Point-Counterpoint: Molina and Hunter Debate Downtown TRIP Fee

Molina: Between the forces that advocate growth at any cost and the voices that call for no growth at any cost lies a middle ground. That middle ground says that growth can and should occur, but only if planned to coincide with new infrastructure to mitigate the negative impacts of that development.

Growth in Los Angeles has historically occurred with too little consideration for the increasingly overburdened infrastructure that must support it. Development has especially outpaced the ability of our regional transportation system to handle the traffic it produced.

The interim control ordinance now before the city council is the very first step in a planning process that must comprehensively examine the transportation needs of the greater downtown. It gives developers fair notice that they too will be responsible for their share in the final solutions, solutions which will result from thorough study of the problem, and input from all interested parties.

Hunter: Before attempting to answer any of The Planning Report’s questions about the proposed Downtown TRIP fee, it is important to place this proposed legislation on its political context.

The question before the City’s Task Force is to determine the form an interim control ordinance (ICO) should take. The City Council has firmly signaled its intention to adopt this ICO. The concerns that the Central City Association and others have expressed publicly about the ordinance have to do with crafting the best and most equitable ICO. What the business community wants is a policy that will create needed regional transportation improvements. What we do not want is the imposition of a fee that disrupts the orderly growth and development of the heart of the City, yet does not generate sufficient revenue to accomplish the goals promised.

The Workshop held by the Department of Transportation on August 13 demonstrated that the ordinance requires considerable refinement before it is ready for passage by the Council. The questions posed by The Planning Report raise a number of the issues that have concerned a wide variety of groups, both public and private.

What, if any, justification is there for choosing a TRIP fee over other financing mechanisms for transportation improvements?

Hunter: The rush to adopt this ICO has not allowed the Department of Transportation an opportunity to analyze adequately the appropriateness of this and other financing techniques for the regional transportation it seeks to fund. In particular, CCA has suggested that creation of Mello-Roos benefit assessment districts may be a far more appropriate financing mechanism for some of the major improvements that transportation agencies such as Caltrans and DoT have suggested. A benefit assessment district can raise funds from all the beneficiaries of an improvement—existing property owners as well as new development.

The City clearly recognizes the need for alternate funding mechanisms for transportation. The City and the County Transportation Commission have placed a ½ cent sales tax initiative on the ballot in November to pay for completion of the Metro Rail system and to fund operating costs for the RTD.

Regional transportation systems are very expensive. A development impact fee to “solve” the regional transportation problems of Downtown could never do more than provide a minor portion of the cost of the improvements we need. If the fee were to be set at a sufficiently high rate to have a major impact, it would so penalize development that construction and growth would plunge to a halt, solving nothing. Thus, DoT needs to provide the Council and the Downtown community with an analysis of how a TRIP fee fits into an overall transportation funding package now. Otherwise, adoption of the ICO falsely provides a promise of solutions to a key problem in our City.

Molina: Instituting TRIP fees for downtown and other congested areas of our City is a choice that is intended to complement, not substitute for, other mechanisms to fund needed transportation improvements. TRIP fees are, at a minimum, a means to mitigate the regional traffic impacts caused by additional development to an already saturated transportation system. But used in conjunction with other regional and local funding sources, they can help yield greater efficiencies, and more long-range solutions to this city’s serious transportation woes.

Massive federal assistance for local transportation is history. State transit projects have also dwindled. The passage of Propositions 108, 111, and 116 will provide some relief to our long neglected highway and rail systems, but the list of unfunded projects that will compete for these dollars is longer than the line to get in the City Hall garage on a busy Council day. Benefit assessment districts may be attractive, but they are unfortunately difficult to accomplish.

No single source of funding can potentially fund the necessary transportation improvements to accommodate regional growth and additional development. The unpleasant reality is that in order to foster growth in a city that has often reached, and sometimes exceeded, the capacity of its physical infrastructure, new developments must mitigate their impacts. TRIP fees are an appropriate mechanism to accomplish that goal.

Does an adequate nexus exist for this fee under the Nollan decision?

Molina: Absolutely. There is no better example to meet the test posed by Nollan and related court decisions.

