Hailey losing money on new development
Most land uses, including business, costs city
By GREGORY FOLEY
Express Staff Writer
A financial consultant told Hailey city
officials last week that the city could lose substantial amounts of money in the
future if it doesn’t take measures to offset the costs of most types of
residential and commercial development.
Paul Tischler, a representative of
Maryland-based consulting firm Tischler and Associates, issued the findings
Monday, Jan. 13, to the Hailey City Council and select members of the city
staff.
After examining the city’s costs and
revenues from 10 different residential and nonresidential prototypes, Tischler
said nine of the 10 land-use categories generate annual net deficits for the
city.
"To me it’s foreboding, quite frankly," he
said.
Tischler ultimately told council members
that he recommends the city pursue a plan to assess various one-time impact fees
on new developments or impose a 1 percent local option tax on citywide retail
sales, lodging and liquor sales.
Mayor Susan McBryant said after the
hearing she "wasn’t alarmed" by the news, but does intend to direct the City
Council to address the problem.
"I feel like we have some time," she said.
"I feel like we don’t have a lot of time."
The report issued to city officials by
Tischler and Associates outlines in detail a scenario in which the city is
currently paying out significantly more money to provide services to most new
developments than it is bringing in to pay for those services.
In short, the report concluded, most
developments cost the city more in providing services such as police and fire
protection than developers or landowners are required to pay for in local taxes
and fees.
The report was commissioned by the city
last year. Tischler made his determinations by measuring the city’s costs for
serving the 10 selected land-use categories during the 2001-2002 fiscal year
against the revenues for the city’s General Fund generated by each land use.
Tischler concluded that single-family-home
developments in the city’s Limited Residential and General Residential zoning
districts generate deficits for the city, as do duplex and apartment
developments.
"The greatest annual net deficit is
generated by the apartment prototype at $466 per unit," the report states.
Of the six residential land-use categories
studied, only single-family homes on minimum one-half-acre lots generate a net
revenue for the city. Tischler estimated that such developments generate an
average of $162 per unit annually for the city.
In examining commercial land uses, the
consultants concluded that industrial, office, lodging and commercial uses all
generate deficits for the city. Hotel rooms on average produce an annual net
deficit of $30 per room, while commercial developments cost the city an
exorbitant $735 per 1,000 square feet on an annual basis.
Tischler said the overriding problem is
that the city relies heavily on property taxes and shared revenues from the
state of Idaho for its operating budget revenues. "This is fiscally constraining
to the city since state law limits the city’s growth in (the) existing
assessable property tax base, and a downturn in the economy will likely result
in less shared revenue from the state," he noted.
Of the city’s General Fund revenue of
$2,481,145 in the 2001-2002 fiscal year, property taxes and state shared
revenues made up 72 percent of the total figure, he said.
The consultant explained to council
members that the city has been able to keep its budget balanced by deferring
certain necessary capital improvement projects.
Tischler provided city officials with a
long list of recommendations for the city to plan more effectively, reduce its
costs and generate more revenue for its operating budget
In his presentation to council members,
Tischler focused on two particular recommendations to raise revenue.
"The local option sales tax is what we
suggest you give serious consideration to," he said, noting that he estimated a
1-percent LOT could generate approximately $785,000 annually for the city.
Tischler also said impact fees—one-time
assessments levied on developments to ensure new or additional city services
required by the development are paid for—would also be an effective means for
the city to eliminate the associated deficits.
"If you do nothing, your level of service
goes down, and your quality of life goes down," he said.
McBryant after the meeting noted that
imposition of a LOT in Hailey is a possibility, but would take a considerable
effort.
Indeed, the measure would need council
support, a state designation of Hailey as a resort city that is impacted heavily
by tourism, and the support of 60 percent of voters.