TO: LINDA REICH, CITY MANAGER
FROM: NADYNE LOWRY, ACTING DIRECTOR OF FINANCE AND HYE JIN LEE, DIRECTOR OF PUBLIC WORKS
SUBJECT
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Development Impact Fees (DIF) Annual Report for Fiscal Year 2023-24.
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RECOMMENDATION
Receive and file the DIF Annual Report for Fiscal Year 2023-24, submitted in compliance with the recently enacted state legislation Assembly Bill 516 Mitigation Fee Act, which establishes transparency and reporting requirements for local agencies regarding DIF programs.
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FISCAL IMPACT
No fiscal impact to the City.
CITY OF CHINO MISSION / VISION / VALUES / STRATEGIC ISSUES
The recommendation detailed above further the City’s values and strategic issues that serve as key pillars on which identified priorities, goals, and action plans are built, by fostering:
• Financial Stability
• Responsible Long-Range Planning
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BACKGROUND
Development Impact Fees (DIF) are levied on new development projects to mitigate the impact of that development on public infrastructure and services, such as transportation, water, sewer, storm drain, parks, and public safety to name a few.
California Government Code §66000 et seq. (the Mitigation Fee Act) requires local agencies to report annually on the status of Development Impact Fees (DIF), including their collection, expenditure, and remaining balances. In previous years, the City’s DIF reporting was relatively simple, with less detailed breakdowns and limited future projections. However, recent legislative changes through Assembly Bill 516 introduced new requirements aimed at enhancing transparency, accountability, and efficiency in the reporting of DIF. These changes, effective January 1, 2024, are designed to ensure more comprehensive and transparent DIF reporting by local agencies.
New DIF Reporting Requirements
The new requirements, which became effective with the latest round of legislative updates and local ordinances, include several key changes to improve reporting practices. These updates are summarized as follows:
1. Detailed Breakdown by Project: each development’s DIF contribution must be tracked and reported individually, which includes:
o The specific amount collected from each development.
o The infrastructure projects funded by the fees.
o The status and timeline for each project.
2. Annual and Cumulative Expenditures Reporting: the City is now required to not only report annual expenditures but also provide cumulative totals for fees collected and expended over the past five years. This provides a more comprehensive view of the City’s financial planning and utilization of DIF funds.
3. Future Project Projections: new regulations require that the DIF Annual Report include projections for future infrastructure needs, as well as estimates of expected future revenue from anticipated developments. This aims to enhance long-term planning and ensures that fees are being collected and allocated in a manner consistent with growth trends.
4. Transparency and Public Access: the report must be made publicly available, and a summary must be presented at a public meeting. The City is also required to publish annual updates on the use of DIFs on its website.
5. Audit and Compliance: an external audit of DIF expenditures will be required every three years to ensure compliance with state regulations. The City must report the audit findings within 60 days of receiving them.
These changes underscore the importance of maintaining up-to-date, transparent reporting practices to improve the management of impact fees and maintain public trust in local agencies’ fiscal stewardship.
ISSUES/ANALYSIS
The City’s Municipal Code, Chapter 3.45, titled Development Impact Fees, provides that if, as a condition of approval of a development project, a developer constructs a public facility identified in the DIF Nexus and Calculation Report, for which a DIF is imposed, the Developer shall be eligible to receive reimbursement and/or fee credit toward the DIFs imposed on the development project for the same type of public facility so constructed and shall be entitled to credit for eligible costs of constructing the public facilities.
Historically, developers have been responsible for constructing most of the public facilities required by new developments, as stipulated by the conditions of approval. In The Preserve, for example, DIF fees collected or credited to developers have been allocated to cover the costs of these infrastructure projects, ensuring that the necessary public facilities are in place to support population growth.
Recent changes in infrastructure management have led to the City taking on greater responsibility for certain development-driven projects. While DIF fees continue to be collected and credited to developers, a portion of these funds is now being allocated to City-managed projects. Notable examples include the Pine Avenue widening between Euclid and Johnson Avenues and the Storm Drain Line I projects, which are now under the City’s direct oversight. As the City takes on more responsibility, the allocation of DIF fees may evolve, with an increasing portion directed toward City-managed projects.
During the reporting period, DIF fees were collected and credited to developers as per program guidelines. The attached financial summary details the total fees collected, ensuring transparency in reimbursements for developers’ infrastructure costs. Additionally, ongoing monitoring is essential to align with the City’s capital improvement plan and address emerging needs. The next reporting period will focus on assessing developer-driven and City-managed projects, ensuring that sufficient funding is programmed to meet the evolving needs of the community as the City’s population continues to grow. It is essential that the City proactively tracks DIF collections, as this will support infrastructure development at the City’s build-out, ensuring that the necessary resources are available to meet future demands.
This report and all supporting documents are available in the Chino Branch Library and on the City’s website.
Attachments: Development Impact Fees Annual Report (FY 2023-24)