The Stockton City Council voted recently to gradually phase out the Stockton Economic Stimulus Program over the next five years.
The stimulus program, also known as SESP, offers a fee reduction for some public facility fees for both single-family and multi-family residences being built in Stockton, according to city documents. The program has created over 3,400 single-family homes, 500 multifamily units and the creation of over 3,700 jobs since 2016, the city says.
Originally introduced in 2015 by former Mayor Anthony Silva and the Building Industry Association of the Greater Valley, the incentive-based program was created “to promote economic development through residential construction through the reduction of certain public facilities fees,” also known as PFFs.
These fees provide revenue to Stockton to help implement the city’s goals and objectives, as well as to mitigate impacts of new developments, the city says, ensuring new development projects pay their fair share of public amenities to offset impacts and be used to serve Stockton residents.
“At the time, the hope was that the economic benefits of home construction would offset lost PFF revenues,” the city says in agenda documents of the stimulus program.
While the fees waived have helped the growth of residential properties, it is a larger drain on the city’s budget, as creating residential projects creates a need for other new public projects, such as parks and police presence, according to the city. Since its inception, the city says SESP has waived more than $94 million dollars in community development fees, including community recreation, emergency services, street improvements, etc.
However, in many ways, the program has also created significant revenue for Stockton, Christian Santos, director of government and public affairs for BIA of the Greater Valley, said during public comment advocating the council to continue to the program in some form.
New housing developments through SESP have generated more than $138.4 million dollars in revenue to support Stockton’s infrastructure over the last decade, Santos said, with BIA’s research showing the city would have only gotten half of that or less without SESP in place, as well as have missed out in millions of dollars generated by the residents who live in these new homes.
“In addition, to over $100 million in one-time impact fees, homebuilders and developers continue to pay for building permits, plan checks, inspections, mapping applications and subdivision agreements,” Santos said. “These fees totaling nearly $22.5 million in annual revenue are an incredibly important revenue stream that support the operations of the permit center and directly fund city staff.”
Stephanie Ocasio, Stockton’s director of community development, re-presented several options regarding the future of SESP to City Council at a meeting last week.
According to Ocasio, the council could maintain the current SESP, established in 2019. The program has been updated and extended by council twice.
Another option would allow all planned and ongoing projects to get SESP wavers, while newer projects would get gradually reduced waivers, decreasing in six-month increments over 18 months.
The third option would look at all programs getting gradually phased out of the waiver, with waivers being reduced in four-month increments over two years, while the fourth option would see the program ending, either immediately or at another date picked by council.
Some councilmembers such as Lee have vocally supported the phasing out or elimination of the program. However, the vice mayor did have concerns about how eliminating the program would affect jobs for people in the city’s disadvantaged areas. When Lee asked for more details, Santos was unable to provide a clear answer, noting that he was speaking on behalf of John Beckman, CEO of BIA.
“I want to see all of Stockton thrive, but I also want to see people get jobs,” Lee said. When the representative tried to respond again, Lee interrupted. “Unless you have the answers, I would just take it and go.”
Councilmember Michelle Padilla pointed out the possibility of amending the stimulus program to help better support underserved communities. Meanwhile, Mayor Christina Fugazi and other concerned members of the public pointed out potential concerns with limited housing, particularly for multi-family units, and how amending or removing the program could add to Stockton’s rising unhoused population.
Many public commenters also argued the program was not benefitting them even now.
Kimberly Graves, a self-described private investor and real estate broker, said during public comment that she has received “a ton of resistance” for her self-funded four units of housing for former foster youth being built in what she described as a “disadvantaged” neighborhood of Lee’s south Stockton district.
Graves claimed during public comment that the California Water Service, a water utilities company that serves Stockton, “intentionally and recklessly” decided to remove the water meters that are necessary to complete the development for the units, a project that is not receiving any help from SESP or other stimulus programs.
“You talk about providing affordable housing, you talk about what happened in the crisis, but the people that were affected by the crisis were also affected by predatory lending,” Graves said. “And then there were developers that were building … excessively expensive developments that were not benefiting the peopel that are unhoused or people that cannot afford market-rate properties.”
Despite several concerns raised during council discussion, ultimately a motion passed 7-0 for the waivers to be cut over a five-year period rather than the original 10-year term.
However, Mayor Fugazi did recommend a fast-track with low-income and transitional housing to make sure that empty residences would be filled, which she said could work to ease concerns about affordable housing.