Critics worry city fee hike will discourage development

Kelly Sloan, The Business Times 

An increase in fees assessed on development in Grand Junction has raised concerns the higher rates could discourage business growth.

“Now is not the time to be increasing transportation fees. While we are struggling to recover from the recession, we should be doing everything we can to help business, not stymie it,” said Sam Susuras, one of three members of the Grand Junction City Council to vote against an increase in the transportation capacity payment (TCP).

Bennett Boeschenstein, one of four council members to vote to approve the increase, said the higher fees are needed to help pay for improvements to streets, lights and other infrastructure that accommodate the increased traffic development generates.

“The fees need to go up because the costs of construction have gone up,” Boeschenstein said. “This is a gradual increase to help pay for new transportation and infrastructure demands.”

The council voted in early March to increase the transportation capacity fee assessed on new development in the city starting April 1. Boeschenstein, Jim Doody, Laura Luke and Bill Pitts voted in favor of the increase. Susuras, Teresa Coons and Tom Kenyon voted against the measure.

The base TCP on new commercial and industrial development in Grand Junction will increase $322 per year for three years — from the current rate of $1,589 to $2,554 by 2015.

Commercial, office and industrial properties have no single, uniform TCP rate. Instead, each property type is assigned a rate per 1,000 square feet derived from a calculation that includes a base rate adjusted by such factors as vehicle trips generated daily. The measure increases these rates using a recent increase in the rates for single-family residences as the base. In 2008, the TCP rate for single-family residences went up from $1,589 to $2.554, an increase of 60 percent. The adopted measure raises the rates for each commercial building type by the same percentage over three years.

The TCP for a sit-down restaurant, for example, will increase from $3,203 per 1,000 square feet to $3,860. By 2015, the rate will climb to $5,159.

Diane Schwenke, president and chief executive officer of the Grand Junction Area Chamber of Commerce, said the higher fees will make it costlier for businesses to open and expand. “It now makes Grand Junction a more high-cost location in which to construct a business,” Schwenke said, adding the costs will be higher than Mesa County or Fruita and on par with Palisade.

Schwenke said the increase is enough to be stifle business growth. “To say this is not going to be significant for businesses is simply not true.” The higher fees make little economic sense at a time when there’s little commercial construction in the city, she added.

Greg Motz, president and CEO of Sun King Management, a local construction services firm, agreed. “This increases the cost of development for commercial projects that businesses want to build in the city.” The higher fees could determine whether or not projects go ahead, Motz  added.

Motz, who testified at a city council hearing against the measure, cited several examples. He said an 8,000 square foot medical office currently pays $44,112 in TCP fees. By 2015, the fee would increase to $70,84 — or nearly $9 a square foot. A 3,500 square foot bank would see fees levied at around $7 a square foot. And a  new 3,000 square foot fast food restaurant would pay more than $11 a square foot.

The increasing fees will affect small businesses the most, Motz said. “For a national chain, this increase might not be that big of a deal. But for a small, local business, $9 a square foot is a burden,” he said. “It might be doable for the Wal-Marts of the world. But for smaller businesses, this will prevent them growing.”

Boeschenstein countered, though, that the increase is needed to keep pace with the rising costs of construction required when new businesses open.

“For many years, the TCP fees have been set arbitrarily too low” he said, pointing out that the fee rate had been stagnant for 10 years in Grand Junction. “Without this increase, existing residents will have to pay for these added costs out of the general fund, which is unfair.”

Susuras and Schwenke noted, however, that commercial properties often generate sales tax revenues. Moreover, commercial property tax is assessed at  higher rate than residential property tax.

Boeschenstein also said the council based its decision on recommendations from a report completed by a Texas-based consulting firm that analyzed city growth patterns and the affects of new roads and used the data to suggest where fees should be increased to keep up with development. “It is a scientific way of approaching the issue.”

Schwenke said that report is more than 10 years old and the findings out of date. “Ten years ago, things were very different in the valley,” she said. “You cannot make solid decisions based on information that is that old.” She recommended the council commission a new study to provide updated information.

In addition to increasing transportation capacity payments, the council approved the designation of zones in the greater downtown area and along North Avenue where the fees will be half of what is assessed elsewhere as incentive for development. In the downtown core, the fee will only apply to the first floor of a multi-story project.

The council also waived fees on existing buildings in which the uses change.

“This is a classic case of government picking winners and losers,” Susuras said. “Some are paying nothing, some 50 percent, some 100 percent. It ought to be standard across the city.”

Schwenke agreed. She said the zones are unfair to business owners in different parts of the city. “You build where your market is, not where city council wants you to.”

Boeschenstein said the zones should be expanded to include other areas. “I disagreed with the map myself,” he said, adding the city also should encourage development in such areas as Fruitvale and Orchard Mesa.

One aspect of the new measure that is almost universally welcomed, however, is the exclusion of change of use fees, which waives the TCP on owners of existing buildings who are simply changing purposes.

Schwenke said the chamber supported the removal of a large fee on change of use. “They did get one thing right.”