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LA Passing Up Tens of Millions For Infrastructure and Affordable Housing

Los Angeles has got a lot of expensive infrastructure issues that need attention and money, like the dangerous sidewalks and lumpy roads and aging water pipes. But a new audit from the LA City Controller's office shows that the city is "failing to exercise its power" to charge developer impact fees that could be helping pay to fix things, says a release from the controller's office. California law lets cities charge developers fees that can go toward all kinds of public use, including "fire and police protection, traffic mitigation, and the construction of libraries, parks, public art, child care facilities, and affordable housing." In the 2013-2014 fiscal year, LA had $5.3 billion in permitted construction, but collected only $5 million in impact fees. Portland, OR, by comparison, had just $1.5 billion in permitted construction but managed to collect $31 million in the same period.

In a letter to Mayor Eric Garcetti and city officials introducing the audit, the controller says that LA's method of collecting and spending the fees has so far been "haphazard" and that "no central entity has been responsible for monitoring the fees." The amount of money collected by other cities suggested to auditors that LA could be missing out on anywhere "between $15 million to $91 million a year" by not uniformly charging the fees.

When LA does charge developers, auditors discovered that the city is just sitting on the cash in some cases. For their report, auditors looked at a three-year time frame that ended with the 2013-2014 fiscal year. They found 17 funds that had been set up to receive these fees from developers. The total balance for all the funds at the end of the three-year period was $68 million; of that, they found $54 million "sitting in eight special funds whose balances had grown or remained stable over three years," meaning it just wasn't being used. The auditors are also concerned that not spending the money could put some of the funds in a position where they may have to be refunded.

It's a shame that LA's sleeping on collecting these fees from residential, commercial, and industrial developers, because they can be used toward all kinds of projects that benefit the public, like infrastructure improvements and even affordable housing. (The mayor suggested that developer fees be used for creating new affordable housing with developer fees just a few weeks ago.)

The controller's report recommended that a developmental impact fee program be created so that fees can be charged fairly and reliably, and also that one department should take on the responsibility of making sure those funds are used in a timely manner.
· Audit of Development Impact Fees [LA City Controller]
· Seven Scary Facts About Los Angeles's Aging Infrastructure [Curbed LA]
· Los Angeles Hoping to Use Its Building Boom to Fund More Affordable Housing [Curbed LA]