ECCFPD Set for Showdown with City of Oakley Over Developmental Practices Detrimental to Fire District

Operating revenue funds the District’s ongoing expenses, such as salaries for firefighters and maintenance for apparatuses. The City stated in its response to the Finding #10 of Grand Jury Report 1706 that it often conditions approval of new development on annexation into CFDs to support other services, but not for fire protection. The City Council further committed to considering whether requiring new development to join a districtwide CFD would be an effective means for generating operating revenue. (Letter from Bryan Montgomery, Oakley City Manager to Jim Mellander, Foreperson, Contra Costa County Civil Grand Jury “Responses to Contra Costa County Grand Jury Report No. 1706, entitled ‘Funding the East Contra Costa Fire Protection District.’” (August 9, 2017).) While we appreciate the City’s formation of Community Facilities Districts 2004-1 and 2018-1, we understand that participation in fire protection CFDs is voluntary, and has been limited to date. The District strongly supports requiring participation in a districtwide fire protection CFD, or another equivalent means of providing fire protection operating funding, as a condition of approval for all new development. We are encouraged by the efforts of the City Attorney in collaborating with our legal counsel to explore ways the City can require broader CFD participation, and we look forward to seeing the results.

• The District requests that the City update its development practices to account for impacts on fire protection, and demands that the City fulfill its obligations under the Station 55 Agreement
• The entitlement process for the new Contra Costa Logistics Center exemplifies how the City’s failure to collaborate with District staff can lead to development that compound the District’s funding deficits

As discussed above, new development that increases District responsibilities – without sufficient contributions to mitigate these impacts – hurts all residents of the District.

As you also know, Oakley recently announced that it will be welcoming a major online retail fulfillment center that will be housed at the new Contra Costa Logistics Center (Logistics Center). Unfortunately, the City failed to ensure that the Logistics Center will provide sufficient resources to mitigate its impacts on the District. Furthermore, the City failed to respond to the District’s concerns at any point in the environmental review process of this new development. The initial study for the Logistics Center incorrectly asserts that payment of impact fees would adequately mitigate the impacts of the project on the District. On September 26, 2019, the District submitted a comment on the draft environmental impact report for the Logistics Center informing the City that the current impact fees did not cover the full capital impacts of the project and would not account for operating costs. (Letter from Steven Aubert to Joshua McMurray “ECCFPD Comment on Oakley Logistics Center Project” (September 26, 2019).)1 The District requested that the City correct this statement and require that the project (1) pay impact fees at the rate applicable at the time the City issues building permits, and (2) join a CFD to provide operating funds for fire protection. The City did not respond to the District’s comment in its final environmental impact report for the project in violation of California Environmental Quality Act. (See Public Resources Code 21091(d); 14 Cal Code Regs §§15088(a).)

The City also stymied the District’s efforts to make its requests known to the Logistics Center developer during the entitlement process. Despite the District’s repeated requests over the span of three months, City staff refused to involve District staff in the negotiation of the development agreement, or to give the District’s Fire Chief or Fire Marshal contact information for the developer, until after development agreement negotiations were complete. Instead of requiring payment of impact fees at the effective rate at the time of building permit, the “Development Agreement Between the City of Oakley and NP Oakley, LLC Regarding Oakley Logistics Center 6000 Bridgehead Road” (Logistics Center DA), adopted by the City on December 19, 2019, froze fire facility impact fees at the rates in effect on December 17, 2019.2(Logistics Center DA, Section 8.1.) The City negotiated these terms in full knowledge that the District was working on a study to update fire facility impact fees throughout its service area.

This failure to consult with the District has resulted in a development agreement that may create large deficits in both capital and operating funding for fire protection services. The District’s Development Impact Fee Study indicates that the project’s share of the District’s capital costs at buildout is about $1.2 million. Under the Logistics Center DA, the project will only pay about $340,000 in impact fees, a shortfall of about $860,000. Additionally, the Logistics Center DA contained no provision for operating funding from the Logistics Center. While the City’s “Oakley Logistics Center Fiscal and Economic Impact Analysis” estimated that the best case scenario is that the Logistics Center will generate $420,000 in property tax revenue annually at buildout, it did not even attempt to calculate the costs to the District of providing service, nor did the City consult with the District at all to assess the potential costs of service. In fact, the District’s Fiscal Impact Analysis indicates that even the property tax revenue from the Logistics Center may not cover the District’s operating costs to provide fire protection services, further exacerbating the District’s annual operating deficits.

This lack of communication and regard for the District’s needs is endemic in the City’s development processes. We request that the City review its development processes to ensure that new development is providing sufficient funding for fire protection, as required by the City’sGeneral Plan, and that the City develop protocols for better involving District staff in the entitlement process.

2. The City has failed to comply with its obligations under the Station 55 Agreement, degrading the District’s ability to provide service.

(a)The City’s continuation of its nonresidential development impact fee incentive program and freezing fire impact fees for the Logistics Center violate the Station 55 Agreement.

