Builders in the South Valley pleaded with Hanford city leaders to forgo inflation adjustments this year on development impact fees, saying the move would harm potential homebuyers in the economic downturn. The argument, however, did little to convince the City Council Tuesday to reconsider its move.

Despite concerns from the building industry, the Hanford City Council went ahead with the across-the-board 5.71-percent hike on fees intended to raise money for infrastructure needs caused by growth. The vote was 3-0, with council members Joaquin Gonzales and Dave Thomas absent.

The adjustment comes on top of major increases that are scheduled to kick in this year for some of the most expensive fees.

Hanford leaders' action Tuesday was a stark contrast from that of their counterparts in Lemoore. Considering the same topic on the same night just 10 miles away, the Lemoore City Council voted to spread out this year's 6.8 percent inflation over the next two years in response to builders' request.

A developer building a single-family home in Hanford will pay $11,476. That's up from $10,084 now. Inflation accounts for $620.

Bob Keenan, president/CEO of the Home Builders Association of Tulare/Kings Counties, says that's significant enough to affect potential buyers.

"I just think they missed an opportunity to help local people to be able to afford a house," Keenan said. "There's somewhere between 70-120 people who will not be able to buy a house they're qualified for because the price will go up about $600."

Builders front the cost, but the customers end up paying the impact fees.

Decision-makers defended their action, saying it is important to keep up with the cost of inflation now so the city would not ever have to subsidize builders in the future.

"If we didn't do the rate increase this year, instead of charging 100 percent, the city of Hanford would have to use taxpayers' dollars to subsidize home builders," said Vice Mayor Dan Chin. "We decided several years ago we're not going to subsidize builders in the city of Hanford."

Not so long ago, Hanford was giving builders and commercial developers a 30 percent break on their fees.

But the council shifted its policy in 2007, taking steps toward a 100 percent cost recovery. Officials began charging full fees for parks and recreation, fire, police, transportation and refuse, although they took a phase-in approach for big-ticket items -- water, sewer and storm water fees -- to give builders time to adjust. The three fees are now due to increase to 100 percent from what's currently 85 percent.

Builders agreed to that arrangement.

City officials also built in an annual inflation adjustment at the time. The builders agreed to that arrangement, too.

But Keenan says the market conditions are drastically different today and the city should take that into account. He also said the engineering cost index the city uses does not reflect actual market conditions.

"Two and a half years ago, they were building infrastructure for a certain percentage of population increase each year. That's fallen off. So they need to be reasonable," Keenan said. "The sewer plant is not going to need to be expanded at the same ratio, the same capacity and the same timeline as it was planned for. Same with streets. Same with parks and recreation."

Chin expressed concerns about the economic slowdown, but he disagreed with Keenan's opinion that the $620 increase is enough to price out some buyers.

"It is true that times have taken a turn for the worse, but I don't think $600 in the cost of a $200,000 home is going to keep anyone from purchasing the home," Chin said.

The reporter can be reached at 583-2429.

(March 19, 2009)