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By Steve Levy

Housing Impact Fees and the Economy

Uploaded: Mar 25, 2017

This is the letter I sent to council.

Impact fees to provide funding for subsidized housing for low and moderate income residents should, in my professional opinion, have two objectives:

1) To maximize the number of units that can be funded, taking into account the possible disincentive effects of fees that are out of line with neighboring jurisdictions and

2) To maintain funding from future development for the city budget, again taking into account the disincentive effects of being out of line with neighboring jurisdictions.

The staff report does indicate that the proposed fees are in most or all cases above those in neighboring jurisdictions.

I support the staff recommendation to make it easier for new housing developments to pay in lieu fees instead of providing units. I support the recommendation of the housing professional that fees can be leveraged to obtain additional funds and that building larger developments can reduce the cost per unit form economies of scale versus having developers build two or three units on each site.

I support fees on non-residential developments that are comparable to those in neighboring jurisdictions but do not support fees that are much higher compared to neighboring jurisdictions especially the large differences in the proposal before council and even more so for hotels, which bring in substantial revenue to the city and for infrastructure.

If the council approves fees that are well out of line with our neighbors, I support the PTC recommendation for phasing and do not find the staff argument that phasing would be burdensome to outweigh the potential loss of city revenue from disincentive effects of high fees.\

The local and regional economy has had a sustained period of growth and that has led some to believe that development in Palo Alto is impervious to out of line fees.
I find that to be a risky and unsupported argument and forgetful of the property market following the dot com bust or following the 2007 recession.

Residents are requesting a high level of local services and council should understand the connection between funding these services and revenues from new developments, even if residents disregard or do not care about these connections.

It is a mistake in my professional opinion to assume that new developments will occur no matter how high our impact fees are compared to those of our neighbors.

Stephen Levy
Center for Continuing Study of the California Economy