State

Building business through waivers

A proposal is circulating to jump-start Modesto's dire economy by waiving public facility fees on new projects in the city's downtown redevelopment area.

Monday evening, the city's economic development committee will discuss the idea for an 18-month moratorium on the fees. If the committee thinks it's worthwhile, it will ask staff to research the proposal.

The waiver would be an attempt to generate business growth and tax revenue in a city with close to 20 percent unemployment.

Councilwoman Kristin Olsen, who leads the committee, said the talk of a moratorium is preliminary.

"I just feel that, as a City Council, we should be scrambling to identify solutions to our unemployment level," she said. "Right now, I don't see any building activity or commercial or job growth in the downtown. And this may be one way to spur economic activity to create jobs."

Modesto's redevelopment area extends from the downtown for some distance on Scenic Drive and Paradise Road and northwest along the Highway 99 corridor.

The redevelopment agency assists with developing property in the area and then captures the increase in property taxes.

Under the proposal, the city would waive the one-time fees collected from new development that pay for fire stations, community centers, roads and other public improvements.

Either new building projects or business expansions in the redevelopment area could qualify. The spike in property tax revenues from the projects would be earmarked for repaying a $20.5 million RDA debt to the city general fund.

Other cities, such as Fremont in the Bay Area, have taken similar steps to revive economic growth.

Niniv Tamimi, who has a real estate and development firm, wrote the proposal being considered by the economic development committee. He was involved in developing the multistory building at 12th and I streets that houses Oak Valley Community Bank and the district attorney's office, among other tenants.

"A lot of businesses, when they talk to the city about expansion, are shocked at what the development fees are," Tamimi said. "Oftentimes, it kills their expansion plans."

Fees for general offices are about $13 per square foot and upward of $25 dollars per square foot for medical offices, he said.

A fee waiver could make a difference for a business that is close to making a project pencil out, he said.

Tamimi said he knew of one proposed project that could benefit from a waiver, but the moratorium can't be established soon enough to aid that project.

Others said they were not aware of businesses lining up to build downtown, but thought the city should make an attempt to induce growth.

"Unfortunately, I think with the economy and employment levels, it may not help," said Steve Madison, executive officer of the Building Industry Association of Central California. "It is hard to get lending and hard to get cash flow for a project. ... But it's smart for the city to consider it."

If the proposal moves forward, city officials could consider different options, Olson said, such as waiving 25 percent or 50 percent of the fees or trying a 12-month moratorium. Another idea is to use the extra property taxes generated by projects to reimburse the city for the fees, with interest.

"Somebody was brainstorming this proposal and it makes sense, so we are going to start talking about it," City Councilman Brad Hawn said.

Modesto's economic development committee will meet at 5:30 p.m. Monday, Room 2005, on the second floor of Tenth Street Place, 1010 10th St.

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or 578-2321.

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