Fire district weighs tax on new development

The fire protection district that serves Menlo Park, Atherton and East Palo Alto is going with Plan B in response to inaction by the cities, particularly Menlo Park, to institute a per-square-foot impact fee to subsidize new firefighting equipment to keep pace with new commercial property development.

The board of the Menlo Park Fire Protection District is in the initial stages of considering a special “new growth” tax that would have the same effect as a fee.

With substantial new development projected for Menlo Park, particularly east of U.S. 101, the tax revenue would help the fire district cope with the added burden to its emergency services, district officials say.

A February 2016 study on the need for additional revenues, commissioned by the fire district, says the district will have 27,000 more residents within its boundaries by 2035, and 25,300 more employees.

Current plans for development of the M-2 light-industrial area in Menlo Park would require the fire district to add at least two and possibly five new firefighting vehicles stationed east of U. S. 101, Fire Chief Harold Schapelhouman said in an interview.

The fire district had asked Menlo Park and East Palo Alto to consider impact fees, the chief said, but the cities were slow to respond, in part over a complaint from Menlo Park City Hall that the fire district had not provided enough information on its finances.

By forming a community facilities district, the fire district no longer needs impact fees from the cities. Nevertheless, subcommittees from the Menlo Park City Council and the fire board, plus the executives, have a meeting scheduled.

The fire district will not be pushing for a fee, the chief said. “In terms of due diligence, we at least want to finish the conversation,” he said, and added, “We want to make sure that they get their questions answered.”

No vote required

The fire district derives its taxing authority from a 1982 state law that allows independent agencies — such as fire districts, schools, parks and libraries — to impose a one-time tax on new developments by creating a “community facilities district.”

A September 2016 analysis by consultant NBS on the district’s options for collecting revenues based on the impact of new development says that a special-tax formula “can be based on nearly anything, limited only by a legal requirement that the formula be rational and non-discriminatory.”

The tax would not affect residential properties, and the tax formula recommended by NBS would not require a two-thirds majority approval by the voting public, the chief said. Instead, commercial landowners with development plans could “vote” to approve the tax as part of the required process of engaging with the fire district before proceeding with a construction project.

If the fire district board chooses the landowner-vote approach, “only the commercial developer/landowner would be required to pay the tax,” said Lauren Quint, an attorney representing the fire district.

Asked whether the fire district could halt a project if a property owner refused to pay the tax, Chief Schapelhouman said it was a question for the district’s legal counsel. Ms. Quint had no comment.

Atherton would not be affected because it has no commercial property, the chief said. East Palo Alto and the unincorporated areas served by the fire district, such as North Fair Oaks, are mostly residential, he said. “It was the city of Menlo Park that put us on the trajectory of looking at independent financing,” he said.

The February study on district needs proposed a one-time, per-square-foot tax — for new square footage only — of approximately 43 cents for retail, 35 cents for hotels, 57 cents for office and research-and-development, and 22 cents for industrial.

If a building’s commercial purpose does not fit these categories, the fire district could charge a fee of $173 per new employee. Fees could also apply to new large multi-family housing developments, the chief said.

The fire district would restrict the use of the tax revenues to spending on firefighting equipment, vehicles and stations, he said. Property tax revenues, likely to increase with the new development, would go to pay the firefighters using the new equipment and stations, he said.

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