Questions & Answers about the “Development Shall Pay Its Own Way”

Questions & Answers about the
“Development Shall Pay Its Own Way” Charter Amendment

What is the origin of this proposed amendment?
The Boulder Valley Comprehensive Plan provides clear direction that development should pay its own way. Note that, just like the proposed amendment, the BVCP Policy 1.30 covers both facilities and services, and includes affordable housing and avoiding negative impacts to the transportation system. Here’s the language from the current Comp Plan, as it’s known:

Policy 1.30 Growth to Pay Fair Share of New Facility Costs
Since the public costs of annexation and developing several areas concurrently could prove excessive, the city will limit said costs to those, which can reasonably be accommodated within the Capital Improvements Program and are compatible with anticipated revenues.
When permitting additional development or redevelopment, the city will consider whether public facilities and services are adequate to reasonably maintain current levels of service or service standards given the impacts of such additional development or committed funding sources for such adequate facilities are sufficient to ensure their provision in a timely fashion.
Growth will be expected to pay its own way, with the requirement that new development pay the cost of providing needed facilities and an equitable share of services including affordable housing, and to mitigate negative impacts such as those to the transportation system.
This policy idea was included in the original Comp Plan that went into effect in 1970, now 45 years ago. But, in spite of the nearly half century that has passed, this policy still has not been fully implemented, far from it. And with all the growth that the city is allowing, and in fact promoting, we think that it’s time the city council took the Comp Plan seriously.

What will be the effects if this charter amendment passes?
The long-term effect will be that the costs of dealing with the impacts that are imposed by development will be borne by such development. This will relieve existing residents and businesses of this burden, and ensure, at least to the extent reasonably possible, that our facilities and services are not further stressed by growth.

The most common device for requiring development to pay its own way is an “impact fee”. This could be a water tap fee, which pays for the additional water rights, reservoirs, treatment plants, etc., needed because of development, or pays back current water users for these investments that they have already paid for. Or it could be a requirement to ensure that public facilities are adequate, like with roads and transit. Or it could be a fee or excise tax on new development to provide additional parks and recreation center space, or affordable housing, needed as the population and job base grows. All these are typically paid for or committed to by new development before the project can be built or occupied.

As to specifics, the city utility impact fees are more or less up to snuff. Facilities like parks, libraries, and fire stations have studies (and master plans for many) that show the true costs, but the actual fees and development excise taxes charged do not generally recover these amounts. The biggest lacks are in transportation and affordable housing.

The transportation department collects almost nothing relative to the costs of preventing traffic increases. Even in years of substantial growth, the department reportedly collects only around $500,000 in one-time fees. In comparison, Boulder citizens and institutions spend around $8 million each year just for EcoPasses. So the funding is completely inadequate to prevent traffic from increasing, much less meet the Transportation Master Plan goals for reducing traffic. On the housing side, until recently, charges on commercial development to pay for affordable housing for their low and moderate-income workers were almost non-existent. And even the numbers being discussed currently are way too low. (More on this later.)

How will this amendment affect Boulder’s rate of growth?
It will likely slow things down somewhat, because a lot of the profit from new development comes from not having to pay these costs. You can say the same thing about the development business as is said about the big banks –  “it privatizes the profits, and socializes the costs.” Just as the Federal government should eliminate such implicit subsidies, so should local governments.

But doesn’t new development provide some benefits in terms of additional taxes that they pay, and fees and taxes they pay when they build?
It’s generally true that adding development increases gross tax revenues. But the real question is whether these increased revenues cover the full costs.

Unfortunately, these additional taxes and fees do not generally cover the costs of maintaining current levels of service, much less providing the needed infrastructure for many areas of city services. This was shown in the Jobs-Population studies that were done around 2001-2003 by the city.

More anecdotally, have you ever heard of a city, or state for that matter, that reduced taxes because of growth? No, as they grow, cities and states generally try to increase taxes, not reduce them. Fast growing Colorado is the perfect example, with a huge deficit in its transportation funding, around $1 billion a year, and an equivalent deficit in funding for new schools.

Also note that the Boulder city council is currently discussing whether to put a head tax on the ballot for this fall’s election, in spite of having asked for a tax increase just a couple of years ago.

How does the amendment address the fact that residents pay, in part, for services through sales taxes, which are not collected where they live but where they shop?
The amendment requires the City to set standards and practices for implementing the amendment that include “consideration of indirect revenues and contributions from new development, such as sales and use tax paid by occupants.”
Also, to ensure that any disparity between what residential development and commercial/office development is evened out, the amendment also allows the City to consider “multiple developments evaluated in aggregate.” This way, the City can do the required analyses on a holistic basis, and ensure that so long as new development overall pays its way, then it will be allowed.

