Moratorium redux

Moratorium redux

Government Watch by Jean Gruss | Editor/Lee-Collier

Collier County commissioners threatened to impose a moratorium on new construction. Builders are worried the anti-growth trend has spread north to Lee County and beyond just as the economy falters.

Brenda Talbert was glancing through the minutes of an upcoming meeting of the Collier County Commission when she spotted the "M" word.

Buried in the agenda, the commission's staff recommended Collier County adopt a moratorium on all new developments until it figures out how to pay for roads and other infrastructure. Talbert, who represents the building industry in Collier County, sprang to action and the effort failed.

But the battle hasn't ended.

The Collier commission's preferred solution is now to raise taxes on builders. It raised so-called "impact-fee" taxes on builders by as much as 30% June 26 and that increase will take effect Jan. 1. Already, Collier has the highest taxes on new construction in the state.

Meanwhile, the commissioners plan to reconsider imposing a moratorium on all new construction later this month. Builders worry even the talk of a moratorium will prompt businesses to reconsider locating to Collier and it may even chase growing companies away because they won't be able to expand.

"You can put any fee you want on me, but if I don't build you'll never see it," says Andy D'Jamoos, vice president with Naples-based development company D'Jamoos Group.

Michelle Harrison, vice president of sales for Gates Capital Group, part of the Gates construction and development firm in Naples, says talk of a moratorium is meant to sideline builders in the greater statewide debate over property taxes. "It's going to backfire on them," warns Harrison, who also is president of the builders' association this year.

Collier's anti-growth sentiment is creeping up the coast. The Lee County commission tripled taxes on new construction starting Feb. 1. Now, it's considering adding another tax on builders to pay for affordable housing.

"I can't think of a single business which could triple its rates and get away with it," says Mark Stevens, president of Stevens Construction in Fort Myers. He says he has lost two projects totaling $7 million because of the tripling of taxes on new construction.

All of this comes as the construction economy slows, aggravating an already shaky market. But their pleas are falling on deaf ears. "I met with the commissioners one-on-one and they just didn't get it," says Michael Leannah, president of Eagle Concrete Systems in Fort Myers.

Collier's building moratorium

Despite efforts to reach out to Collier County commissioners, Collier's builders were taken by surprise by the recommendation of a moratorium on the agenda.

The commission voted 3-2 recently to approve a moratorium, just short of the 4-1 vote required to pass it. Commissioners Tom Henning and Jim Coletta voted against the moratorium. Neither commissioner could be reached.

Builders say the move was just an effort to gain leverage in the larger debate over property taxes. "It's just a political ploy," Harrison says. Instead of cutting the county's budget as a result of property tax reform, commissioners are slapping additional taxes on builders.

What's more, commissioners planned to raise taxes on new construction despite the fact that Collier has the highest such tax rates in the state. To an average new homeowner in Collier, these added taxes add $277 a month on a 30-year mortgage, builders say.

Builders argue they're tapped out and many construction projects simply won't happen because of rising taxes combined with an economic downturn. "They're biting the hand that feeds them," Harrison says.

Revenues from building industry and related trades account for 50% of Collier's economy, Harrison says. "They're shooting themselves in the foot."

A Lee manifesto

For some time, builders perceived Lee County to be more business-friendly than Collier. But that started to change with the recent election of new commissioners, which some say established a new anti-growth tone.

One of the new commissioners, Frank Mann, wrote a guest column in the local Fort Myers News-Press in May lamenting the county's growth spurt and local government's inability to keep up with it. It's now referred to as the "Mann Manifesto."

Mann agrees with the previous commission that voted to triple taxes on new construction, citing the mantra that "growth doesn't pay for itself." He says the county's economic decline is a result of rampant overbuilding and says impact fees have nothing to do with the slowdown.

But builders say the effect of the tax hike is only just now being felt. "They're not going to see the impact of that until October or November," says Leannah, Eagle Concrete's president.

Already, taxable sales are down along the Gulf Coast as the downturn spreads to other businesses, from restaurants to furniture stores. The construction industry, along with tourism and health care, is a pillar of Southwest Florida's economy.

In January, Leannah says builders applied for 26 permits in Lee County for commercial buildings valued over $250,000. Taxes on new construction tripled on Feb. 1 and builders applied for just 20 commercial-building permits in the subsequent three months. Many of the 20 buildings are small restaurants and clubhouses. "That's really telling you there's no activity going on," Leannah says.

The Lee County Department of Community Development publishes reports on permits pulled but that number mostly reflects permit applications made before the impact-fee increase. The department does not publish the number of permit applications, but Joan LaGuardia, the department's communications manager, says January was the biggest month ever for permit applications in the county's history.

Anecdotally, construction companies say they're losing projects because of a combination of impact fees, rising property taxes and insurance, as well as stubbornly high land costs. For example, taxes on new medical-office space rose from $8,000 to nearly $25,000 per 1,000 square feet in February. One thousand square feet is enough room for four office workers.

Other firms fret over the additional taxes. "For us, I don't think it's killed any projects yet," says Steve Richards, vice president of the Fort Myers office of Owen-Ames-Kimball Company, a large commercial builder. "From what I'm hearing it's affected other contractors," Richards adds.

Many builders rushed projects to beat the Feb. 1 deadline for impact fees. "We had a few owners who definitely requested we beat the deadline," Richards says. The rest weren't so lucky: "There will be no choice but to pass it along to owners and clients."

Lee County Commissioner Tammy Hall says she welcomes the economic slowdown so that the county can catch up with road-building projects in time for the next boom. "The true hard-core business people will survive this downturn the way they survived the last downturn," she says.

Hall rejects any argument from builders that impact fees will wreck projects, especially if the population of Lee County keeps growing. "It's not an unfair fee and it's based on very sound methodology," she says. "I could put a moratorium on building right now," she adds.

Hall says the state won't provide funding for roads but demands counties come up with a viable plan to pay for them. A sales tax is political suicide, so commissioners have targeted builders and developers instead.

Another looming tax is the one the county is considering adding onto new construction to pay for affordable housing. According to the county's consultants, that could amount to as much as $36,000 per 1,000 square feet.

This time, the real estate industry plans to more aggressively fight any move to add another tax. The Real Estate Investment Society in Fort Myers, a group of influential real estate investors, builders, lawyers and bankers, is leading the fight to keep it off the books. But the society's participants are reluctant to discuss the specifics of their actions, preferring to lobby commissioners privately.

So far, commissioners such as Hall and Mann say they haven't seen evidence that fees should be imposed for affordable housing as they are with roads. What's more, they say the housing downturn has put homeownership and rentals within the grasp of many residents.

Other battles looming

One big battle on the horizon is the fight over the 90,000 acres in eastern Lee County set aside for water resources and conservation. A meeting of interested parties is scheduled for July 25 in Estero to begin discussions on a plan for that area.

Further ahead, there's the statewide property tax reform and "Hometown Democracy" referendums early next year. The Hometown Democracy movement is an effort to require major land-use changes be voted on by referendum rather than by county commissioners.

Builders say the skirmishes over "impact-fee" taxes are just a prelude to bigger battles ahead. The Collier County Commission's threat of a moratorium is the kind of posturing builders are likely to see more of in the months ahead, says Harrison.

REVIEW SUMMARY

Industry. Construction

Trend. Rising taxes on builders

Key. County governments are raising taxes again on builders even as the economy slows.