The New World Order
Through a process more complicated than nuclear fission, state law and regional agencies determine how much housing each city must be prepared to provide in the coming years. That determination is called the RNHA – Regional Housing Needs Allocation. The allocation is based in large part on something called the Job-Housing Connection Strategy. While much more complicated than it seems from its title, job growth is a significant factor in the amount of housing allocated to any particular city. Thus, while cities look to increase their business base, doing so increases the amount of housing they must also have room for. Cities like Menlo Park, with its relatively recent inflow of Facebook, can end up in a precarious situation with a large employer and insufficient room for residential growth.
Business growth and then the requisite housing growth, in turn, impacts on the resources of the locality. There is more traffic, more strain on the water and wastewater systems, more strain on the municipal infrastructure and more strain on the municipal employees having to service a larger population of both residents and commuters coming into the city for work.
Compounding this problem further is that not only are cities required to plan for additional housing, they are also required to make a significant portion of that housing available at below market prices, what is known today as “affordable housing.” Affordable housing is not free, government paid housing, but housing at below market rates, offered to people and families with below market incomes for the area. In Foster City most affordable housing is not cheap and most people receiving affordable housing are fully employed.
While some might say that the solution is not to move forward with business growth, the fact is that in modern day California it is all but impossible not to grow. Since the passage of Prop. 13, the majority of our City’s income is relatively fixed and increases by less than the increase in the annual cost of living. Thus, without growth we would eventually run out of money.
Nonetheless, for many years, cities have borne the impact of this growth in stride, using the additional revenue from business growth to offset the impact to their city. However, this was only possible when the law allowed cities to have redevelopment agencies that could raise funds to pay for the affordable housing that the State required. With the State killing off redevelopment agencies, there is a new world order for cities, one that is antagonistic to growth for the simple reason that it makes growth more expensive when businesses and developers pass these costs along to their customers.
Today, cities look towards businesses and real estate developers to pay fees to cities in order to offset the impact that they have on the city’s economy. Our staff recently studied some of these new business deals and the fees are often pretty significant, sometimes as high as seven figures. The businesses, however, do get something for their money; they get a guaranty that the city will reserve capacity for them as they grow. Once a city commits to a development, the city commits to having the capacity to provide all of the municipal services to the business as it grows.
While this seems like a win-win, the problem is that capacity is not infinite and reserving capacity is a risk for a city in that if the developer or business does not grow, the city will not realize the revenue from that growth. In addition the city cannot use the reserved capacity to allow another business or developer to build because it is required to keep it reserved for the prior business. Thus, since the future is not certain, the city takes a significant risk when it reserves capacity. It is with that justification that it charges significantly, in the form of impact fees, for taking that risk.
Unfortunately, charging businesses and developers impact fees changes the relationship from one where they are working together towards a common goal of growth to one where the business and developer feel as if they are being held to pay an unfair share of the financial burden of State government decisions. This can create problems with a city’s ability to grow and through growth continue to offer the services that its residents and businesses have come to know and appreciate.
As you can see, this is a very complicated issue but it is one that the City Council will be looking at as we enter into the new world order created by our State government. This is something that our residents and businesses should also weigh in on. I urge you all to stay aware of this issue as it could be critical to the future of not only Foster City but of all California cities as we move forward.
Those are my thoughts. You can always share your ideas with me by email at firstname.lastname@example.org or call me at (650) 286-3504.
April 24, 2013
The New World Order
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