SEQUIM — City Manager Steve Burkett has introduced to the City Council a proposed ordinance that would temporarily suspend a recently adopted city impact fee in an effort to bump up sagging single-family home permits.
While council member Ted Miller in a memo to the council contended that the proposal to suspend for three months the park and transportation fees is “a serious mistake,” at least one Sequim-based home builder, Greg McCarry, called for the suspension of impact fees to encourage future home construction in the city.
After Burkett presented an in-depth analysis to the council for first review Monday night, council members agreed to conduct three readings of the proposed ordinance and a public hearing before taking any action.
No date was set for a public hearing.
“Some have suggested that the reason there are not as many single-family home permits is because city fees are too high,” Burkett said.
He said he thought it more likely that the world economic crisis has caused a significant downturn in new home construction.
“Staff contends that the general facility charges and impact fees are required to accommodate new growth and development and allow construction of new infrastructure to serve new homes and increased population,” the city manager wrote in his proposal to the council.
“Rather than local city fees depressing the construction and housing market, staff believes the reduction is the result of market forces outside our control.”
Burkett said the reduction in development-related business in the city has resulted in a loss of revenue to the city’s general fund amounting to about $800,000 a year, which has reduced staff levels.
“In our view, it would be worthwhile to reduce the parks and transportation impact fees by 50 percent in order to evaluate the impact during the 2011 construction season,” Burkett said, and if that stimulates more construction, then so much the better for the local economy and city revenues.
McCarry, Westerra Custom Homes president, said that, in general, the fees that builders pay amount to charging a customer a total of $1.25 for every $1 needed to build a new home.
“As the economy recovers, the Sequim housing market will take longer to recover because it costs $7,500 to the consumer,” he said of impact fees and other fees, including those paid to the city, state and bank, as well as real estate closing costs.
That gap must close before the housing market can recover, he said.
“That’s why I would advocate the city laying off the fees,” McCarry said.
“The sooner they get the builders back to work, the more revenue they generate to pay for their overhead,” McCarry said of the city.
Burkett said single-family building permits declined from 211 in 2005 to 19 in 2010, the same number issued in the city of Port Angeles last year.
To date this year, he said, four single-family permits have been issued.
Increased construction of single-family housing could plump up the city’s general fund revenue.
A reduction in impact fees would cut revenue by about $2,400 per home permitted.
Miller said he believed the impact fees had nothing to do with the building industry doldrums.
“When the real estate recession ends, they once again want to be able to transfer their infrastructure impact costs to the Sequim taxpayers,” Miller said.
“What will happen in three months when the reduction is scheduled to end? The developers will claim that more is needed.
“We need to make the reduction permanent, they will say, and reduce the fees to zero. Maybe they will want the taxpayers to additionally subsidize their building,” Miller said
Miller called for three readings and a public hearing on the proposal.
Mayor Pro Tem Laura Dubois — who sat in for Mayor Ken Hays, who was absent — said she agreed that the public hearing was necessary. Council members Bill Huizinga and Don Hall agreed as well.
Councilman Erick Erichsen called the proposal “political posturing” and urged that discussion of the matter be “tabled until 2016.”
________
Sequim-Dungeness Valley Editor Jeff Chew can be reached at 360-681-2391 or at jeff.chew@peninsuladailynews.com.
