A decision on whether to tax future homes for public safety split the Fresno City Council on Thursday.
Ultimately, Fresno officials decided not to retroactively apply a new property tax for police and fire costs on undeveloped land.
The application and necessity of the $164 property tax assessment on some new homes and $112 on apartment units, called the Community Facilities District 18, confused even the politicians who crafted it.
City Councilmember Nelson Esparza said when legislators aren’t fully clear on their decisions, the city administration is left to make the choices.
“That’s what happened with CFD-18,” Esparza said. “We passed it with a couple of developments and it worked. But no one ever really asked the question, what all does this really apply to?”
Councilmembers voted 4-3 to clarify that CFD-18, a property tax assessment area, would apply to only areas of land annexed after August 2020 — the month the tax-sharing agreement between the city and county expired.
Watch the discussion and vote
Councilmembers Nelson Esparza, Mike Karbassi, Luis Chavez, and Tyler Maxwell voted in favor of the decision. Councilmembers Annalisa Perea, Miguel Arias, and Garry Bredefeld voted to oppose the change.
City Manager Georgeanne White said looking back at written documents about CFD-18, the administration didn’t make it clear where it would go into effect.
“Perhaps it was not as clear as it could be that it was our intent to be applied to all areas in the 62/38 (county-city revenue sharing) split,” White said.
How the City Landed on Taxing Homes/Apartments to Pay for Budget Shortfall
On Sept. 28, councilmembers questioned the city administration on how much of a budget shortfall for police and fire would come from houses built in land annexed by the city after 2002.
That questioning led to the item Thursday from Esparza to apply CFD-18 to only parts of Fresno brought into the city after August 2020.
After 2002, the way the city and county of Fresno divvied up property taxes changed, favoring the county.
It changed from an even split to the county getting 62% and the city getting 38%. And, because of ongoing disagreements between the two bodies, that tax-sharing agreement expired.
In 2021, an analysis found homes and apartments in those areas don’t generate enough revenue to pay for police and fire services, especially at the periphery.
Builders disagree with those calculations.
To make up that shortfall, City Hall proposed adding the CFD-18 tax to all undeveloped areas of the city annexed since 2002.
Granville Homes developer Darius Assemi appealed the decision to apply CFD-18 to a 71-lot subdivision in Esparza’s district.
Assemi is the publisher of GV Wire.
White said paying for public safety services in the newer areas of town is expensive.
However, a heat map from the city of Fresno shows the greatest demand for fire in the city’s older neighborhoods, closer to the city’s core.
“The people that CFD would be taxing would be the people with the least demand for police and fire services,” Assemi said. “And these people don’t get a chance to vote on the tax imposed on them.”
Council Disagrees on Whether CFD-18’s $1.8M Is a Shortfall or Money City Never Had
A week after being asked to come up with the financial impact of not having CFD-18, public works director Scott Mozier said it could create a future $1.8 million shortfall. But that requires all land in the 6,600 acres annexed since 2002 but before the tax sharing agreement expired to be fully built out.
Mozier estimated 10,000 housing units built and 2,000 apartment units built.
Council Vice President Annalisa Perea said she agreed with the proposal to apply CFD-18 to only annexations after the tax agreement expired, but that she was concerned about the fiscal impact on the city.
“If we were to approve this today, the annual cost we are going to have to fill is $1.8 million, where are we going to get this shortfall?” Perea asked.
Perea did not want to take money out of the general fund.
“This is the money that potentially we will not have to pay for our firefighters when our SAFER grant runs out,” Perea said. “This is money that will not be available to us for road infrastructure repairs.”
White said that money would have to come from the general fund but clarified that the shortfall would be in the future.
“I would reject the premise that we’re putting the city in dire financial straits by voting on this matter since this is revenue that never really materialized for us,” Esparza said.