How do you ensure that this amendment is implemented fairly?
The charter amendment requires that it be done in accordance with Federal and state law. In fact the opening words in the amendment are, “To the extent allowed by Federal and state law…”. These ensure that the City can only do what is legal. And there is plenty of both Federal and state case law and statutes that address how impact fees, adequate public facilities requirements, etc. are to be fairly implemented, and ensure that new development does not end up having to subsidize existing residents and businesses or is forced to pay more than its fair share. And some of our neighboring cities, like Fort Collins, have experience with approaches that Boulder has not used, and have done a good job of ensuring that they meet the applicable legal standards.

Also, the amendment requires the City to use standards and practices that are “consistent with generally accepted professional standards and practices”, so that it cannot just make things up. However, where the City may need to explore new approaches, this is allowed. But they still have to be within Federal and state law.

What if there simply is no legal way to collect from new development for some specific facility or service? Will that development be allowed?The amendment’s opening sentence also covers that point. Fundamentally, the City cannot violate an owner’s right under the 5th Amendment to “reasonable economic use” of his or her property. So the City must make its best effort to legally collect the costs that the development will impose, or set the conditions under which it would be allowed. Given the wide variety of approaches to making growth pay its own way that are currently being used legally across the country and in Colorado, only in the most unusual circumstance would the City have to consider outright denial of permission to build (for example, if it were simply impossible to maintain levels of service, but the property owner already had reasonable economic use of the property.) Also, because developers will press the issue so they can build, the City will be forced to explore all reasonable ways to implement the requirements of this amendment.

What about a new building that replaces an old building, or a new tenant that replaces an old tenant, but without increasing impacts on city facilities and services?
The amendment is quite specific: It only requires new development, including changes of use, “…to provide the additional facilities and services required to offset the burdens imposed by such new development…” If there are no additional impacts, then there are no needs for additional facilities and services. The amendment also specifically exempts new construction or changes in use that have de minimus impact on facilities and services.

What will it cost to do the studies required by this amendment?
The city is already committed to doing a new study on the costs of growth to update the current numbers, and has been doing these updates on a regular basis, so that’s nothing new. In fact, they issued an RFQ in December of last year, but it was so inadequate that they pulled it and started again. We suspect that this charter amendment will stimulate some real movement and put a priority on getting this done, getting it done right, and getting it done fast.

You’re asking the city to expand its measurements of travel time. Won’t that cost something to measure for these additional hours?
Yes, but it’s pretty minimal. The city already does travel time measurements on all these streets. What we’re asking for is to expand these measurements to cover the expanding morning and evening rush hours, which have grown as in-commuting traffic has increased. We figure that this will add something like a half to two-thirds of one full time employee. This is not a big cost to get a real handle on the impacts of development, and make sure that they are addressed.

To put some numbers to it, for some years the city has been measuring travel times on 6 streets (Arapahoe Avenue, Pearl Street, Valmont Road, Broadway, 28th Street, and Foothills Parkway), 2 directions per street, 3 times in a day (7:30, 12:00, and 5:00), on 15 days of the year. That’s a total per year of 540 measurements of travel times in one direction from one end of the street to the other. This charter amendment would increase this, at most, by an additional 4-6 times per measurement day per street. But each measurement only takes 10-20 minutes, plus time to get there and back, and record the data. So it does not add a huge number of hours.

What about the other traffic measurements?
The city already tracks emergency response time and total VMT, so there shouldn’t be any major cost increases there. And in any case, the costs of preventing our traffic from getting worse so far exceed these measurement costs that these costs would be in the “noise” financially.

Can a new development really meet these requirements to not increase traffic?
Yes, but it will require more than just taking action on site. Obviously, a new development can’t be traffic free, but it can invest in programs that offset traffic at other locations. We expect that the city will set up programs for car pools, van pools, free EcoPasses, and so on that would be funded by new development and that would provide adequate offsets on an area wide or city wide basis to keep traffic from getting worse. Of course, we can’t keep doing this forever, but nobody in his or her right mind wants to keep growing forever anyway.

Also, it’s important to note that the proposed amendment doesn’t require each new development to address its specific traffic impacts; it requires that new development considered in the “aggregate” pays or otherwise provides for this to get done on a cumulative basis.

