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Economic plan proposes fee waivers, rebates
Wednesday, July 22, 2009

Local government staff, key elected officials and the Archuleta Economic Development Association (AEDA) have unveiled and endorsed an economic development plan intended to revitalize the local economy; however, plan particulars leave some questioning the architects’ underlying motives and the plan’s efficacy in addressing deeper economic issues and the root causes of the local economic downturn.

The two-year plan, the outgrowth of discussions between Town of Pagosa Springs Manager David Mitchem, members of the Archuleta County Board of County Commissioners, members of the AEDA and key county staff, focuses primarily on providing incentives for new construction with development fee waivers and sales tax rebates.

For example, in 2009, the plan proposes that the town and county waive all development fees. For the county, that means a waiver of the building permit fee and the road and bridge fee. For the town, it means a waiver of the building permit fee, the road and bridge fee, impact fees and the sewer fee.

The county does not currently levy a “road and bridge” fee.

In addition, the plan mandates that the town and county agree to rebate up to 25 percent of the total county and town sales tax paid on construction-related costs, provided the purchases were made in Archuleta County.

Secondly, the plan indicates the town and county will rebate up to 25 percent of the sales tax paid on construction related costs provided “the applicant can demonstrate ... that labor costs incurred related to the project were residents of Archuleta County.”

Huh?

The fourth piece of the plan suggests that the Pagosa Area Water and Sanitation District (PAWSD) reduce its “water meter fee,” the water resource fee, capital investment fee and sewer fee.

According to PAWSD staff, the agency does not levy a “water meter fee.” That said, the plan must be referring to the water connection fee. If that is the case, the connection fee added to the other PAWSD development related fees totals $15,073 for a home with a standard 5/8 inch meter and one equivalent unit. Under the plan, PAWSD would be required to waive $7,536.50 in fees.

Mitchem said the town had not estimated its average total waiver amount because many variables are involved in calculating town development fees. Combined town impact fees currently total $3,815. According to town documents dated May 2006, the residential impact fee breakdown equals — $818 for roads, $450 for county administration of public facilities, $859 for a recreation center, $368 for park land, $464 for trails, $574 for fire protection and $283 for school land.

The foreshadowing for an economic development plan that largely targets PAWSD development-related fee structure came during the 2008 election, when Archuleta County Commissioner John Ranson decried impact fees and the PAWSD fee structure, saying both had discouraged and crippled development in the Pagosa Springs area.

During July 2008, discussions on the PAWSD fee structure and its detriment to the community continued, with Steve Van Horn, and Realtor Mike Harrity encouraging the council to advocate for changes in PAWSD fee structure. In addition, Council member Mark Weiler called for suspension of all town impact fees, building fees, plan review fees and sewer related fees for development within the downtown area.

Fast forward to April 19, 2009 and the county’s “Roads to Recovery” economic forum when impact fees and PAWSD’s fee structure came up again when one audience member called for the ouster of the PAWSD board. The proposition was supported by many in the audience.

Most recently, the Pagosa Springs Area Association of Realtors (PSAAR) fired off a vitriolic memo to PAWSD staff and the board calling for changes to board leadership and the fee structure, stating, “The PSAAR believes the rate of decline in the total number of sales in the Pagosa Springs area directly corresponds to the Pagosa Area Water and Sanitation District and the Town of Pagosa Springs impact fees.”

Should PAWSD not adhere to PSAAR’s requests, the group says it “will support the resignation of the current PAWSD Board of Directors and top management.”

At its simplest, the plan is predicated on rewarding new construction activities while offering little economic relief to other facets of the local economy. And this, in contrast to Mitchem’s presentation to the Town Tourism Committee June 23, that the key to Pagosa Springs becoming financially self-sufficient is to attract and grow “the full spectrum of businesses ...”

Moreover, and perhaps more interesting is the plan’s attempt to provide economic relief through tax rebates and fee waivers, while failing to acknowledge previously passed legislation that does the same, town and county planning documents, existing limitations on new construction, the realities of the PAWSD fee structure and the state of the local real estate economy.

To begin, three moratoriums currently exist, thus limiting new development. The first is a defacto moratorium unofficially imposed and caused by the town’s overburdened and out-of-compliance waste water treatment plant. The others are official and imposed by PAWSD as the agency struggles with waste water treatment issues of its own.

The town sewer treatment plant issue has gone unresolved since before 2007, and although neither the state nor town council have imposed an official moratorium on new construction, the plant, per state regulations was pushed to capacity two years ago. Unfortunately, and as of June 18, the town council still had not plotted a decisive course to rectify the problem. Meanwhile, town residents are paying sewer rates 114 percent over the state average, and double what they paid in 2008.

During a town council meeting March 6, 2007, former Town Manager Mark Garcia reported the ailing plant could handle roughly 100 additional taps until the new wastewater treatment plant was built. Nevertheless, and despite the plant was poised to run over capacity, the town council, just hours before, approved five units at the Sixth Street Townhomes project, the final plan for 38 townhomes at Sunridge Villas Planned Unit Development, the sketch plan for 119 single family lots at Pradera Pointe, and the preliminary plan for 218 units at the Dakota Springs planned unit development, for a total of 380 possible new taps.

Moreover, the planning cue for that same month totaled 900 residential units at various stages of the planning process, not to mention the 187 units slated for Blue Sky Village, which recently annexed to the town.