The Station 55 Agreement prohibits the City from taking any action that has the effect of waiving payments of any fire facility impact fees for any project without consulting the District. (See Station 55 Agreement, Section 5(B).) Freezing fire facility impact fees effectively waives the increases with respect to the Logistics Center. Two of the Logistics Center’s five buildings have already paid their impact fees.3 Assuming that the City adopts impact fees at the levels proposed by the District, the difference between the fees set in the Logistics Center DA and the District’s proposed fees for the final three buildings would be several hundred thousand dollars. We note that while the Logistics Center DA waived impact fees that would support the District, it included a $850,000 in one-time “community benefit contribution” that the City may “utilize in a manner it believes best to serve and benefit its residents.” (See Logistics Center DA, Section 8.3.) Essentially, the Logistics Center DA waived impact fees that would have gone to the District, and granted the City unrestricted funds for its own use.

The Station 55 Agreement also expressly prohibits the City from taking “any action that has the effect of (i) repealing, suspending, or reducing its Fire Facilities Impact Fee below the amount of such fee as established in Resolution No. 09-01, as adjusted for Inflation; [or] (ii) continuing any existing suspension or reduction thereof” without consulting with the District and making findings regard
ing the effects of its actions on fire protection in the City. (See Station 55 Agreement, Section 5(B).) The City breached this provision on February 11, 2020 by adopting “A Resolution of the City Council of the City of Oakley Continuing the City’s Non-Residential Development Fee Incentive Program,” which included an eighteen-month continuation of the City’s suspension of its fire facility impact fees for nonresidential development. The City did not consult with the District prior to enacting this resolution, nor did the City make any findings regarding the impacts of this action on fire protection service within the City. We request that the City repeal this resolution as soon as possible.

Waiving and refusing to increase fees causes damage to the District. First, it increases the District’s capital deficits, stretching already insufficient resources across greater call volumes rather than equipping the District to service new residents and developments. Second, it delays repayment of the funds the District forwarded to the City under the Station 55 Agreement, locking up the District’s unrestricted reserves in a capital project that the District cannot even afford to staff, and substantially constraining the District’s financial flexibility. For example, these reserves could be used to improve services, like covering up-staffing costs for new personnel.

The District has been requesting information for weeks to assess its potential damages as a result of these breaches. While the City has recently provided most of the information the District requested, some remains outstanding. We request that the City provide the remaining information, as detailed below, to allow the District to determine the extent of its damages, and compensate the District for fees waived in violation of the Station 55 Agreement.

While we have yet to receive a formal offer, we understand that City staff may propose to provide the District with certain real property to offset the effects of the continuation of the nonresidential development fee incentive program and make the District whole for losses incurred due to breaches of the Station 55 Agreement. The District is open to considering such an arrangement, and looks forward to hearing more about this potential solution.

(b) The City’s failure to transfer impact fee revenue and documents to the District violates the Station 55 Agreement.

The City agreed to begin providing the District with a monthly reimbursement and accounting of all fees received commencing 60 days after final completion of the construction of Station 55. (See Station 55 Agreement, Section 3(A).) Station 55 achieved final completion on or about April 16, 2020. We understand that the City has collected over $300,000 in impact fee revenue since then, though the District has yet to receive any payments from the City or an accounting of the fees collected. Additionally, within 30 days after final completion of Station 55, the City agreed to transfer to the District title to Station 55; ownership of all plans, drawings, and specifications; certain rights under the Design-Build Agreement for Station 55; and evidence demonstrating that prior to construction, someone exercising discretionary authority approved the design for Station 55, or that the design for Station 55 was prepared in conformity with standards previously so approved. (See Station 55 Agreement, Section 1(D), 1(E), 1(F).) The District has yet to receive any of these documents. We request that the City fulfill these outstanding commitments under the Station 55 Agreement.

3. The City’s continued delays in updating its impact fees degrades the District’s ability to provide fire protection services.

The District is disappointed in the City’s continued delays in updating its impact fees. District staff worked with staff from the City of Oakley, the City of Brentwood, and Contra Costa County for over a year to produce a study that more accurately reflects the District’s capital needs and new development’s fair share contributions according to growth projections provided by all three land use authorities. Adoption of a uniform districtwide fee will also resolve inequities resulting from development in different areas of the District paying different amounts, and promote a more regional approach to fire protection service consistent with the formation of the District.

The District is concerned by comments at the August 11, 2020 City Council meeting suggesting the City may continue to discount impact fees for nonresidential development. While the District understands and supports the City’s efforts to promote development, new development that does not generate sufficient capital or operating revenue to allow the District to protect that development puts the entire region at greater risk. When the city waives fees funding operating or capital costs for city services, such as police or streets, the City backfills these funds from its general fund. The City has not made any similar considerations when waiving payment from revenue streams to fund the District.

We also understand that City staff is concerned that updating the fees may compound the City’s liability for its improper waiver of fees under the Logistics Center DA. Refusing or delaying the fee update would perpetuate the effects of a past wrong, further exacerbate the District’s capital funding deficits, and hamper the Districts efforts to provide service to the City (and the region) at levels consistent with national standards. We request the City adopt the updated impact fees – as detailed in the District’s Development Impact Fee Study – to prevent further deterioration of the Districts services.

Conclusion

We request that the City cease and desist its detrimental development practices and violations of the Station 55 Agreement, and take the following actions:

We believe these actions will allow the District to better provide fire protection services to new development in the City of Oakley and throughout its service area. I appreciate your prompt attention to this matter. Please feel free to contact me if you would like to discuss this matter further.

Sincerely,

Brian J. Oftedal
President, Board of Directors East Contra Costa Fire Protection District

Also on behalf of:
Stephen Smith, Vice President
Adam Langro, Director
Car
rie Nash, Director
Joe Young, Director