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Clock Ticking for Building Industry to Dispute 105% Clovis Home Fee Hike
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By Edward Smith
Published 21 hours ago on
June 11, 2024

Clovis City Council voted to approve new development fees Monday, June 10, 2024, including a 105% increase in the cost of water facilities. (GV Wire Composite/David Rodriguez)

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By Aug. 12, the cost homebuilders must pay to supply water to new homes in Clovis will increase by 105% — unless builders can convince the Clovis City Council before then that a lower hike will cover the costs.

And, because development fees go into the price of new residential homes, the coming hike — regardless of the size — will affect consumers, too.

Clovis staff said at Monday’s council meeting that an analysis of what the city charges to install water pipes, tanks, and wells is far below the actual cost. These inadequate fees are depleting city resources and jeopardizing future development, they said.

“If we continue to not collect adequate development fees, there’s going to be a point within the next five years where we’re not going to support future development due to either a lack of sewer or water infrastructure,” a city staff member said during the meeting.

But developers question how large the fee hikes need to be. The city of Clovis automatically adds a 48% contingency fee to project costs in case something goes wrong.

In addition, Granville Homes CEO Darius Assemi — who is also publisher of GV Wire — gave one example of the city paying far more for pipes than developers pay.

The council decided that delaying the fee hike by 60 days would give builders and city staff enough time to sort out these discrepancies.

At the same time, Fresno City Councilmember Mike Karbassi thanked Clovis for the vote, saying it makes building in Fresno more attractive.

“I, for one, am thrilled, it just goes to show that Fresno is the place to build, and I think it sends a message to developers,” Karbassi said. “We know that we’re in the middle of a housing crisis and the last thing we need to do is to raise costs on developer fees that get passed on to consumers.”

The cost to build major water facilities in Clovis has drastically increased, according to city estimates. (City of Clovis)

City Missed Out on $4.5 Million by Not Raising Fees Earlier: Staff

The increase comes after city contracted with two agencies to review the cost of water projects versus what the city charges developers. In 2022, staff recommended raising fees 59%. Council authorized a 15% increase and directed staff to come up with an alternative way to pay for water.

The next year, staff said a 62% increase was needed. Councilmembers, however, did not raise fees.

During Monday’s meeting, staff said the city would have collected $4.5 million more over the past two years if the council had approved fee increases as suggested.

Because of the fee shortfall, the city has had to resort to financing projects, which can double the cost, according to the staff report.

Other fee increases averaged 7.7%. Staff said those increases followed a different metric called Construction Cost Index. Councilmember Vong Mouanoutoua said increases in water charges showed how unreliable the CCI method is. He asked if the city should be doing in-depth studies on all city impact fees.

“If we had the time to do cost comparisons every year, it’s more accurate,” Mouanoutoua said.

Builders Dispute Charges, Question City Math

Builders said they have a lot of questions about how staff came to the 105% figure.

Building Industry Association of Fresno Madera Counties President Darren Rose said the increase would have a massive impact on builders.

“Frankly, looking at these numbers coming on board, my daughters will not be able to afford a home,” Rose said. He said the constant fee increases make it hard for builders to plan for the future in an industry where project timelines take years.

Rose said the average fee for a home in Clovis is $60,666 versus in Fresno where a fee is $42,993.

Assemi brought up the cost for a 16-inch pipe, which he could obtain for $155 a foot versus the city’s $295 figure.

In private enterprise, the typical contingency rate on projects is 7% —and that is rarely triggered unless it is for infill projects, Assemi said.

Arakel Arisian, real estate consultant and urban planner with the Arisian Group, said the $705 million figure the city projected for water facility costs to justify the 105% increase also included hundreds of millions in financing costs, administrative fees, and contingency costs.

For those reasons, the building industry asked for more time to review costs and come up with a figure that stakeholders could agree on.

“We well understand that fees need to be adjusted, one of the main points of this effort was to validate the top line number, the $700 million, is that the right number?” Arisian said. “There’s a lot of detail and assumptions that go into that number and so that’s the part where we need a little bit more time.”

A home under construction in Clovis, CA (File photo)

Mouanoutoua: ‘How Much of Your Profit Margin Are You Willing to Lower?’

Mouanoutoua said even though the math was only given to builders on May 21, the principles behind the fee increase have been around since mid-2023 when the city held public forums on fee increases. He said the 60 days should be enough to find out if the costs are accurate.

Given the concern about housing prices voiced by all parties, he wanted to see builders give up profits if the city gives in on development fees.

“If we do lower, how much of your profit margin are you willing to lower as well?” Mouanoutoua said.

Assemi also asked what Clovis was doing to secure state grant dollars for infrastructure projects. In 2023, Fresno Mayor Jerry Dyer secured $250 million from the state for downtown Fresno sewer, water, and other major projects.

Clovis Mayor Lynne Ashbeck expressed doubt about being able to secure grant funding.

The city earlier in the meeting also authorized other fundraising methods including special tax districts allowing builders to secure bonds to pay for infrastructure. Ashbeck also mentioned allowing developers to build projects.

Builders, Staff Have Until Aug. 5 Meeting to Change the Plan

The new fees will go into effect Aug. 12. Builders have until the Aug. 5 Clovis City Council meeting to make their case and adjust fees. If a change needs to be made, the 60-day clock restarts.

In that time, the city will continue to lose funds, staff said.

“Every day, week, month you push this out means you’re going to be losing out on additional monies,” one staff member said.

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Edward Smith,
Multimedia Journalist
Edward Smith began reporting for GV Wire in May 2023. His reporting career began at Fresno City College, graduating with an associate degree in journalism. After leaving school he spent the next six years with The Business Journal, doing research for the publication as well as covering the restaurant industry. Soon after, he took on real estate and agriculture beats, winning multiple awards at the local, state and national level. You can contact Edward at 559-440-8372 or at Edward.Smith@gvwire.com.

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