Almanac

News - February 24, 2010

Atherton OKs $1.6 million refund of road-impact fees

by Andrea Gemmet

It seemed like a good idea at the time: charge builders a road-impact fee and use it to repair Atherton roads torn up by heavy construction vehicles. Now, town officials are preparing to refund $1.65 million in road fees collected since July 1, 2006.

The Atherton council voted to approve the refunds on a 3-1 vote, with Mayor Kathy McKeithen opposed, at the Feb. 17 City Council meeting. Councilman Jim Dobbie was absent.

"If it keeps the town from lawsuits, that's worth a lot," said Councilman Jerry Carlson.

Road-impact fees are a matter of legal controversy, according to Atherton's city attorney, Wynne Furth. A 2005 court case in Southern California touches indirectly on the issue and says that California vehicle code pre-empts any local impact fees for damage to roads.

In December, Atherton officials decided it would be prudent to rescind the fee, rather than risk a lawsuit. They also acknowledged that the town improperly raised the impact fees by 40 percent in August 2007, tying the increase to construction value calculations rather than a nexus study of the actual cost of road repairs.

Even so, the town is legally obligated only to refund fees collected in the 90 days prior to the date in December when the council rescinded the road-impact fee, according to Ms. Furth. For the sake of fairness, council members said they would expand the time-frame for refunds.

From July 2001 through June 2009, the town collected a total of $5.17 million in road-impact fees. Road-impact fees paid for about half of all of the street reconstruction projects done in Atherton last year, Public Works Director Duncan Jones told The Almanac.

The plan adopted by the council, to refund anyone who paid the fee from July 2006 to December 2009, was proposed by a volunteer citizen group that convened to advise the City Council on the refund issue. During that two-and-a-half-year time period, the town collected $2.7 million in road fees. Anyone who paid the fee would have to apply for a refund.

"We request that you acknowledge that this was of questionable legality," said Jeff Wise, a member of the citizen group.

Mr. Wise said his group was OK with capping the total refunds at $1.6 million.

Councilman Charles Marsala pointed out that probably not everyone who paid the fee would request a refund. Atherton recently refunded improperly assessed business license taxes, and only 42 percent of those entitled to a refund applied for it, Mr. Marsala said.

Mayor McKeithen espoused different parameters and time-frames for refund eligibility, saying she was concerned that some in town would see the refunds as a gift of public funds to builders. Councilwoman Elizabeth Lewis said she thought a simple, straightforward solution was best.

"The less explanation we have to make, the better," she said

Mr. Carlson said he hoped people receiving the refunds would consider making charitable donations to nonprofits that support the town, such as the Holbrook-Palmer Park Foundation.

Even with the cap on the refunds, the town's bottom line is going to be affected. City Manager Jerry Gruber said the town is heading into a fiscal crisis next year. A mid-year budget amendment on the evening's agenda authorized $540,000 of deficit spending by tapping into the town's general fund reserves and building department operating reserve fund. The vote was 4-0 to authorize the budget adjustment.

Comments

Posted by Charles Marsala, a resident of Atherton: West Atherton
on Feb 24, 2010 at 7:28 am

Dear Editor,

I disagree with the opening of the story, "It seems like a good idea at the time.."

Many of us thought it was a bad idea at the time. In the Summer of 2006 many residents took issue with an illegal Off-Haul Fee the council adopted in 2005, citing that since trucks already pay the state taxes and the state allocates funds back to cities, Off-Haul Fees and Road Impact Fees are double taxation.

In September 2006, the council rescinded the Off-Haul Fee and refunded back to the start of the fee in May 2005.

In June 2007, the council majority adopted, (Jim Janz and I opposed), a plan to increase Road Impact Fees 40% without any study to support the increase.

Only a small amount of cities (less than 30) charge Road Impact Fees in the state and Atherton charges at least 40% more than any other city. Only a few charge Off-Haul Fees and Atherton was charging four times what any other city was charging. Hence the likely hood for a lawsuit to challenge was in Atherton.

During the Summer of 2008 residents and schools came before the council complaining about the illegal Business License Tax increase of 2003 and the illegal Road Impact Fee increase of 2007. Interim City Manager Wende Protzman had advised the council in Fall of 2007 that the Business License Tax increase was illegal.

In December 2008, the council rescinded the Business License Tax increase and was advised it legally had to go back one year. Council opted to go back to December 2006, approximately one year from the date it was advised by Protzman.

My understanding is the 90 day legal obligation is only on part of the road-impact fee problem and does not apply to the 40% increase nor the fees charged in 2006 before the Town placed a clause at the bottom of the permit form stating applicants had 90 days to protest fees.

As an example Menlo School paid almost $300,000.00 in both Business License Tax and Road Impact Fees to build a new gym in 2008. The school will be eligible for a refund in both these categories. Although the school had expressed its concern on the high fees to the town in emails, technically it had not filled out the correct paperwork to be eligible under the 90 window to protest.

With more than 500 permits processed a year, the majority number of refunds are to residents who did improvements to their existing properties.

Charles Marsala
Council Member


Posted by got to wonder, a resident of Atherton: other
on Feb 24, 2010 at 9:08 am

How much of the "off haul, road impact, or biz lics. fees" charged and then returned, have been offered back to you Mr. Marsala?


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