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POV - Oscar Wilde once famously noted that a cynic is “a man who knows the price of everything and the value of nothing.”
Many developers in California, on the other hand, seem to be people who know the value of everything and the price (or cost) of nothing.
Running a city is not cheap.
And yet cities, almost all of which face significant budget challenges and rising costs, hardly ever charge developers the actual incremental costs associated with new development.
Every city in the State should commission a detailed nexus study to determine the incremental costs associated with various kinds of new development. These nexus studies should form the basis for impact fees, which would offset the costs associated with these new developments. The most obvious costs would be for expanded and upgraded infrastructure and for an increase in services, most notably police and fire, necessitated by growth and added density. However, incremental costs also encompass a wide variety of other municipal needs, including parks, schools, transportation, health services, and, perhaps importantly, affordable housing itself. Yes, new commercial development and market-rate housing creates a significant need for an incremental amount of affordable housing, as comprehensive nexus studies would show.
It's probably no great surprise that developers, their friends and their WIMBY advocates hate nexus studies with a passion. At a recent Beverly Hills City Council meeting, riffing off of Mark Twain, who himself claims he was quoting Benjamin Disraeli, developer attorney David Rand said: “There are three kinds of lies: lies, damned lies and nexus studies.”
Such statements reflect the venom directed at nexus studies from other professional developer fanboys and market fundamentalists like M. Nolan Gray, research director, for the dark-money-funded developer advocacy group, CAYimby. Gray, it should be noted, is also associated with the radical libertarian, Koch Bro-funded Mercatus Center. Gray hates nexus studies more than vampires hate sun-dried garlic.
Not only is California expensive, but we also live in a State in which cities must grapple with forced densification and forced growth, thanks to a State legislature controlled almost completely by moneyed special interests. In the past few years, the California State legislature has passed literally hundreds of housing laws, almost all of which preempt local, community-based urban planning and decision-making. Many of these laws are a form of deregulation with the ultimate goal of zoning abolition. All in the interests of developer profits, in line with our country’s rich history of market fundamentalism dressed up as something other than profit maximization and coming at the expense of communities.
In some cases, all pretense is dropped. State Senator Scott Wiener, the California legislator perhaps most beloved by the real estate industry, once famously said: “I don’t care how much money developers make.” At a recent housing seminar at Claremont McKenna College, California housing legislation was openly described as “developer-oriented state laws.” While the honesty was in some ways refreshing, for those of us who would prefer Community-oriented state laws, it also shows for whom our State legislature is ultimately working.
The Our Neighborhood Voices initiative would amend the State constitution to make clear that urban planning, land use, and zoning belong in the municipal sphere. It would make clear that Community-oriented development should take precedence over developer-oriented development.
A constitutional amendment via initiative is a heavy lift, especially when it is truly a citizens’ initiative and all the money is on the other side (i.e. developers, Wall Street, private equity, foreign investors, real estate speculators, and the like). While the Our Neighborhood Voices initiative undergoes revisions (which should include bringing back redevelopment to California in order to focus on affordable housing), all of the state-mandated, special interest, developer-oriented laws continue to create significant incremental costs, putting even more pressure on cities struggling to fund basic services for their residents.
While cities may have to wait for Our Neighborhood Voices to stem the tide of state preemption and forced density (not to mention unsustainable, ecocidal growthism), cities do NOT have to wait for a constitutional amendment to be able to recoup the incremental costs associated with all these state mandates.
Provisions already exist within the State constitution to ensure that cities are not saddled with unfunded mandates. Article XIII B, Section 6 of the State constitution is clear: “Whenever the Legislature or any state agency mandates a new program or higher level of service on any local government, the State shall provide a subvention of funds to reimburse that local government for the costs of the program or increased level of service.”
Clearly, the plethora of developer-oriented housing laws that add to density create a need for added infrastructure and increased levels of service. The standard escape clause the State uses to absolve it of fiscal responsibility is: “No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandate by this act...”
So, basically, Sacramento is saying that since cities can charge fees to cover any and all incremental costs created by the collective plethora of state laws, the state laws aren’t unfunded mandates subject to reimbursement by the State under Article XII B, Section 6 of the State constitution.
(As developers complain about municipal fees to their cronies in the legislature, there is some discussion that Sacramento might try to limit cities’ ability to recoup costs through impact fees. Surely Sacramento must understand that it is expensive to run cities, especially since the State legislature itself refuses to tackle public pension reform and other measures that would help cities control operating costs. However, if Sacramento did choose to limit the fees cities may charge developers to below the level of the actual expenses incurred, cities would have an excellent case under Article XIII B, Section 6 to demand reimbursement from the State for the costs of what would then be unfunded mandates).
Most cities aren’t doing a good enough job of charging fees to cover the actual incremental costs created by new development. Cities are prohibited from imposing random fees on new development; doing so would not only be unfair, but it’s also unconstitutional according to a recent SCOTUS decision (Sheetz vs. County of El Dorado) and it’s illegal in CA under Prop. 218 by which fees must be proportional and can only cover actual costs.
So, nexus studies are required to determine an appropriate and legal level of fees. And, yes, running a city in California is not cheap. It’s understandable why paid developer representatives like David Rand and M. Nolan Gray dismiss and demonize nexus studies. They would prefer to increase their profits by not having to pay for the costs their projects create; after all, who doesn’t like money for nothing and chicks for free?
Still, we should appreciate the irony in how some developers and their representatives always seem to whine about how expensive construction is (even though they are in many cases building in profit margins that other industries can only dream of), while ignoring the price of the infrastructure and services that enable their projects in the first place.
Cities and communitarians don’t need to wait for the much needed Our Neighborhood Voices initiative to take action to protect their residents. As the barrage of developer-oriented state laws force density and costs upon cities, cities can and should commission nexus studies and fully load developer impact fees to cover the incremental costs created by the new development.
Running a city is expensive, and the job of local government is to serve its residents, not to offer FSD (Free Shit for Developers).
If we want sustainable cities, the time has come for comprehensive nexus studies and for corresponding, fully-loaded impact fees.
After all, in the immortal words of Max Bialystock: “Can’t produce plays without checkies.”
(John Mirisch was elected in 2009 to the Beverly Hills City Council, where he has served as mayor three times. He is currently a garden-variety councilmember.)
