Major Fresno developer, thousands of future homes exempted from special police, fire tax
A prolific Fresno developer won a significant concession from the City Council this week, and that relief from a special property tax assessment for public safety also extends to potentially thousands of future homeowners on the fringes of the city.
Darius Assemi of Granville Homes plans to build 71 new homes near Shields and Fowler avenues, at the east-central edge of Fresno. As a condition of approval, the city’s planning department, with backing from the Fresno Planning Commission, had imposed a special public-safety property tax of $164 per year onto the property tax bill of each of the new homes in the eight-acre subdivision.
Assemi appealed the tax, arguing to the City Council last week that it amounted to double-taxation of future residents for police and fire services without any added benefit or enhanced protection. On Thursday, the council approved two separate measures that had the effect of exempting Assemi’s project – and others – from the special assessment.
Some council members including Miguel Arias are concerned that eliminating the special assessment, or removing some properties from its effects, would create a situation in which homeowners throughout much of the city would be partially subsidizing police and fire services in newer developments.
Fresno created the special tax assessment, known as Community Facilities District 18, late last year to cover a shortfall in property tax revenue for police and fire services for new developments in certain areas of Fresno. City officials blame the shortfall on the expiration of a property tax-sharing agreement in August 2020 with Fresno County.
Under the old agreement, property taxes in annexed areas were divided evenly between the city and the county. But after the agreement lapsed, the county’s share rose to 62%, while the city’s share shrank to 38%.
That smaller share, city leaders argue, isn’t enough to cover the cost of providing police and fire protection to developments in growth areas at Fresno’s fringes, particularly as the city hires more police officers and firefighters and provides pay raises for those personnel.
To make up the difference, the City Council formed the special taxing district to be imposed when landowners or developers submit plans to subdivide or develop their land. Fresno City Manager Georgeanne White said those assessments are currently calculated at $164 per year for a single-family home or $112 per year for each residential unit in multi-family projects.
But the legislation that created CFD 18 was imprecise on what properties would fall under its reach, Councilmember Nelson Esparza said Thursday, leaving it open to the interpretation of city staff and allowing the tax to be applied retroactively to properties on the city’s edges that had been annexed into Fresno years before the expiration of the city-county tax-sharing agreement.
“When we leave gaps or cracks in the legislation we create, those gaps default to the administration’s decision-making,” Esparza said. “If we don’t detail it, it essentially goes back to the bureaucrats for a decision – and I mean bureaucrats in the most endearing way.”
Esparza, joined by Mayor Jerry Dyer’s administration, proposed to clarify that CFD 18 would now be applied only to properties that came into the city limits through annexation after August 2020, when the tax-sharing agreement lapsed. That measure, approved by a bare 4-3 council majority, not only relieves Assemi’s property – which was annexed in 2007 – from the tax, but also 15 other proposed subidivision maps that are going through the city’s planning and approval process, said Scott Mozier.
Mozier and White estimated that under Fresno’s current zoning and land-use plans, properties affected by the measure have a development capacity of about 10,000 future single-family homes and about 2,000 units of multi-family residential projects such as apartment. The long-range effects could amount to a maximum of about $1.8 million less per year in property taxes for the city, White and Mozier added.
Who makes up the difference?
If property taxes on new developments do fall short of covering the city’s costs, White said, the city’s General Fund – the pot of money from which most of Fresno’s day-to-day bills are paid – would have to make up the difference unless grants could be found to cover the losses.
Fresno’s planning director, Jennifer Clark, told the council that there have only been two annexations into the city since August 2020 amounting to about 160 lots of future single-family residential development. Those areas would remain subject to the additional tax assessment.
Esparza was joined by Councilmembers Mike Karbassi, Luiz Chavez and Tyler Maxwell in voting to set the Aug. 29, 2020, date. But three of their colleagues – Garry Bredefeld, Annalisa Perea and Miguel Arias – opposed the plan, each for different reasons.
All of the council members said they would like to see fruitful negotiations with Fresno County for a new and more equitable tax-sharing agreement rather than impose an additional tax. Bredefeld said he originally opposed the formation of CFD 18 because he believes it removes any incentives for the county to come to the negotiating table on a new agreement.
Perea expressed concern over the future financial impact of removing the affected properties from the special tax assessment. “This interpretation makes sense in terms of adding clarity in how to apply CFD 18,” she said. “What I don’t agree with is taking it out of the General Fund to subsidize some folks. …”
“I think it’s a rushed decision that I don’t think we’re fully comprehending and taking full responsibility for,” Perea added. “I think there’s going to be a lot of unintended consequences.”
Arias noted that while Assemi was asking for relief amounting to about $11,000 per year in future added property tax assessments, Esparza’s proposal would potentially cost the city much more. “I don’t know how we got here where the cure is worse than the disease,” he said. “We are committing future councils to shortfalls.”
After narrowly approving Esparza’s measure, the council voted unanimously to grant Assemi’s appeal of the assessment condition.
Will there be a shortfall?
“Folks may want to frame this as ‘lost’ revenue,” Esparza told The Fresno Bee following the votes. “But it’s revenue that’s never materialized for us and has yet to materialize for us.”
He added that he believes the eventual impact of any revenue shortfall will be less than the maximum forecast offered by White and Mozier. “That is a maximum estimate,” Esparza said. “We’ve never been that lucky to ever get the maximum potential out of any of these deals.”
Assemi said his project will include 71 single family homes that will be owned by Granville Homes and be made available to renters, most likely at lease rates of $2,000 to $2,200 per month, depending on what happens with construction costs over the next year to 18 months. He told The Fresno Bee on Thursday evening that he expects those homes to reach the market in 2025.
Assemi and the Fresno-Madera Building Industry Association argue that the rising value of new homes – an average of about $513,000 in the Fresno market – mean that even with the diminished 38% share that the city receives in property taxes, there won’t even be a shortfall.
“Our math and the BIA’s math shows that new properties pay for themselves,” Assemi told The Bee, because “new homes are substantially more expensive than older homes” and generate more property taxes than older homes. In a letter to the city, the Building Industry Association “shows new neighborhoods not only pay for themselves but also generate additional revenue.”
Assemi’s vacant land is surrounded on three sides by existing residential subdivisions, including some already developed by Granville Homes.
This story was originally published October 6, 2023 at 2:59 PM.
