Discussion continues on increase of fees paid by developers

Menifee City Council members Matt Liesemeyer, Neil Winter, Greg August and John Denver listen to testimony.

Menifee City Council members took the first step last week in a process that could have a huge impact on city finances as well as both residential and commercial development in the city.

All agreed that a major increase is necessary in developer impact fees (DIF) -- the fees paid by developers to the City for the right to build here. All cities require this, but fees vary as determined by each city. The question at hand is the amount of increase that's appropriate to help fill City budget needs while continuing relationships with developers who already are invested in major projects locally.

To begin what will be at least a 60-day process, council members voted unanimously to introduce an ordinance to amend the DIF fees. However, after consulting with city attorney Jeffrey Melching on their options, they chose not to attach dollar figures to the amendment until meeting with developers to discuss the issue. The issue will be re-visited at the Dec. 6 City Council meeting during the second reading of the ordinance.

According to a presentation given to the City Council Nov. 15 by financial consultant Shane Spicer, the City of Menifee has not increased DIF fees since its incorporation in 2008. In fact, he says, fees were temporarily reduced 15 percent during the recession from 2009-11. Since then they have been restored to the original fees: a maximum of $5,185 per single family residential unit and $26,609 per acre for commercial projects.

After conducting a study of the issue, Spicer pointed to Menifee's huge increase in population since 2008, requiring additional funds for infrastructure. A population that has increased to 90,000 is projected to reach 121,000 by 2040, he said. That was cited as the basis for an increase in DIF fees.

The new fees proposed in the presentation by Spicer (right) were a maximum of $10,089 per single-family residential unit and $10,235 per 1,000 square feet of commercial retail space. The suggested new residential fee is approximately double the previous amount. The conversion from acres to 1,000 square feet for commercial space makes a comparison a bit more complicated, but at least one commercial developer who spoke at the Nov. 15 public hearing cited a huge increase he believes would eliminate his company's planned project.

Dan Long spoke representing Rancon Real Estate, which has for years been working on a planned retail shopping center (Heritage Square) at Menifee Road and McCall Boulevard. First, Long said he had just learned about the proposed increase the day before. He also said the proposed new fees for that project would increase his company's cost by $1.4 million.

"If this goes through, I would have to go back to my board and tell them I don't see how we could go forward," Long said. "There's just no way."

Council members had varying reactions to the statements of several developers who spoke during the public hearing. Greg August seemed to show little patience with the complaints of developers and said he preferred to trust the staff's judgment in creating the new fee schedule.

"I can't believe Rancon just heard about this yesterday," August said. "We've been working on this for two years. I don't buy that at all."

On the other hand, Mayor pro tem Matt Liesemeyer said he was concerned that previous meetings on the subject set up by City staff members involved members of the Builders Industry Association -- which represents home builders -- but not developers of commercial projects, which he believes should be the emphasis in city growth. Liesemeyer responded when August asked why so many commercial developers were suddenly on hand and addressing the subject.

"The reason they're here is because I emailed them," Liesemeyer said. "I copied a hotel builder on an email about this and he was shocked to hear about it. I reached out to developers to see if they had been allowed to give any input, and they had not.

"Our city manager (interim CM Ron Bradley) has been all cozy with the BIA, and there's no reason for it. We want commercial development. We're all sick and tired of hearing about more houses. All I'm saying is that city staff wasn't directed appropriately to reach out to the entire development community."

One commercial development the City of Menifee obviously doesn't want to lose is the Menifee Town Center, with which residents have already grown impatient waiting for a planned theater complex and other entertainment venues to be built. It's been 3 1/2 years since the City announced that Krikorian Premiere Theaters had signed an agreement with Regent Properties to build the theater complex and entertainment center, yet there still is no building rising on the 172-acre property.

Regent can't control the pace of projects of the companies to which it leases or sells land. Krikorian has acquired additional land at least twice, which has required revised plot plans. Even so, a representative of Regent expressed concern at the City Council meeting that a dramatic increase in developer fees for the Menifee Town Center project would have a trickle-down effect on all involved.

"We feel this would have a negative impact on projects for the Town Center," said Hannah Wosskow of Regent Properties. "We're investing hundreds of millions of dollars in the project. The hurdles we continue to encounter will make this extremely challenging. If this goes forward, it will delay another phase of the process."

During the discussion, Menifee Community Development Director Cheryl Kitzerow said that the current DIF fees would be frozen for existing projects upon entitlement, which would appear to preserve the current free structure for at least part of the Town Center project. Even so, several other developers expressed the desire to delay the fee increase, reduce it or at least include them in the discussion.

Kassen Klein, representing Pac Ten Partners, reminded council members he suggested months ago that they should include developers in a discussion about the fee structure.

"This is why you have this confusion and all the requests before you," Klein said. "You need to get a working group together to move this forward. If this gets adopted as is, there's no need for an economic development director. All community development will stop."

A motion by Liesemeyer to table the entire matter until January was defeated, 3-2. A motion by August to introduce the ordinance for an amendment and add financial data at the Dec. 6 meeting passed unanimously.