Ventura eliminates development fee said to stifle small business growth

The Ventura City Council voted unanimously last week to get rid of a development fee it said was stifling small business growth and crimping affordable-housing projects.

The fee, implemented in August 2016, was meant to help pay the cost of developing water supplies for new commercial and housing projects, according to an agenda report written by two council members.

The fee has made it harder for small businesses to open and for affordable housing to be built, said Councilmember Doug Halter, who authored the report with Councilmember Mike Johnson.

Revenue from the so-called net-zero fee goes to the city’s water department to help develop new sources. Those include the city's massive VenturaWaterPure program, which will treat wastewater to drinkable standards, and a pipeline project to connect Ventura with state water supplies through the Calleguas Municipal Water District.

When the fee was approved in 2016, the city’s supplies were being used at or near full capacity, the council members' report said. Demand since then, even with anticipated growth, has dropped dramatically due to citywide conservation, they wrote in their argument proposing changes to the 2016 ordinance.

Although demand increased slightly in 2020 and 2021, they said, it isn't likely to return to pre-drought levels.

Halter said residents have done a phenomenal job at conserving water over the last two decades. As water demands have eased, there is less of a need to “unfairly charge” new businesses and future homeowners, he said, adding there is more economic benefit to building new homes and businesses.

Councilmember Mike Johnson said Tuesday the fee, which varies depending on the project, creates a burden on new businesses and affordable-housing developers.

“It decides which projects will be built and which won’t,” he said.

In 2017, he said, a 24 Hour Fitness set to open in Pacific View mall was presented with a $300,000 fee. The fee nearly killed the deal until the Macerich-owned mall paid it, he said.

Halter and Johnson's report includes other examples. A tamale kitchen that moved to the city from Oxnard was hit with a surprise bill of tens of thousands of dollars. A $92,000 net-zero fee was slapped on a small restaurant/arcade tenant at Ventura Harbor Village.

Affordable-housing projects, they noted, have less cushion to absorb the added fee than high-end developments.

The city still charges for new water service, meters and upgrades, Halter and Johnson wrote, which cover the actual cost of putting in new infrastructure. What's more, new developments are required to build to the highest water-efficient standards.

The original ordinance estimated the fee would generate $1.7 million a year, Halter said. Over the last eight years, the city has received about $6 million from it, he said.

The majority of the speakers at Tuesday's meeting, including many businesses owners, supported the repeal.

But Robert Eranio, a city water commissioner, wanted the commission to study the issue first.

Eranio said the last two years have been very wet, which could contribute to a lack of demand. A lawsuit over groundwater rights in the Oxnard basin that could result in less groundwater for the city should be studied, he said.

The council's vote to end the net-zero fee took effect immediately. Other aspects of the original ordinance will remain in place.

Wes Woods II covers West County for the Ventura County Star. Reach him at wesley.woodsii@vcstar.com, 805-437-0262 or @JournoWes.