This is from Jerry Kurtkya:
EL PASO – AFFORDABLE STEPS TO RENEWAL
# 3 – Socialize the Benefits of Growth
I have been outlining the local game that has been played out for years now which is to privatize the benefits of El Paso’s growth while socializing its costs onto the tax base. My ideas have included several low cost strategies to instead privatize the costs of growth and save the land as an environmental resource.
In this installment, I will emphasize that the city needs to see its way through to creatively recapturing the now socialized costs of development with fees that pay for the ancillary costs of development, e.g., parks and libraries and public safety. The recent “victory” of the Builders Association in city council effectively removes much of the master planning initiative instituted by a prior council. As a result, the PSB will go back to the bad old days of piecemeal lot sales and development, endangering not only our future water supply, but the natural environment, too.
Whether there is master-planned or piecemeal development, the city has to find a way to force builders to pay for the costs of development that will otherwise be loaded onto the taxpayer. If we’re going to have growth, then let’s find a way to socialize its benefits instead of privatizing them as the current model does. The council’s recent decision to allow the Monticello development to assess fees to property is one example of how this can be done using a private sector model.
Impact fees, as previously described, are difficult in Texas because such fees are explicitly identified to incremental development, i.e., the city has to use the fees for their intended purpose or risk recapture by the builder. This is only fair but it requires a level of planning-to-action that city hall is incompetent to do. Need I say, “San Jacinto Plaza?” Then again, can you imagine the outcry from the builders if realistic impact fees of $10K to $20K per lot were charged? The impact fee route may not be politically feasible here.
But another form that we could consider is for the PSB to levy a surcharge on property sales that is not specific to ancillary infrastructure, as with impact fees. In this scenario, the PSB could simply estimate the number of housing units that might be built on a parcel and add, say, $20K per unit to the price of the property. Since the PSB owns the property being sold, they are just asking the purchaser to pay a higher price on a take-it-or-leave-it basis, not as an impact fee. This “extra” money can then be deposited into a fund for the city to use for the otherwise unfunded infrastructure, but not specifically tied to the sold parcel and, hence, not legally an impact fee. I hope.
Whether with higher impact fees or a PSB surcharge this is what has to be done in some form or we just keep getting poorer in spite of our growth as costs are transferred from builders onto taxpayers. Will housing costs go up? Of course, but that is not a bad thing. Housing is too cheap here now because of massive overbuilding for many years.
Finally, I have a cynical take on why the council deconstructed the PSB’s master plan strategy and it is more than just campaign contributions from the builders. Several on council, namely Niland and Acosta, have political ambitions beyond their current offices. They will soon be facing the reality of rising city taxes to pay for all the luxuries they voted for in the stadium, downtown spending, bond issue and trolley (its operating cost), in addition to the continued giveaway of tax abatements. This is not going to sit well with the voters, so how do they pay for these things without raising taxes?
How about forcing the PSB to sell its land and the city pocketing all the proceeds? IMHO, that is what the current strategy is moving toward and why the council’s hostility toward the PSB. They, and especially Rep. Niland, are looking for a way to force the sale of PSB lands to fund their spending spree as it hits the tax roll. This is like selling the family ranch to pay off the credit cards but not stopping the spending binge. If the city can capture the revenues from sale of PSB land, the coming credit card bill is not so scary. Look for more efforts in the near future to merge the PSB back into the city.
What do you think?
NEXT – #4 A Public Sector Bank
elpasospeak 
Thank you for your excellent explanation of the fallacy that “growth means more revenue” for the City. GREAT idea to increase impact fees and / or add a “surcharge” for new developments!
I have some links to old research (1994) on the amount of revenues vs cities’ expenses for various land uses: residential, commercial, and open space. http://extension.unh.edu/resources/representation/Resource000400_Rep422.pdf
It would be great to have some more current references.
Farmland Information Center, http://www.farmlandinfo.org/statistics used to have similar research, but I can’t find it now.
Please continue this discussion!
judy
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I do not like that PSB taxpayer fees keep increasing. I do not like that the PSB paid huge amounts for property over CAD appraisal. But, I definitely do not think City Council should take over PSB. I am between the proverbially rock and a hard place.
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I totally agree that this Council is acting unwisely in this area, and I abhor what I see them doing to the PSB, which used to have such a good (and well deserved) reputation. I cringe at the thought of those members who have further political ambition because I think they happen to be the worst of a pretty bad group. Something does need to be done, and this time it should not be at such a cost to the taxpayer. Meanwhile, it sure looks like the great 2012 heist is worse than I had been predicting. I am referring, of course, to the so-called quality of life bonds that were voted in, and on which very little progress is visible to date.