Fees used to build the necessary infrastructure for a community and mitigate the negative impacts of development have long been upheld in courts. The linkage between new development and transportation improvements is clear. Preventing increased traffic congestion advances a significant public purpose. TRIP fees in no way approximate the opportunistic leveraging by government addressed in the Nollan decision.

Hunter: (See answer to next question.)

What should be the dollar amount of a downtown TRIP fee?

Hunter: Both the question of a nexus and the appropriate dollar amount should be answered during the nexus study phase. First, the types of improvements to be made must be studied. Then, integration of a TRIP fee into the mix of financing mechanisms can lead to a fee amount. However, until these studies are completed, it is premature to speculate on the existence of a nexus and the amount of the fee.

The Downtown Strategic Plan will hopefully form the analytical core of the types of improvements to be included in any transportation specific plan that a TRIP fee would fund. This Plan is already underway with a conclusion scheduled for next year. Thus, if a Downtown ICO is adopted, the lag between adoption of the ICO and the completion of the studies and plans may not be as great as it has been in other areas.

Molina: The appropriate TRIP fee for downtown will result from study of the projected impacts of future development and the cost of the transportation measures to mitigate them. It should not be the product of political whim.

The Central City West Specific Plan provides the best estimate at this time. After extensive study, that plan recommended a $16,500 fee per trip generated into that area.

Should the ordinance treat all trips equally, or should it exempt certain uses that promote one of the City’s other policy goals?

Molina: The Department of Transportation recommended the exemption (in the Notice Ordinance) of some uses that advance other policy goals. I am inclined to agree that such uses as housing, non-profit entities, and child care should be exempted. These not only achieve a public purpose necessary for the successful development of downtown, they are uses that historically have required a subsidy to exist downtown, and could not operate with the additional burden of a TRIP fee. Just as important, they generally are not the generators of significant traffic, and in the case of housing, may actually reduce traffic congestion.

I believe that promoting another policy goal is a necessary, but insufficient reason to grant an exemption. Virtually every use promotes at least one City policy goal. Before any exemption is granted, we must consider the implication that exemption has on traffic congestion, and whether the exemption is necessary to achieve the policy goal.

Hunter: A Downtown TRIP fee cannot stand apart from all other city policies. For example, the city has created enterprise zones which need a variety of government incentives to attract jobs to low income areas of the city. New developments should be exempted from the ICO in these areas. Likewise, redevelopment areas exist because the city has identified parts of the City as blighted and declining. Providing a damper on the restoration of these areas does not seem to conform to the city’s own notion of what should happen in these areas.

In addition, we fear that by not exempting industrial uses (as the housing linkage fee ordinance does), the city may be contributing to the destruction of the blue-collar labor force in this city. The marginal economics of the garment manufacturing and flower distribution sectors will most likely be adversely affected by a TRIP fee. This also holds true for the fish and toy wholesaling industries in the eastern part of Downtown.

Finally, it has been city policy to promote hotel development in Downtown to support the Convention Center expansion. The city has recognized that hotel projects may not be viable without economic encouragement. The massive amount of public funding invested in the Convention Center expansion may well be wasted if the downtown lacks the hotel space necessary to lure convention business.

It should be noted that all the examples listed here create large numbers of entry level jobs and steady work for low income citizens of the city. Before adoption of an ICO, the city needs to consider exemptions of these categories of projects seriously.

Given the apparently imminent downturn in the local economy, is this the fee that will finally kill the “golden goose” of downtown development?

Hunter: In fact, this may be the fee that breaks the camel’s back. While there is still a great deal of construction taking place in downtown Los Angeles, increasing vacancies and reports of abandoned projects and difficult financing suggest that the marketplace has slowed. As the economy slows, each additional exaction pushes a project closer to the point of infeasibility.

Molina: The golden goose will suffocate in traffic congestion if government and business do not join together to build the necessary infrastructure to support growth. The best way to promote responsible development, and reap its benefits, is to look our urban problems squarely in the face and plan to overcome them.

Traffic on the Harbor Freeway exceeds capacity for several hours each day. By 1995, traffic on that thoroughfare will be unacceptable all day long, and that is without factoring in another square foot of development that has not already been approved. Existing State and local funding is inadequate to provide the infrastructure needed to support additional development.