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Impact Fees, Damned Impact Fees!

January 20, 2010

Anyone dealing with new construction most likely knows the term “impact fee.”   On the surface, they are easy to understand but like most governmental issues, over time the waters become murky.  You need to be a lawyer with doctorates in political science, economics, and mathematics to understand the formulas and wording of these ordinances.

Impact fees first appeared in the 1970s.  Traditionally, they are collected to cover added wear and tear new construction has in the service related areas of local government, roads, parks, and libraries for example.  In that respect, they rather make sense, you pay for the impact you have on the community.  A disturbing trend, related to impact fees, is to cover projected budget gaps for improvement, repair, and upkeep of services.  This practice increases fees exponentially.  Fees vary depending of your location; the national average is around $8,000 per single family home.  That figure is open to debate as an exact number is next to impossible to nail down.

Even with the high cost of the fee, it seems only to affect the individual or business involved in a particular new construction.  That is not true, it affects every member of the community.  Local governments have the greatest influence in our daily lives, the more local, the more influence.  Think of it this way, we interact least with services at the federal level and most with services at the local level.  Allowing local governments a revenue stream outside of sales and property tax we support or oppose by voting, allows for financially irresponsible spending practices that ultimately pass to all tax payers when growth slows and fees are not collected.  Our current economic downturn is a prime example, with limited new construction, where are the counted on fees going to come from.

For the most part, local governments follow state regulations regarding impact fees.  Rather than control the process, it builds in a layer of complexity that prevents understanding of why money is collected and how it is used.  The state claims credit for controlling the practice and the local government claims they are simply following state guidelines.  The only effective controls seem to be keeping the citizens confused and misdirected.

We need to demand accountability from local government.  Impact fees and their uses live in a dark place, away from the light of the voting public.  They allow elected officials and various department heads money for projects that otherwise would not receive funding.  This commits all of us to a debt we are obligated to pay if (when) the revenue stream dries up.  When that happens, property and sales tax will increase.  It is past time to reign in local government and remove from them processes where they are not accountable to voters.

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2 comments

  1. If it’s on property already owned, you’re SOL. but if it’s property you’re purchasing, you can stipulate impact, lic, building permits, fees etc in the purchase contract to be completed by the seller before title transfer.
    No, this doesn’t solve the problem; the thugs still have you by the bawlz. What can you do? Leave!


    • You are right, of course, about the ability to transfer the requirement to the seller and it is just pushing the problem. As for a solution, we simply need to change the purpose of impact fees. That is the subject of today’s blog. I will be posting it soon.



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