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The kind of growth promoted by the developers of El Paso, who pretty much determine what the city will look like (including Montecillo and the Aldea to come, supposedly creating an “urban and walkable environment, but in fact really just giant apartment complexes that do not resemble a true urban environment at all and will overwhelm the very limited transporation infrastructure of the westside), does little if anything to “add value” to the city. A friend who worked for one of those developers said flat out that their value begins to drop as soon as the buyer opens the door. They are cheaply made and priced. Tracts of houses advertised as cheaply affordable are also advertising that the city continues to be populated by cheap labor – not exactly an appeal to “brain-power” businesses to come here. Even with an impact fee, the sprawl has enduring consequences for the city. One reason that it is so hard to create an effective public transportation system here is the sprawl. Tens of millions of dollars will be spent on the BRIO system bus system – but most of us do not live near a BRIO stop, and other buses wander around the city’s neighborhoods once an hour. Who wants to walk half a mile or more to a bus stop that may not even have a bench, hope not to miss the bus and wait for an hour, in order to get to the fast buses on four main roads? The continuing sprawl just increases the amount of time that people have to spend getting somewhere, unless they only shop and eat and find entertainment in their immediate neighborhood.
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Excellent points, Helen.
Smart Development does not automatically translate to smart residents.
One also has to consider the reality that few West Texans want to give up their cars and big trucks and SUV’s which are a strong part of our culture and our self-identity as well as longstanding symbols of socioeconomic status and personal freedom.
Unfortunately, a large portion of the vehicles on our streets are Juarez and New Mexico vehicles, many of which are owned by El Paso residents who refuse to register them locally. How many El Pasoans are willing to ride the bus to reduce traffic congestion and make it more convenient for out-of-town drivers who use the streets paid for by taxpayers?
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Jerry & Brutus,
Not much has been said nor did the local news organizations weigh in editorially regarding city council’s decision to give the Montecillo developers taxing authority. It’s safe to assume that other developers will now request that same authority. Hunt, which recently announced its own smart community, is almost certainly waiting in the wings.
Is it a coincidence that this was approved just months after the former city CFO went to work for this developer?
Is this constitutional? If so, has our constitution been bastardized for the benefit of developers?
Do El Pasoans now have to worry about both public and private taxes? This is especially problematic when developers are granted this power AFTER people have already purchased property or signed leases in districts in which developers are later granted this power.
I would appreciate if the two of you would share your thoughts on the city giving developers taxing authority.
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Constitutional? Probably, unfortunately. Then again the courts will probably have a chance to review this after the fact tax fiat.
My understanding is that the taxes will have to be voted on by the property owners, but since there is one large owner the little guys probably do not stand a chance. I find it hard to believe that people will want to buy property in this development now that these private parties will in effect be able to levy taxes.
Personally I believe that the city is wrong here. It is hard enough to get our elected officials to keep spending down. The average property owner will have no chance against the developers. Again, people should think long and hard about buying property in one of these areas.
As far as changing the rules after the fact, I suspect that the paperwork was cleverly designed to allow this while hiding the ability to do it from the buyers.
Brutus
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How is this different from association fees? Where is the former CFO employed?
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According to the EPISD web site she is employed at Integrity Asset Management. Maybe she will learn more about what those words mean.
Brutus
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Love it 🙂
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If it were simply an association fee, the developer would simply create an association and implement a fee. They don’t need city council’s approval to do that.
There is one big difference. By establishing the special taxing district, the city council is enabling the developer to issue bonds. The developer will use the projected recurring tax revenue as its hook to float the bonds. Try that with association fees.
The Times glossed right over that point by simply reporting that “Approval will allow the developer to issue bonds and impose a property tax on property owners…”
The city is now making decisions related to taxing authority to help facilitate expansion financing for developers.
— Since when is developer financing the city’s concern?
— Who bears the cost of collecting the management district’s special taxes?
— Will the taxpayer-funded Appraisal District now become the billing and accounts receivable department for the developer’s tax district with all the revenue going to the developer?
— How are unpaid district tax bills collected?
— Does the city have any direct or indirect liability for the repayment of these bonds?
These special districts are reminiscent of the special purpose entities, which Enron and others used in creative accounting.
Here is another point that is not being discussed. Typically, these districts can be dissolved by the City Council, property owner petition, or by a vote of its board. Once it’s dissolved, guess who pays to support the infrastructure and services developed in the district? The public, naturally — and not just the property owners in that district.
Neither the Times nor El Paso Inc. consider it important to raise such questions or help educate the public on the reasoning or implications for these kinds of decisions.
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Very good points. Inquiring minds would like to know the answer.
If a developer can assess taxes on their property what rights do the tenants/owners have? Is this taxation without representation?
Unfortunately the local press does not consider it a duty to inform the public of the public’s potential indenture by developers.
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