth, which reduces the need for public facilities and traffic improvements.
The economic development committee could recommend the commercial fee suspension to the City Council, which has the final say.
The economic development committee will meet at 5:30 p.m. today in Room 2005 on the second floor of Tenth Street Place, 1010 10th Street.
Bee staff writer Ken Carlson can be reached at firstname.lastname@example.org or 578-2321.