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More To Measure P Than Meets The Eye, Just Look At The 10-Year-Old Parks Bond

Election 2018

More To Measure P Than Meets The Eye, Just Look At The 10-Year-Old Parks Bond

If Measure P passes, many questions arise on park impact fees and the Measure could become the darling of developers because it could mean parks impact fees never need to be raised for the next 30 years.

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A review of Fresno’s 10-year-old parks bond is a good way for voters to learn more about the implications of Measure P.

Turns out the sales tax initiative has political ramifications beyond simply dramatically raising funding levels for Fresno’s parks system.

First, let’s take a look at the parks bond. Michael Lima, the city’s finance director/controller, and Mark Standriff, the city’s communications director, kindly spent a half-hour with me on Sept. 19 to go over the bond’s history.

The idea of a parks bond was born during Alan Autry’s eight years (2001-2009) as mayor. Autry was elected in November 2000 on a “tale of two cities” theme. This was a familiar theme – Fresno, divided by haves and have-nots – but Autry reinvigorated it in his successful campaign against former Mayor Dan Whitehurst.

Fresno’s overall lack of green space, and its absence in certain income-challenged neighborhoods, was but one aspect of the “tale of two cities.” Autry wanted to tackle all aspects of the divide as fast as possible, but was slowed by the bursting of the dot.com bubble in his first term.

The challenge then, as now, was finding a substantial pot of money to build new parks and rehabilitate long-neglected parks. Grants were scarce. The general fund couldn’t carry such a burden on a year-to-year basis.

The answer was a bond. In 2008, the City Council voted to borrow $37.7 million.

It’s easy these days to forget the dynamic nature of Fresno’s Parks Department back then. Director Randy Cooper and Assistant Director Jerry Haynes were full of energy and vision. They got the public engaged in drafting a plan for a better parks system.

The two big questions were: 1.) How do we spend the money? 2.) How do we service the annual bond debt?

No. 2, of course, was the tough one. The bond would have an annual payment to investors of about $2.19 million (principle and interest). In the end, the payment formula would call for about half to come from parks impact fees paid by new development and about half to come from the general fund.

There are two key points to make about the parks impact fees.

First, Autry moved the city’s development/infrastructure funding strategy away from the outdated urban growth management system and transitioned to developer impact fees. It’s enough here to say the latter system is designed to be both simpler and a more accurate reflection of the cost of growth to the city’s infrastructure.

Second, it’s the nature of developer fees and the law that the infrastructure money raised by new development is spent where it is generated – in the neighborhoods of new houses and commercial/retail buildings. Most of such new development for decades had been in North Fresno. But much of the need for new green space and better-maintained parks facilities was in older parts of the city. Hence another aspect of Autry’s “tale of two cities.”

To cut to the chase, City Hall did a nexus study showing that development on the city’s edges directly impacted the older neighborhoods. Therefore, some of the money from parks impact fees generated in, say, North or Southeast Fresno, could be spent legally on existing or new city parks in older neighborhoods with little or no new development. The nexus study carried the day in the Council Chamber. This, in turn, enabled the sale of the $37.7 million parks bond with its 50-50 repayment formula.

I covered/observed City Hall for The Bee, as a reporter or an assistant city editor, during much of this long process.

Lima on Sept. 19 told me that all of the bond proceeds earmarked for parks (some was set aside in a reserve, some was used to pay for issuing of the bond) has been spent. He gave me a list of where the $35.2 million went (minus reserve and bond costs).

The list consists of 21 projects.  They range from the Victoria West Park Expansion ($3.1 million) and the Downtown Vagabond Skate Park ($571,053) to Riverside Golf Course improvements ($2.33 million) and the BMX bike park at the Sal Mosqueda Community Center (1.16 million).

City Hall will be paying on the bond through 2038. Originally, the city was looking at a total payment – principle and interest – of $70 million over the 30 years. That total has been knocked down to $61.7 million after a recent re-finance of the bond.

But the single biggest ticket item was $7.1 million for the North Figarden Drive Park in Northwest Fresno.  That was a controversial expenditure in a city supposedly riven by class and geography. It was an expenditure that, by itself, didn’t lead to Measure P. But it certainly fueled parks activists who thought too much Parks Department investment was going to North Fresno (this contention during the Mayor Ashley Swearengin Era was disputed by some at City Hall).

What do we takeaway from the parks bond experiment?

For starters, Lima said, it worked as intended.

“We spent money on a variety of different projects” all over the city, Lima noted. “We had a lot of projects we wanted to get done.”

Lima also praised city officials for doing what it took to adopt the developer impact fee system, including parks fees. He said having a stream of fees dedicated just to parks was “critical” in making the bond repayment formula a prudent policy decision. Instead of a bond bill covered 100% by general fund money, we had a bill covered about half by new growth.

“What it did was it freed up what otherwise would be general fund money going in there,” Lima said. “That (general fund) is money you can use for anything else…. If they’re going to do it (borrow to build), I think they did it the right way, by having a dedicated stream to help pay for that – the parks impact fees.”

Another plus was capping at about 50% the amount that the parks impact fees would contribute to the bond payment. Lima said that while parks impact fees contribute about $1 million annually to the bond bill, the fees actually generate about $2 million a year. The $1 million not spent on the bond bill is spent on parks improvements.

