Fresno attorney Eddie Fanucchi encountered more than he bargained for in his quest to convert a family vineyard into nearly 500 homes. A tax dispute between the City of Fresno and County of Fresno has caused delays. Photo by Edward Smith

Eddie Fanucchi doesn’t call himself a developer.

But when the Fresno lawyer wanted to take on the task of transforming his family’s farmland into housing, he found himself caught in the middle of inner-agency strife between the City of Fresno and the County of Fresno.

Multiple delays from the Fresno City Council to hear and approve proposals for the project pushed development back more than a year after a memorandum of understanding (MOU) between those agencies expired.

And now, the director of the Fresno Local Agency Formation Commission (LAFCO), which mediates between the two government authorities, says there at least 200 acres of development and five different projects delayed because the two governments can’t come to an agreement.

 

Long time coming

The Fanucchis had wanted to develop their farmland going back as far as 2005. The housing crisis hampered that and it wasn’t until 2018 that work to develop the land resumed in earnest.

Fanucchi contracted with Steele & Associates, Precision Civil Engineering and JLB Traffic Engineering, Inc. to draw plans and conduct studies on the property.

They determined they could construct 488 homes on 4,000-5,000 square foot lots — sized for first-time homebuyers, says Fanucchi.

Developing on land outside city limits — where almost all new housing goes — takes cooperation between city and county governments. The property on the west side of Hayes Avenue between Ashlan and Shields avenues lies within the City’s sphere of influence but outside its jurisdiction, meaning homes would require city services such as trash pickup and road maintenance. Infrastructure would also need to be connected. This means that land would have to be annexed by the City in order to receive services. Single-family home developments rarely pay for themselves in terms of property tax revenue and the cost of services required, said David Fey, executive director of Fresno LAFCO.

 

Slicing the pie

Rules outlined by Prop. 13 limit property tax to 1% of sale price, and that has to be divided amongst different government agencies, including the City and the County. Counties provide their own services including law enforcement, social services and more. But when the proposal finally made it before the Fresno City Council in August 2021, several councilmembers said the usual split of 38% to the city and 62% to the county was not enough to cover the costs.

In this circumstance, an MOU would establish tax-sharing agreements and development standards for projects outside city limits. City and County officials could turn to the document in disagreements about how maps should look and property taxes divided.

But in the case for Fanucchi, it meant spending a year doing his own tax revenue analysis and making the project revenue neutral.

An official with Esmeralda Soria’s office — whose district the development falls in — said delays were because of objections by Fanucchi to requirements set out by city standards.

“The councilmember was strong,” said Terry Cox, chief of staff for Soria. “As in all projects, improvements need to be borne by the developer.”

Cox said Soria asks the same of all developers.

The developer did come around and agree to all improvements, Cox added.

 

Mixed signals

Delays to get the project done before the MOU expired began with disagreements about traffic studies — more specifically, the number of traffic signals.

Fanucchi was directed to conduct traffic studies on his development, typical for large projects, he said. He contracted with Jose Benavides of JLB Traffic Engineering in Fresno to conduct the studies. Benavides analyzed 25 intersections and concluded that no more than two or three signals would be required, even with the project fully built out as well as other nearby projects. The Fresno Planning Commission weighed in, saying it would require six traffic signals as a condition for approval.

Creating intersections is no simple feat, Benavides said.

Streets have to be widened, which can often require a city to exercise eminent domain to purchase property. Construction can take as long as a year-and-a-half, including plan review. And home building can only be done concurrently with traffic light installation up to a limit of 100 homes before work has to stop. Installation of all but one traffic signal will cost more than $1 million, said Benavides. Developers can be reimbursed for installation of traffic signals, but only if they fulfill build-out conditions set by the city.

Fanucchi said he didn’t object because of the cost, but rather he objected because the traffic study they told him to conduct said he needed only two.

The City did their own study after he paid $50,000 to do the one they told him to do.

The decision to install six was appealed and by May 2020, the Planning Commission reduced the number to four. Fanucchi agreed to the four to “move the project forward.”

 

Doing the right thing

Fanucchi also exceeded requirements for green space by half an acre. He said he wanted to create a neighborhood the community could be proud of, adding safe access for schools and coordinating with other developers for a walking space that goes all the way to Herndon Avenue.

“It was upsetting to me because I felt like I was being portrayed as a developer that was trying to get away with not putting in infrastructure and not doing what was right for the community,” Fanucchi said.

By July they needed to get on the council’s consent calendar for approval before the MOU expired. Twice, Fanucchi’s team was ready to present and twice they were pushed to later dates. By Aug. 27, 2020, they knew they would not make it in time before the MOU would expire.

It wouldn’t be until Aug. 19, 2021, — 27 months after initial submissions — that the Fresno City Council voted on the proposal.

“This guy has done everything he’s been asked to do and is caught up in a tax-sharing agreement with the County,” said Fresno City Councilman Garry Bredefeld in the council meeting.

This isn’t the first time an MOU has expired, said Fey with LAFCO.

“It’s the City that needs an MOU to grow its boundaries,” said Fey. “A county can wait out a city when it comes to negotiations establishing tax-sharing agreements and development standards.”

 

Stuck in the middle

There are five projects Fey said aren’t moving forward because revenue sharing needs to be as a standalone agreement, much like the Fanucchi development. Projects include the First Responder’s campus, proposed by the State Center Community College District and another housing development, said Fey.

Negotiations on an MOU are done by the City Manager’s office and the recent departure of former City Manager Tommy Esqueda has delayed the process.

“Although the negotiations to enter into a new tax-sharing MOU with the City have not been successful, we remain hopeful that an MOU agreement will be reached,” said Sonja Dosti, public information officer with the County of Fresno.

When asked about why the MOU was allowed to expire, City of Fresno Communications Director Sontaya Rose said Fresno City Council “wanted a better deal.”

Rose could not elaborate further.

Fresno City Council President Nelson Esparza echoed that sentiment, saying the cost of city services outpaces the tax revenue under the previous agreement.

During the Aug. 19 meeting, councilmember Miguel Arias said “it would take far more than 38% to provide maintenance and infrastructure.”

Now, escrow has closed on the property, which is being divided into two developments, one by Century Communities and the other by Lennar Homes.

He hopes the vineyards on his land will begin to be taken out by March.

And despite the obstacles to get his project approved, Fanucchi says it is still possible to get things done, even if it takes a lot of work.