IMPACT FEES THE BASICS AND EXAMPLES FROM TWO EASTERN MONTANA COMMUNITIES

Transcription

1 IMPACT FEES THE BASICS AND EXAMPLES FROM TWO EASTERN MONTANA COMMUNITIES Montana Association of Planners Conference September 15, 2014 Dave DeGrandpre, AICP

2 Impact Fee Basics What Are Impact Fees? KEY CONCEPTS Impact fees are charges imposed on development as part of the development approval process. Impact fees are one-time payments to help finance new or expanded public facilities. Impact fees help to mitigate the impacts (costs) of new development. Impact fees charge for the proportional impact of new development on specific public facilities.

3 Impact Fee Basics What Are Impact Fees? KEY CONCEPTS The fee must be roughly proportionate to the demand created by the new users for specific public improvements. Impact fees are typically paid when a building permit or certificate of occupancy is issued. Impact fees are not considered a tax: they are a land use regulation (an exercise of police power to protect public health, safety and welfare). Impact fees are authorized by , MCA.

4 Impact Fee Basics What Can Impact Fees Be Used For? Land or capital improvements Examples: A water tower, sewer lagoon, park Buildings or equipment with a life of 10 years or more Examples: A fire hall, an excavator Planning, easements, design, construction and administration of an impact fee program Improvements at the scale of the whole community or a large service area (system improvements)

5 Impact Fee Basics What Can t Impact Fees Be Used For? Improvements intended to benefit a development project (project improvements) Example: A water line that must be enlarged to serve a subdivision. Personnel Operation and Maintenance Equipment with a life of less than 10 years Examples: Police car, supplies To correct existing deficiencies Example: A city s sewer system that does not meet DEQ standards.

6 Impact Fee Basics How Are the Fees Determined? A Service Area Report is written for each type of impact fee (e.g., water, sewer, fire, streets ) Describes existing conditions, including deficiencies Establishes level-of-service standards Examples: 5 acres of parkland per 500 residents; A water system serving the city that meets MDEQ requirements Forecasts needs for future service Identifies capital improvements needed to meet future demands at the desired level of service

7 Impact Fee Basics How Are the Fees Determined? Service Area Report Identifies costs needed for O&M vs. costs needed to serve new development Establishes a timeline for fee collection and expenditure Establishes methodology for how the fees are determined Must take into account user fees, debt service payments, grants and other available sources of funding the capital improvements. Must be based on the estimated or actual cost of acquiring, constructing, or upgrading the facility. The fee must be no more than a proportionate share of the costs to provide new capacity.

8 Impact Fee Basics What is the Process for Adopting Impact Fees? Governing body appoints an Impact Fee Advisory Committee (at least one representative of the development community and one CPA) Impact Fee Advisory Committee reviews and makes recommendation Advertised public hearing Town must make information available to the public Council must pass a Resolution or Ordinance

9 Impact Fee Basics Once Impact Fees Are Adopted, Can They Change? Impact Fees must be reviewed and updated every two years to ensure: The demand and cost assumptions are still valid. The fees do not exceed the actual cost of constructing improvements. The money collected in each impact fee fund has been or is expected to be spent on improvements for which they were paid. The improvements will benefit those developments for which fees were paid. The money collected is not being used to correct deficiencies or for general operation and maintenance.

10 Impact Fee Basics If a person thinks there is an error in their charge, what can they do? Ask the Public Works Department to recalculate the charge. If not satisfied, appeal to Governing Body. Governing Body can grant refunds and credits Governing Body makes final decision.

11 Pros & Cons PROS Impact fees provide up-front money for capital improvements. Impact fees can provide a lot of money for capital improvements. Up-front money means less debt is necessary, which keeps costs lower for everyone. Impact fees are a fair way to divide the costs of infrastructure the people who use the facilities pay for the facilities.

12 Pros & Cons CONS Administering impact fees takes time and effort not just up front but over time. It takes attention to detail in terms of making sure the money is collected and spent correctly. Impact fees can be politically difficult: Complaints from developers saying the fees will stifle growth. Nobody likes new fees. Impact fees typically do not pay all costs necessary for improvements existing taxpayers often pay too.

13 Examples In Montana, impact fees are charged for: Sewer, water and storm water improvements, parks and trails, street improvements, street maintenance equipment, an emergency services center, a new city hall. City Whitefish Kalispell Polson Belgrade Bozeman Sidney Bainville Base Water Base Wastewater Other Approx. Totals $ 2,314 $ 1,864 City hall, EMS, admin. $ 6,443 $ 2,567 $ 5,757 $ 8,324 $ 204 $ 306 Parks, fire, admin. $ 1,453* $ 5,128 $ 2,708 $ 7,836 $ 4,729 $ 4,565 Transportation, fire/ems $ 12,160 $ 2,000 $ 3,000 Parks, street equipment $ 5,578 $ 0 $ 7,030 Admin. $ 7,381

14 Examples from Eastern Montana Examples

15 City of Sidney, Montana Examples

16 Examples City of Sidney, Montana Largest city in northeastern Montana (Richland County) Economy based on farming, ranching and oil production Commercial center of the Montana Bakken Served by a major rail line, 1 hour by car from Williston, ND Previous oil boom/bust cycles (most recently the 1980s) Population declined by 1,000 residents (-17.4%) from Today s population of approximately 6,500 (+36% in last 10 yrs.)

17 Examples The next boom ? HUGE CHALLENGES for the City of Sidney Housing Sewer ($23 million, in part to bring system up to current DEQ standards) Water ($7.5 million) Parks ($2.4 million) Streets, sidewalks and trails Police Garbage facilities Personnel retention

18 Examples City of Sidney, Montana In Land Solutions researched and developed service area reports for sewer, water, parks and street equipment improvements. City Council chose to adopt the following impact fees: Sewer Water Parks Street equipment TOTAL $2,000 per EDU (50% of maximum allowed by law) $3,000 per EDU (50% of max.) $475per EDU (50% of max., residential only) $103 per EDU (maximum allowed by law) $5,578 per EDU + 5% administrative fee No impact fees for streets, police or garbage collection RESULTS: APPROXIMATELY $760,000 COLLECTED AS OF 8/15/14

19 Examples Town of Bainville, MT ½ hour west of Williston Very small town, few amenities Sewer system designed for 283 people A 2013 sewer expansion added capacity for 575 people This expansion covered only ½ of requested permits A second expansion was designed for an additional 400 people ($1.7 million) In this case, 100% of the project costs could be paid for by impact fees because the expansions were made necessary by growth.

20 Examples Town of Bainville, MT In 2013 the Town Council adopted impact fees to pay for the wastewater expansion. $7, % administration fee per EDU (100% of the maximum allowable). Growth has been slow since fee adoption: Only $118,000 collected so far. CAUSATION OR CORRELATION? More hotels, apartments and other housing in Williston area. Only so many people want to live in Bainville, MT. Some say the fees have slowed growth.

21 Take Home Messages Impact fees are a good way to help pay for some of the costs of growth They can be used to help pay for significant, system wide improvements They can only be used for certain, specific improvements as authorized by law They take time, effort and care to administer They can be politically difficult They are one piece of the growth-funding puzzle