Although plant modifications proposed then might have bought the town additional time, Town Council member Stan Holt, said during the session, “I’m sitting here thinking how do we handle this? If they all come on line, we’d be in a world of hurt.”

Although the state has not yet fined or sanctioned the town for releasing inadequately treated effluent into the San Juan River, state sanctions may come soon depending on how town council chooses to proceed. Meanwhile, and with existing PAWSD moratoriums and the town sewer treatment plant in violation of state regulations, it’s unclear why the town, county and AEDA might endorse an economic development plan that could arguably add taps to system that is stressed, out of compliance and in desperate need of a fix.

The legislative trail

Although the plan, as currently presented, proposes fee reductions to boost the local economy, a clear legislative trail exists that shows similar measures have already been enacted, although building permits — and corresponding revenues — in both the town and county remain at virtually unprecedented lows.

For example:

• On July 1, 2008, the Pagosa Springs Town Council approved Ordinance 714 which provides a 10-year impact fee deferral program for land development activities deemed by the council to provide public benefit to town residents.

• Also in July 2008, PAWSD approved a five-year impact fee amortisation program and a new method of calculating equivalent units (upon which the fee structure is based) to provide a more accurate and fair method of calculating equivalent unit-based fees. The board reapproved the five-year amortisation program in January 2009. (The Town of Pagosa Springs still used PAWSD’s old, and arguably less accurate method.)

• Also in January 2009, the San Juan Water Conservancy District voted to suspend its impact fee. The deferral saves homebuilders $1,129 per equivalent unit.

• In April 2009, the PAWSD board also approved up to a 50-percent waiver of the water resource fee for affordable housing projects. The current water resource fee is $5,617.

Other sources of

economic decline

During the fall of 2008 and early winter of 2009, Archuleta County staff proposed merging the town and county building and planning departments. The rationale for the merger was simple: to streamline an arguably convoluted, inefficient and cumbersome planning process that many elected officials and staff in each organization said had driven away development dollars. In short, the culprit responsible for our economic decline was the planning process, not development related fees.

The Pagosa Springs Town Council ultimately voted against the merger.

‘Development should pay its own way’

The Archuleta County Community Plan, PAWSD policy and past town and county legislation indicates that new development should pay for its impact on public infrastructure facilities and services. Most recently, the town and county demonstrated a commitment to impact fees when they jointly funded a $30,000 dollar impact fee study. If the economic plan suspends impact fees for two years, it is likely that study will have to be undertaken again, at additional expense to the taxpayer. Moreover, with a policy drafted to waive impact fees, the question remains: Who will pay for impact wrought by new development?

PAWSD fee structure

and existing real estate inventory

PAWSD Manager Carrie Weiss said she is concerned about an economic development plan that largely targets PAWSD fees.

“The district is not in the business of economic development. We are in the business of providing clean, safe, drinking water and wastewater services,” Weiss said. “There are a lot of factors as to why people will or will not come here, and I think the community as a whole should look at those factors. And, there is a lot of real estate out there that wouldn’t be subject to our fees anyway.”

According to local Realtor Lee Riley, as of the end of June 2009, there were 569 homes on the market, 135 condos, 1,121 listings for vacant land and 122 commercial listings.

Weiss said none of the PAWSD fees targeted in the economic development plan would be applicable to the existing real estate inventory as long as the equivalent unit calculation on the property in question doesn’t change.

With building moratoriums — defacto or otherwise — already limiting new construction and existing legislation that already provides impact fee relief, questions remain why the town, county and AEDA would support an economic policy that runs counter to stated agency planning documents and policies, rewards one narrow sector of the local economy while ignoring existing businesses and limits key revenue streams that fund the town building and planning department and both organizations’ general funds.

“These are certainly meaningful and particularly very powerful incentives to jump-start this economy,” Mitchem said. “The intent is to get more purchasing done locally and to hire more local contractors. No one says this is a panacea, it’s just one of many tools we can use to help the local economy.”

Mitchem also acknowledged that the plan, in its current iteration, falls short in its failure to address supporting other existing businesses.

“The memo does not address supporting existing business. There needs to be strong support of existing business and we will have those discussions. There are additional tools we can put in an incentive portfolio,” Mitchem said.

Mitchem said sales tax revenue makes up more than 70 percent of the town’s revenue stream, and when asked why the town would voluntarily cut its financial lifeblood when it was already trickling in well under expectations, Mitchem said, “These (construction-related sales tax dollars) are revenues we’re not receiving now.” In essence, Mitchem and Archuleta County Administrator Greg Schulte said some tax collections are better than zero.

When asked how cutting the town’s planning and building revenue stream would impact those departments, Mitchem said, ”There is no doubt that if the revenue doesn’t come in on fees, the general fund will have to pick up the cost.”

The county, depending on the perspective of Wells Fargo, may soon have to answer similar questions of its own.

In May, the county borrowed $5 million from Wells Fargo for road repair, part of which will be used to pave Park Avenue. Loan repayment is based in large part on steady collections of sales tax revenue, and it is unclear how Wells Fargo will respond to the county waiving away a portion of that revenue stream.

Ultimately, the Pagosa Springs Town Council, the Archuleta County Board of County Commissioners and the Pagosa Area Water and Sanitation Board of Directors will decide whether to implement the plan.

According to Mitchem, the plan will go before the town and county boards July 7 and the PAWSD board July 14.

The AEDA endorsed the plan in a joint meeting with town and county officials June 29.

james@pagosasun.com