How will this affect new permanently affordable housing?
First off, the amendment allows the city council to exempt permanently affordable units from its requirements. Ideally, the city would pay the costs of growth associated with these units, but the amendment doesn’t formally require this of the council, and so provides some flexibility in this area.

Will this charter amendment provide additional funding for affordable housing?
Yes it will. The amendment will require the city to impose a “jobs-housing linkage fee” (a particular form of impact fee), or something equivalent, on almost all new commercial development. Until now, the city has not charged new office or other commercial development to pay for the affordable housing for which it creates a need, except a very minimal one-time $9.53/sq. ft. linkage fee on the portion of new development above 38’ in some downtown zoning districts. The council is currently considering expanding this same linkage fee to all new non-residential development. That’s good, but this charge is pretty small compared to the need.

 Can you give an example of why this charge is small relative to the need?
Take the Google building for example. It is about 300,000 sq. ft. and will have roughly 1,500 employees. If one out of every five employees needs affordable housing, then that’s one per 1,000 sq. ft. So, if the developer were charged the city’s current linkage fee of $9.53/sq. ft., the building would generate less than $10,000 total to buy down the cost of one housing unit to the level where it’s affordable to a low or moderate-income employee. This amount is obviously way, way too low, given that the City’s current subsidy for affordable housing is almost $70,000.

It should be pointed out that, at least at this point, the Google building will be exempt from paying any linkage fee whatsoever, because they got their application in before the city council imposed the fee in that area of town.

Won’t these charges and fees increase housing prices, or the cost of renting office space?
The prices sellers charge for housing and landlords for office rents are a function of the market, not of the costs. So developers cannot just raise prices because they spend more; they have to deal with what the market will bear. And based on the anecdotes recently heard about the multi-million dollar profits developers are making from the housing being built around the Boulder Junction area, there’s plenty of extra profit in the system.

But won’t this reduce the supply, and therefore increase the price?Analyses have been done in hi-tech areas in California, and it appears that prices are not very sensitive to supply, simply because there is no lack of demand. It’s not that supply doesn’t affect price, it just doesn’t affect it much in these situations. And also, so long as there is some money to be made, developers will continue to build.

What else can the city do to make housing more affordable, given all this?
Probably the biggest thing the city should do is to stop making the problem worse by stopping its promotion of more and more employment space. It just doesn’t make sense to continue to have job growth outstrip housing supply, given that we already have 60,000 people that commute into Boulder.

How will this charter amendment be implemented?
The council should push to get the update to the costs-of-growth study moving, so that it is done by this Fall. Then they will know what to charge for parks, libraries, fire stations, transportation, affordable housing, etc. This work should be able to be done in that amount of time, but it requires action, not more delays.
At the same time, the city manager should get the transportation department working on what it would take to actually prevent traffic from increasing, again a job that should already be underway. This is not a trivial project, and will require some real creativity. But both the legal and operational tools exist; it’s a matter of integrating the parts. The recent update to the Transportation Master Plan should give them a good starting point. Also, if the city designs the requirements correctly, they could be dialed up or down to ensure that the goal of preventing traffic increases is met.
Once these two projects are complete, the city could implement the requirements of this charter amendment in a matter of a few months or less. They might have to put some big development projects on hold temporarily; but people making improvements to their houses would not be affected, since the amendment exempts such improvements. And affordable housing units could also go forward, as well as public buildings, like in the Civic Center, since they also may be exempted.
Of course, the city council members could vote now to fully implement the Comp Plan Policy 1.30 (shown above) on their own. That would be the responsible thing to do in any case, and it would avoid any delays. After 45 years, it’s well past due.

Why are utilities and internal city operations, like the city manager’s office or the finance department, exempted?
Utilities are exempted because they already have some pretty well defined standards and the fees are probably adequate. The focus is on the areas where the city has not been getting the job done.
As to internal city operations, these are not significantly affected by more growth, and their operations would be very difficult to set standards for. Also, focusing on them would divert from the real work, which is maintaining the levels of the facilities and services that the citizens of Boulder use every day.

What about CU and the Fed Labs?
Because the city does not issue or approve building permits for these institutions’ building projects, the city cannot regulate them in the same way it does other development. Of course, both institutions should do their best to mitigate their impacts, and the city should do what it can to ensure that this happens, but this amendment will not directly affect them.

Aren’t the requirements too specific, so it will be hard to meet them exactly?
We anticipated this issue, and this is why we referenced using generally accepted professional standards and practices. No one expects exactitude on every number, but we do expect the city to honor the intent, and overall prevent development from degrading our quality of life.

Boulder is a Great Place to Live!