Businesses building new commercial projects in downtown Modesto would get a 50 percent reduction in city development fees under a proposal that three City Council members advanced Monday to spur job creation.
Council members Kristin Olsen, Brad Hawn and Dave Geer, who make up the city economic development committee, want to offer the fee cut to encourage business expansion in Modesto's redevelopment area, which includes the downtown.
It would reduce the costs for business people looking to expand a retail store, build a new restaurant or construct an office building. The goal is to promote commerce and create jobs in a county with an unemployment rate above 17 percent.
The full City Council is expected to consider the recommendation later this month.
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The committee had proposed the fee cut citywide but decided Monday to limit it to the redevelopment area.
The proposed cut is specifically for the capital facility fee on commercial projects, which ranges from $8.62 per square foot for a daycare center to $23.80 per square foot for medical offices.
For a 40,000 square-foot retail building, the charge is $740,000. But with the 50 percent cut, it would be $370,000.
The committee decided against waiting for an ongoing review of the capital facility fees charged to residential, commercial and industrial development, which could lower the fees by 20 percent to 30 percent in February or March.
Sandy Lucas, a member of the task force reviewing the fees, told the economic development committee it should table the item, because the revised fee program will include special incentives for businesses wanting to build in Modesto.
"I think you need to let the task force do its work," Lucas said.
The economic development committee first asked city staff to research the fee cut, along with job creation incentives, in May.
Olsen said she was disappointed that staff did not come back with ideas for incentive packages at Monday's meeting.
The city collects capital facility fees when it issues building permits. It uses the revenue to pay for roads, park and recreation facilities, fire stations and police facilities.
If the City Council adopts the commercial fee cut, it will have to work out details such as how long to offer the break and whether to put a time limit on builders starting construction.
City officials say they would lose about $375,000 with a six-month suspension of the fee.
Brent Sinclair, community and economic development director, said all of the capital facility fees are due for significant reductions because of declining land values, the slower pace of growth and the scaling back of road improvements.
The current fees are supposed to address urban growth impacts over 20 years, but with a slower rate of population growth, the road improvements won't be needed for 40 years or more, he said, so it makes sense to reduce the fees.
Bee staff writer Ken Carlson can be reached at firstname.lastname@example.org or 578-2321.