Commentary: Thank goodness for TischlerBise (TB).
TB is a consulting firm and an expert on Development Impact Fees (DIFs). TB says it has designed 900 impact fees in the U.S. and Canada -- more than anyone else -- and never had one successfully challenged.
TB is an important source of factual, rational, and informed advice related to what I call the “Las Cruces GO Bond versus DIF issue.”
The city has been pushing hard for voters to approve a big property tax increase on themselves (10 percent in my case) to pay for tens of millions of dollars in spending financed through interest-paying GO Bonds. The operative words in “GO Bonds” are General Obligation (GO), with the “general obligation” referring to a new obligation imposed on generally all property tax payers.
On the other hand, a DIF, commonly used by municipalities throughout the country, is in effect a “Builders’ Obligation” fee in which builders pay a fair share for city infrastructure requirements made necessary by their building projects.
The City hired TB to help with a legally required 5-year update of the City’s parks and recreation DIF. TB issued a consulting report May 1 which calculated that development in Las Cruces during the next 6 years is going to bring in 9,932 more residents and cost the city $28.7 million for parks and recreation infrastructure to accommodate the new residents at the current level of service. For example, a city official said facilities such as the Hadley complex, and the dog park, already paid for by existing residents, will have to be duplicated for the newer areas on the developing fringes of the city.
In its report, TB calculated that a proposed DIF increase of $4,475 -- to $7,075 -- for each future new single-family house, is “new growth’s fair share of the cost for parks and recreation capital facilities.” Note the use of the words “fair share.” TB said City Council could set the DIF lower. “However,” TB pointed out, “a reduction in park impact fee revenue will necessitate an increase in other revenues [such as property taxes], a decrease in planned capital expenditures, and/or a decrease in levels of service.”
In essence, for GO Bonds, all taxable property owners pay. For DIF fees, the builders, who make the profit from development, pay at the building permit office, and they may pass the cost on to the buyer of the home they build.
The city has slow-walked its 5-year parks and recreation DIF review, which was supposed to be completed by now. The City reportedly was tardy paying TB for its report, which delayed its release. The City canceled a public committee meeting scheduled for July 19 at which TB was supposed to discuss its report and answer questions about it.
But “GO Bonds” are on a fast track and are already being voted on through mail ballots amid a city public relations campaign urging approval. The ballot should, but doesn’t, ask you whether you want to pay for the projects covered by the GO bonds yourself, or would you prefer to have the builders and developers pay DIF fees or pay outright for selected parks and recreation projects that benefit them, and which their developments made necessary?
The GO Bond would make property tax payers responsible for up to $16.9 million in spending on parks and recreation facilities and another $2.7 million on trails. Just to note as an aside, according to a city official, the city gave the Metro Verde developers $1.4 million in impact fee money for parks that the developers built in their own development. Then the developers turned these parks over to the city to maintain forever at taxpayers’ expense. One official said the city can’t maintain the facilities it has now.
Developers and builders contend impact fees increase the price of new homes and make them less affordable. Yet home sales are booming and builders reportedly are getting 99.4 percent of their asking prices. There are also impact fees for public safety and utilities, but none in Las Cruces for other development-driven costs such as expansion of the congested road system.
Increasing the price of new homes through impact fees to reflect their true cost to the city actually would raise house prices and property values in Las Cruces. Increasing property values means you can sell your existing home for more; it increases your net worth; and it increases what you can get in a reverse mortgage or refinancing. It even increases the City’s tax base. Further, it avoids having taxpayers contribute to a builder’s “for-profit” business, even as taxpayers are forced to compete with publicly financed and subsidized developers and builders in the home-sales market.
On the other hand, increasing your property tax offers little to like.
A comprehensive, independent analysis or an audit of the costs and benefits of development for the average resident of Las Cruces is long overdue. We shouldn’t blindly assume growth is good and continue to finance and subsidize it. If growth is so good, why do our taxes and utility bills only go up?
You don’t have to believe me or the city’s press releases. If you want a copy of the TB report to read for yourself, email me at WilliamSr@wbeerman.com and I will gladly email you back a copy. If you only have a spare minute, you can read the essence on pages 25 and 26 of the report.
(Beerman is vice chairman of the Las Cruces Capital Improvement Advisory Committee, but his comments here are strictly his own.)