A plan to tax new apartment developments has hit a wall with builders.
Last week, the Walnut Creek City Council had been set to take up what's now being called the "fiscal neutrality policy." This would allow the city to create a community facility district to levy a special tax on new multifamily developments. A consultant hired by Walnut Creek suggests that developers or owners be charged $429 per unit per year for 30 years. This would bring in millions of dollars to the city to help pay for the impact these new residences have on city services.
After developers, builders and residents called, wrote and lobbied city leaders saying they wanted more information and felt left out of the discussion, the policy was taken off the agenda so those interested could be given more time and contacted, said Mayor Bob Simmons.
City leaders say this policy is necessary because they see a boom in rental housing coming, and its impacts on city services won't be covered by traditional taxes and fees. More than 1,400 apartment units are slated to be built in the next few years.
Such districts are becoming more common throughout the state. But many are taking issue with the proposed Walnut Creek plan.
"These are difficult economic times," said resident Owen Poole in a letter to the council. "Apartments seem like the golden goose. Foreclosures are up, people are unable to qualify for loans and the American dream of homeownership has been
The tax, usually added to a property tax bill, could be used for services such as police protection, maintenance of streets and open space and flood and storm protection. Such a district cannot pay for recreation or library services.
It works like this: For example, the 300-unit Paragon Apartments set to be built on Civic Drive at the former CVS headquarters site was approved by the planning commission last month. Under the proposed policy, Paragon could choose to pay $3.86 million now or pay it out over a 30-year period with a 3 percent a year "escalator rate."
While single-family housing tends to cover the costs of the services their occupants use, high-density multifamily housing or apartments traditionally do not, city leaders have said in the past.
But builders, developers and some residents say they want proof of that claim. And developers who already have their projects in the approval pipeline fear a new tax may soon be applied to them.
"This is a fee that is coming late in the development process," said Bob Glover, executive officer of the Building Industry Association. "Some are getting ready to start construction, and to have this in the eleventh hour, really beyond the eleventh hour, is going to make going forward with projects very difficult."
At special meetings where the issue has been discussed, council members have expressed concerns ranging from whether the tax is equitable to how it may ultimately affect lower-income residents who tend to live in apartments.
That is something Glover said city leaders should be concerned about.
"The likelihood of (the cost) being passed on to consumer is extremely great," he said.
And he argues potentially discouraging infill development with this fee flies in the face of the kind of sustainable, greenhouse-gas-reducing, close-to-transit housing that city and state officials are pushing for.
Simmons agreed that discouraging building is a major concern.
"At the same time, developers have to be prepared to recognize the full cost of multifamily projects on the city," he said.
The idea of this new tax comes when Walnut Creek already has major capital needs and requests for more police officers. But none of that has to do with the proposal, Simmons said.
"It's not something we are doing to generate revenue," he said. "We are doing this to mitigate the costs of these developments. And when you look at the analysis, it is really narrowly tailored to achieve that objective."
The city will hold a public study session on the issue in the coming months.
Contact Elisabeth Nardi at 925-952-2617. Follow her at Twitter.com/enardi10.