What at stake:
In many parts of southeast Fresno, development does not pay for itself.
New developer fees have been created in recent years. One of the region's biggest developers is pushing back.
After a smackdown speech from city manager Georgeanne White on Thursday, the Fresno City Council delayed its vote to give a tax exception to one of the region’s wealthiest developers.
The council postponed a decision to waive a special tax on a new Granville Homes subdivision at the suburban fringe of southeast Fresno. The tax, which helps pay for police and firefighters, was meant to stop the new subdivision from running a deficit for Fresno taxpayers.
Granville’s proposal would open the door to a piecemeal approach to subsidizing suburban sprawl, White said, which could end up giving some of the city’s wealthiest residents a tax break.
“I think it puts the city in a really dangerous place,” White told the City Council. “We could find ourselves in a situation where Copper River pays zero [taxes]. We don’t think that’s appropriate and creates a divide in our community.”
The council’s one-off decision to grant the tax break — on grounds that the homes would be rentals — would be “legally indefensible,” said City Attorney Andrew Janz.
To push past Janz’s legal limits, council member Mike Karbassi proposed an extraordinary measure to get the tax break done for Granville.
Karbassi proposed for the whole special tax on sprawl to be abolished, by dissolving the legal entity that applies the special tax, called a Community Facilities District (CFD).
Karbassi hosts a podcast with the president of Granville, Darius Assemi, on the news site GV Wire, which Assemi also owns.
Karbassi said the tax would punish working-class families.
“My take on this is it is the wrong time to increase the cost of affording a home…that’s why I’m strongly backing a complete redraw of the CFD,” he said.
“Ultimately, I do believe we need to go back to the drawing board.”
Sprawl project threatens to strain city budget, says city manager
The two-hour debate showcased the city’s inability to find solid financial ground for suburban sprawl. The city of Fresno, with its struggling downtown and billion-dollar dreams of urban revitalization, threatens to create financial deficits at its fringe by waiving developer fees, said White and Scott Mozier, the public works director.
Despite White and Mozier concerns, the city council rejected the planning staff’s recommendation to deny Granville’s request. The council members said they needed more time to look into the feasibility of the tax break.
Luis Chavez said the new towns in Madera were making him nervous about the city’s half-hearted approach to encouraging suburban growth.
“I just drove Avenue 12: that is boomtown over there … Why? Because they have gone out of their way to make things easier [for developers],” he said. “How do we actually incentivize housing here in our community?”
Bredefeld echoed Karbassi, saying that he had opposed the developer fee from its inception.
“I didn’t support it before, and I’m not going to support it now,” said Bredefeld.
Councilmember Miguel Arias was critical of the tax break for Assemi’s company, but also left open the door to support it down the road.
“I can’t get behind subsidizing market-rate housing at the fringe of the city,” he said. “It’s a seismic decision.”
Arias asked the city attorney to prepare a “confidential memo” on the defensibility of doing the tax break for Granville, and whether more fringe subdivisions could get in on the tax break down the road.
The Fresno City Council – stuck between warnings from the planning department and the alternative numbers of Assemi and his lobbyist – ended up kicking the can down the road for next week, where closed-door sessions could hash out the details.
Karbassi said an “ad hoc” committee of council members could be made, or an informal collection of three council members, to settle the issue over the coming days.
“Within a week, we could explore some options,” said Councilmember Nelson Esparza. “We’re at a spot at this council where we don’t know where we’re headed.”
City’s 45,000-home mega-development suffers same financial problems
Thursday’s meeting weighed in on one of the biggest debates inside City Hall: whether the city should support more suburban sprawl to meet its housing goals.
The financial problems of the small, 218-home subdivision discussed on Thursday were the same as the Southeast Development Area (SEDA), a proposed 45,000-home mega-development which is only two blocks east.
SEDA, a crown jewel of the city’s general plan, will match, home-for-home, any in-fill development the city plans on doing between now and 2056, according to the city’s general plan.
But the site of the huge project, on an unincorporated stretch of agricultural land and rural homesteads in southeast Fresno, would end up being a net drain on the city’s general fund without new special taxes, said Public Works Director Scott Mozier.
“Unfortunately, it just does not generate enough revenue,” Mozier said. “All these developments have the same issues.”
As Fresno moves forward to vote on SEDA in the next month, White said the city still doesn’t have a plan to pay for the massive subdivision’s multi-billion dollar price-tag.
“We’re working on that,” she said. “It’s going to be really expensive to develop in SEDA.”
The key financial problem with both SEDA and the smaller subdivision stems from a tax-sharing agreement between the City of Fresno and Fresno County that was altered in 2003.
The 2003 agreement slashed the city’s cut of property tax revenues for new subdivisions by 19%.
The cut was meant to wean the city off its long-standing impulse to plant homes at the city’s fringe, White said. But as the city has revived its once-defunct, decades-old plan for SEDA, the tax sharing agreement has become a major thorn in the city’s general fund projections.
Revived “at the request of the industry,” White said the drive to build SEDA has caused the city some growing pains. Development in the area would be “rocking and rolling” without the 19% cut, she said.
Even with the old tax-sharing agreement, however, the financial consequences of sprawl ripple across Fresno. A recent report showed that the city’s investment in sprawl has been the key cause of the city’s urban blight.
“There is a cost to communities when you develop in a way that isn’t sustainable,” she said. “I would never have continued to move forward without the CFD [the developer tax].”