In other words, the parks impacts fees aren’t consumed entirely by payments on a 30-year bond. Politically, in my opinion, that is sound policy. The general fund is, in Lima’s words, the “ultimate backstop” to the bond payments. If there’s a dip in development, causing a decline in parks fees, the drop most likely wouldn’t be 50% of $2 million. Parks fees would still cover their share of the bond payments and the general fund wouldn’t have to be touched in hard times. That makes council members breathe easier.

“You always want to keep your money as free as possible,” Lima said.

Finally, Lima said, the bond deal was done in such a way that it didn’t destroy the public’s faith in borrowing when the situation is right.

“At the end of the day, that bond provided this list of items for the city, which they couldn’t have done because they didn’t have the cash on hand,” Lima said. “I’m not a parks person, but I would say as a community enhancement, as something the community would utilize, I would argue that all these were good investments at the time. But at the end of the day, that’s the essence of the policy debates we have here. Would it have been a wiser choice to put that money somewhere else? Who knows? I know it got us this (he points to the list of 21 projects). I know these are good community amenities. I think that speaks for itself.”

The Autry Era ended as the Great Recession picked up steam. Swearengin took office in January 2009. Pretty soon, she was trying mightily (and successfully) to keep the city out of bankruptcy court. Parks isn’t as dependent as, say, Public Safety on general fund money. But the department does get millions from the general fund even when times are tight.

Swearengin was forced at one point to push hard her “adopt a park” program to provide maintenance and free up money for what her Administration and the City Council viewed as more important priorities. We’re talking police and fire.

This didn’t sit well with parks activists. You take an end to the Great Recession, improved city finances, years of dismal rankings among America’s municipal parks systems and Fresno’s no-holds-barred Republican vs. Democrat politics, mix it all together and you get Measure P.

In a nutshell, this is a three-eights of a cent boost to the sales tax expected to generate $37.5 million in the first year. Measure P would last for 30 years. The measure calls for specific spending levels on things like new park construction, parks maintenance and recreation/arts programs.

One of the measure’s key features is a parks commission whose nine members are appointed by the Mayor and approved by the City Council. The commission would have considerable policy-directing powers.

The activists, including former Mayor Swearengin, now head of the Central Valley Community Foundation, want to revolutionize the city’s parks system. Measure P is their vehicle.

My opening theme to this blog is that Measure P, at 20-plus pages, is more complex than the campaign’s opening sound bites might suggest. Two parts of the measure help me make my point.

1.) “It is the intent of the voters in adopting this ordinance that the expenditures made pursuant to this ordinance shall supplement the levels of spending made by the City of Fresno in Fiscal Year 2017-18 in the areas funded by this ordinance and that the additional expenditures shall not supplant the 2017-18 spending levels.”

I’ve talked to top Measure P supporters. They acknowledge that voters in 2018 can’t bind the decision-making of future city councils-mayors when it comes to general fund dollars. But the parks supporters want it on the record that the voters of 2018, in giving Measure P the necessary two-thirds majority, fully intended for future decision-makers to continue funding parks at traditional levels of general fund money. In the 2018-19 budget, that is about $13 million (near as I can tell).

Suddenly, that $37.5 million for parks from Measure P jumps to more to $50 million per year, not counting annual increases. And the spending of all of this money, to repeat myself, is greatly influenced by a parks commission with strong ties to the activist community.

2.) “The department shall not sell bonds secured by any revenues made available by this ordinance.”

But I saw nothing in the measure that says City Hall couldn’t sell another bond like the one Autry and the council sold in 2008.

The question is: With Measure P on the table, what is to become of the city’s parks development impact fee system?

I can answer the question only by raising more questions.

Might Measure P become the darling of developers because it could mean parks impact fees never need to be raised for the next 30 years?

Better yet from the developers’ point of view, with Measure P in place can parks impact fees be eliminated altogether?

If Measure P is passed, does that mean parks impact fees can go back to being spent exclusively where they are generated?

I don’t know when the parks impact fees were last adjusted for the passage of time. But let’s say City Hall in the near future successfully goes through the legal process of raising the fees. In theory, this would generate money above and beyond what was anticipated in the formula to pay the 2008 parks bond and have some left for system improvements. Do City Hall and the Parks Commission take this new stream of parks impact fees and bond it, perhaps delivering another $35 million all at once to use on construction of new parks?

If parks impact fees remain a viable and growing source of revenue for parks, does that not require City Hall to nurture the primary source of this money – residential and commercial/retail growth on the city’s edges?

Would not this nurturing of growth on the city’s edges in the name of better parks everywhere wind up perpetuating the “tale of two cities”?

A new nexus study would be necessary to raise parks impact fees. But how could such a study come to the conclusion that new development must pay more for its impact on the existing parks system when voters have decided through Measure P that the system is to be funded to a large degree by sales taxes paid by everyone throughout the city?

I raised some of these questions with Lima. He is a policy adviser, not a policy maker. He was tactful in his response.

“Everyone pays the sales tax,” Lima said. “What Measure P says is everyone is going to pay for new parks and existing parks. Everyone in the city. What the model is saying right now is new development pays for those items. They’re paying for new parks, improving the parks in certain areas (while) the other existing parks are being paid for with general fund dollars. In the existing model, the developers pay the load. In the model under Measure P, everyone is going to pick that up. That’s a policy call the citizens are going to make. Do they feel that everyone should pick up that load? Or are they happy with new development picking up that load?”

Lima spoke for many of us when he said in conclusion: “I’m very curious to see how the policy call goes.”

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George Hostetter

George Hostetter is a contributor to CVObserver.

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