During the first few years of the 21st century, real estate prices soared. Economic growth boomed, and developers eyed McCall and the surrounding Valley County for investment. “People say McCall has everything,” former McCall mayor and city councillor Bert Kulesza was quoted as saying during the months leading up to his election. “People want to come here, developers want to come here. We can set standards and rates of development.”
Years later, after the financial collapse, that’s all largely a fond memory. But the land use policies that McCall officials implemented at the time to take advantage of that high demand are still in place—choking many of the small business owners who are left. Today, Valley County faces a 12.4 percent unemployment rate, more than four points higher than the state average and the fifth-highest county jobless rate in Idaho. Except for a few temporary blips upward, home sales in McCall have fallen precipitously in both value and number since early 2007.
Today, business owners who hope to invest in their property say that they find themselves facing an array of costs to build city infrastructure, subject to the whims of a planning process that is far from transparent. Requesting a conditional use permit to remodel an existing downtown building to better meet future business needs triggers a design review, not only of the building itself, but of the surrounding infrastructure. Soon, owners find themselves paying tens of thousands of dollars for engineering and construction costs to install sidewalks, curbs, gutters and lighting—all of which becomes McCall city property, without compensation.
“If you were to get a license for a dog in Ada County, I think it would probably be pretty egregious if they said, ‘Well, we’ll go ahead and license your dog, but you need to build a dog park for us,’” said Victor Villegas, an attorney with a Boise law firm, Evans Keane LLP. “I know it’s sort of extreme, but that’s kind of what they’ve been doing to all the developers and applicants up there.”
The Idaho Development Impact Fee Act allows local governments to exact payments for the increased public land use that new development is expected to bring. However, it appears to Villegas that the extensive nature of infrastructure requirements in McCall may not be legal. The U.S. Supreme Court decided in 1994 that Tigard, Ore., could not require a business owner to build a public bicycle path without reimbursement, because it would otherwise constitute an uncompensated taking of property, forbidden by the Fifth Amendment to the U.S. Constitution.
In order to skirt that restriction, Villegas said, McCall planning officials have tried to claim that such infrastructure requirements were not mandatory at all. If local business owners don’t file an appeal with district court within 28 days, the city may claim that their acquiescence to city demands constituted voluntary participation. This, despite the fact that the city never gave the impression that their requirements were voluntary.
“We, as citizens, have to have some level of confidence in our government, in that what they’re telling us to do is what we have to do,” said Villegas.
Facing slumping investment prospects, last year, officials from McCall, Valley County and the cities of Donnelly and Cascade organized a series of meetings to determine a plan for area economic growth. Todd Hatfield, who owns Hatfield Log Homes and is a former candidate for state controller, said that these meetings immediately began to skew toward vested government interests rather than drawing local expertise from the small business community.
“The first meeting was attended by five county employees, one Donnelly city employee, five McCall city employees, the three facilitators, and three citizens from the private sector in Cascade,” Hatfield said. “This is the first act of deception, stacking the committee with government employees that do not have a grasp on what it takes to create a job.” He said that these officials are focused on attracting tourists, rather than on improving the business climate itself. But those who have become mired in the ever-mounting costs stimpulated by McCall city planners say that the best way to encourage new investment is to stop making the process so complex, opaque and expensive.
“We have tax incentives to attract people, and then we have disincentives,” said Robert Banks, an attorney with Evans Keane LLP and former vice president of real estate for Albertsons. “There are exceptions to every rule, but those are the things you’re dealing with. It’s more important to get rid of the disincentives than it is to have the incentives.”
Note: Mitch Coffman contributed to the content of this story.