Cost Accounting in Local Government

Thirty Years of Impact Fee Experience

This last January 16th I watched with no small amount of pride while the Chino City Council adopted an updated set of development impact fees. It shouldn’t have been remarkable as I see such successful DIF adoptions seven or eight times a year.  What was remarkable was that the Chino City Council had done the same thing with my first Development Impact Fee Calculation and Nexus Report over thirty years ago.  The Mitigation Fee Act (Government Code §66000) had recently been passed but was not chaptered until the following year.   We knew it was coming so RCS and City staff undertook the §66000 calculation making Chino the first public agency in the State to meet the Mitigation Fee Act requirements.  Revenue and Cost Specialists (RCS) was known as Management Services Institute Inc. (MSI) back then.  MSI’s President, Douglas W. Ayres, the Dean of retired City Managers, indicated to me that I was going to be MSI’s resident impact fee guru.  Little did I know that DIFs would be my career.

The 1988 Report, at about 22 pages, was pretty darned skimpy because frankly there was not much in the way of “demand data” information available and no internet to surf to find better data.  All searches were analog and done mostly at college and university libraries.  Things have certainly changed since then.  The recent January 2018 Chino DIF Report was 160 pages with five appendices all supported by a 366 page Master Facilities Plan detailing the 304 individual capital projects.

So what has changed?  The greatest change over 30 years has been in improving the required nexus, that quintessential relationship between various private sector land-uses and a given service.

Police and Fire Emergency Services Infrastructure – In that first report, we distributed service-providing infrastructure costs, in this case police and fire stations, simply by the number of response units that would respond to the various land-uses.  Rudimentary? you bet.  Now we use actual calls-for-service data to all privately held land uses.  As an example, in Chino we found that there were 2,738 fire/medic calls-for-service responses to the 16,239 detached dwellings in the City for a 0.169 average response ratio (or each detached dwelling has a 0.169 chance of requiring a call).  The City’s land-use database indicated that there were 8,215 additional detached dwelling units to be built which would generate 1,388 additional calls-for-service.  These 1,388 additional calls represented 42.96% of all increased calls-for-service thus receive 42.96% of all capital expansion costs.  This has increased accuracy significantly.

Circulation System Infrastructure – In 1988 I employed the well-respected Institute of Transportation Engineer’s Trip Generation “trip-end statistics” but in about 2002 I determined that trip-ends were only half of the equation, as land-uses that generate large number of trip-ends, such gas stations, would be unfairly saddled with a greater percentage of the capital expansion costs, even though they are generally pass-by trips (i.e. you generally fill your vehicle as part of some other trip). I had to recognize as an equal part, trip distance including the twin reductions of pass-by and diverted trips.   I did this by using a now well-known traffic study that identified average trip-ends, pass-bys, and diverted trips by land-use.  It has become the state of the art and has been “borrowed” liberally by others.

Storm Drainage Collection Infrastructure – The first nexus used was the Impervious Surface Percentage, (i.e. the amount of the parcel’s surface that is covered by roof-top or hardscape.  I have since moved on to using the Run-off Drainage Coefficient Index for distributing the cost of expanding the capacity of the existing storm drainage system.  I won’t describe the two methods but the latter is just more accurate.

Electric, Sewer and Water Utilities Infrastructure – In the past the report had to depend upon very broadly-based engineering “desk-top calculations” on the range of utility demand by land-use.  These were often acquired from existing (and old) Master Plans that had very broad projected utility demand tables, probably from some academic or engineering tomes on the subject.  Now we can often employ actual site-specific use data from the City’s billing records applied to a GIS system.  This is far more accurate than the former data.

General Facilities, Vehicles and Equipment Infrastructure – This infrastructure was usually the catch-all for administrative facilities (city hall and the city yard).   I found it best to remove the City Yard expansion costs and distribute them out to the other infrastructure such as circulation which could assume maybe 40% to 60% of the costs of a proposed city yard maintenance center costs.  The typically lightning-rod City Hall expansion cost stands alone, as it probably should.

Public Use Facilities, Libraries/Collections and Parks Infrastructure – The intent of these Quality of Life impact fees is to maintain the existing levels of service such as say 0.32 square feet of library space and 1.8 library collection items per resident.  The costs of expanding these facilities should be distributed by the number of residents that reside in the three major residential land-uses of detached dwellings, attached dwellings and mobile homes.  The U.S. census is pretty well limited to these three residence types.  I have never been keen on distributing these costs to business uses.  I often see some nonsense about people working at a job having eight hours a day to use parks.  No, I think that they are working and that stopping at a park on their way home is the last thing on their minds.

But here is what I think is one of my major contributions: that of changing the dialog and getting public agencies to use the word accommodate.  Early efforts after the passage of the Mitigation Fee Act often included explaining to our clients that impact fees were indeed completely legal.   Over the years our reports have been very successful at changing the dialog from the fabricated claim that “impact fees are just unfair taxes in disguise” to the current reasoning that “impact fees are necessary merely to accommodate new development”.   City council’s are more savvy now and the adoption of a 166 page Development Impact Fee Calculation and Nexus Report supported by a 366 page Master Facilities Plan is far easier now.  And for the thousandth time – no, DIFs are not taxes. They have to be calculated and textually supported according to the tenets of §66000 and the fee sections of Article XII-B of the California Constitution.

So, after 30 years, what’s next?  I don’t know, but I know have a good number of years of creativity and experience left and have recently been joined in RCS’s DIF efforts by our newest RCS Vice President, Chu Thai.  Chu has begun to master the DIF process and has some new ideas of his own.  The experience of thirty years combined with more youthful enthusiasm and new ideas, now that sounds like good way to continue a career.  And besides, someone has to be around to complete that Delhi Sands, Flower-loving Fly development impact fee.

To quote the well-known insurance company phrase, Yeah, we know a lot because we’ve seen a lot.

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