Putting a Price on Growth Proves Tricky

Aurora has concluded that it is going into the red more than $5,000 for each new house built in the city.A 15-month study, released yesterday, also concluded that the price tag for each new condo or townhouse is $3,700. 

Developers are disputing both figures, as well as the city’s plan to boost their fees to cover the cost of providing each new home and its residents necessary services, facilities and infrastructure such as new roads and fire and police protection.

In the end, the city concluded that growth isn’t paying its own way and proposed an additional fee for new development and the developers came to the opposite conclusion, saying growth already puts enough in city coffers to cover its costs.

By putting a price on growth, Aurora is setting the stage to allow an impact fee to be charged to developers to offset the city’s extra costs.

Aurora began the study almost two years ago in part because it discovered an Urban Services Extension Fee that had been on the books for two decades but never collected. City council repeatedly changed the outlying areas of the city the fee applied to, and when development finally appeared in neighborhoods within the fee’s boundaries developers negotiated to pay for temporary fire and paramedic stations instead.

After being rebuffed by independent consulting firms who felt the study was too controversial, the city’s budget office teamed up with a group of 12 development companies to conduct the study.

Despite extending its timeframe twice at the developers’ request, the city and the developers ultimately split. Yesterday, each group presented its own conclusions on who is paying for growth.

That leaves the city council to more closely examine both groups’ findings and decide whether to charge developers more to build homes in Aurora.  The city’s Management and Finance Committee plans to re-examine any possible impact fee in the coming months.

A large group of homebuilders in attendance, represented by Susan Peterson, vice president of SouthShore, an Aurora community of homes still under development, objected to both the conclusions and the premises of the study.

The Development Advisory Group, made up of developers and trade associations, submitted a report yesterday that determined development is already contributing enough money to city coffers to offset any city costs via use taxes on homebuilding materials, tap fees to connect new homes to the city’s water system and building permits.

“Does growth pay its own way? Absolutely,” Peterson said.

Members of the home building community argued that they’re being asked to make up Aurora’s budget deficit.

City staff said tap fees go to Aurora Water, an independent enterprise fund, and that building permits still leave a revenue gap of $5,100 per house.

City budget officials also said they had already given lower estimates for itemized costs such as road building at the developers’ request and that the developers’ report required some “mathematical gymnastics.”

Mike Trevithick, a budget consultant and project manager of the Cost Development Study, said taxpayers have actually been subsidizing the cost of growth with bond issues and federal and transportation dollars that are now starting to dry up.

“Single and multi-family homes don’t generate enough operating revenue to offset the one-time capital costs that they incur. That’s sort of the bottom line,” Trevithick said.

With the housing market in a slump, some worried that any additional cost to homebuilding could hurt development. For example, Peterson said SouthShore would incur $12 million of unexpected costs if the city adopted the $5,100 per house impact fee.

The city’s study indicated that Aurora has the third-highest fees, at $41,495, for home building out of eight metro area cities with or without any additional fee. Broomfield leads the group with $51,591 in fees for each single-family home, followed by Castle Rock’s fee total of $48,224 per house.

“A number of communities have been putting on impact fees for a variety of purposes,” said Larry Mugler, planning services manager for the Denver Regional Council of Governments. “Usually it’s not to control growth but to make sure growth pays its own way.”

Implementing an impact fee is a change in policy and not considered a tax, therefore skirting the Taxpayers Bill of Rights and not requiring a vote of approval.

But a city must prove there is a nexus between what it is providing new development and the price it is asking developers to pay.

The Aurora developers said they have a good legal challenge to an impact fee but did not elaborate.

Duane Senn, a member of the city’s Citizens Advisory Budget Committee and former city surveyor, has advocated for more restrictions on growth in Aurora.

After hearing both reports, Senn said any number lower than the $5,100 proposed “doesn’t work for me.”

Senn, who has run unsuccessfully for Aurora City Council twice, knows how politically sensitive development issues are, having received campaign donations from developers during his first run for office but has said he watched those funds dry up after he publicly criticized developers’ influence on city growth policies during his second bid for city council.

A handful of Aurora’s city council members, all of whom cannot run for city council again because of term limits, seemed sympathetic to the developers’ concerns.

“I don’t think we should make you all pay the whole $5,100,” said Councilman Brad Pierce. 

Aurora Mayor Ed Tauer said his city has an obligation to ensure its current residents are not paying the way for future residents but the number of interconnected economic factors can make it hard to assess when growth is paying for itself.

“The challenge is none of this is black and white,” Tauer said.

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