What's at stake:
In a reversal from last week's planning staff recommendation, the Fresno city council gave a multi-million-dollar tax break to new homes built at the edge of Southeast Fresno.
Following a request last week from one of the region’s wealthiest developers, the city of Fresno waived a key developer fee for scores of subdivisions at the city’s suburban fringes.
By granting the tax break for Fresno developers at a special meeting on Thursday in a 4-3 vote, the council created a $1.8 million annual budget shortfall for the city’s police and fire funding, according to an unreleased financial analysis cited by Councilmember Annalisa Perea.
The city has no plan to make up for the shortfall, said City Manager Georgeanne White.
“Unless we can find some sort of grant to allow us to provide for this cost, it [the budget shortfall] would be on the general fund,” White said.
The shortfall will escalate each year, said Scott Mozier, the city’s public works director.
“I think this is a rushed decision that I don’t think we’re fully comprehending, taking full responsibility for,” said Perea.
Perea voted against the move and was joined by Councilmembers Miguel Arias and Garry Bredefeld, who signaled he voted against the tax break because he favored eliminating the special tax altogether.
Councilmembers Mike Karbassi, Nelson Esparza, Tyler Maxwell and Luis Chavez voted in favor of the tax break.
Esparza said it was OK to create the shortfall because the homes that received the tax break haven’t been built yet.
“I would reject the premise that we’re putting the city in dire financial strains, because it [the revenue shortfall] has never materialized at this point.”
Darius Assemi, the real estate developer who asked the council for the tax break last week, applauded the council’s vote. Assemi, the CEO of Granville Homes and owner of the media website GV Wire, said the city’s concern needs to be directed away from the suburban edge, because there are more demands for services in the city’s core.
“Those are the parts of town that have the most demand for services,” Assemi said.
Karbassi, who co-hosts a podcast with Assemi, applauded the tax break, which exempts roughly 12,000 homes from a special tax administered by Community Facilities District 18.
“I don’t think this is a slam dunk to increase the supply of housing, but this is definitely a step in the right direction,” said Karbassi. “My ultimate goal will be to eliminate CFD 18.”
Karbassi said the developer fee from CFD 18, which started in December 2022, was unfair, because, he said, a new tax is like “moving the goalpost in the middle of a football game.”
He blamed Fresno County for the need to create a new developer fee because the county took a larger share of property tax revenues from homes built at the city’s fringe, per a 2003 tax sharing agreement.
The 2003 agreement cut the city’s slice of property tax revenue from homes built at the suburban fringe by 19%.
“This whole thing is ultimately because we do not have an equitable tax sharing agreement” with Fresno County, Karbassi said.
Developer asked city to exempt 71 homes. They exempted 12,000.
Last week, Assemi asked for a tax exemption for roughly 71 homes built by his Granville Homes company.
But over the week, top officials from Mayor Jerry Dyer’s administration expanded the exemption to encompass 12,000 homes.
Arias questioned why the tax break deal had grown by so much.
“No other planning expert or fiscal watchdog would say that this is good public policy,” Arias said. “Since when did the cure get worse than the disease?”
“Market rate housing in Clovis Unified would be subsidized by working class families in the Washington Union,” Arias said. “That’s our solution, doing this at the 11th hour?”
Tax break for Fresno developers forces county to bargaining table, Bredefeld says
Since the city’s tax-sharing agreement with Fresno County expired in 2020, the city has been trying to renegotiate with the County Board of Supervisors.
On Thursday, Dyer said he was uncertain on where the negotiations go from here.
“I don’t know that we’ve come up with a specific number.” Dyer said. There hasn’t been a willingness from the county to “move 1%,” he added. “The conversations are going to have to get much more real.”
The city needs to get at least 42% of the property tax revenues, the mayor estimated.
Bredefeld said eliminating the developer fee from CFD 18 was good policy because it forces the city to play hardball with the county on the tax sharing agreement.
“The main problem is the lack of a tax sharing agreement, and the old agreement doesn’t cover the city’s cost,” Bredefled said. “Essentially, this CFD incentivizes the county to say ‘we don’t need to sit down with the city of Fresno.’”
“In reality, the fact that they haven’t negotiated an agreement…is basically due to an arrogant attitude from the Board of Supervisors,” said Bredefeld. “They need to get off their asses and solve this problem.”