Posts Tagged ‘Impact Fees’

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Impact Fees Part Two, A Better Way

January 21, 2010

Yesterday’s blog pointed to some of the bigger issues surrounding impact fees and their use.  Rather than simply complain, it is better to present a solution and return them to their original purpose.  The fees need to be a force to improve a community rather than  funding irresponsible practices.

Impact fees are one example of government taking the path of least resistance rather than a longer view of what is best for the future.  Unfortunately, it is too common an occurrence.  Local ordinances are often hard to comply with or are punitive in nature.  In the case of impact fees, rather than encourage responsible construction, they only extract money from process, in effect, a fine for building in the community.

What impact fees fail to take into account is the true impact of new construction.  In most cases, state legislation dictates the areas fees apply but local communities, with state approval, determine the formula for collection.  This prevents local communities the ability to address local issues.  A better method is for the state to list the areas where fees cannot be applied, and then approve the local plan.

In doing this, the process is under local control.  Of course, this assumes the process is open and only in the hands of officials voters elect.  To address specific issues (trash collection, waste treatment, etc.) the process needs to remain flexible.  For example, a community wants environmentally friendly new construction.  To do this, understanding the true cost of the building, from construction until the day it is demolished and disposed of, is calculated.  Questions like, how much of the building material can be recycled are taken into account.  The initial fee assumes none of the structure is recycled, it is reduced by the percentage that is.  If the cost of the whole building going to a landfill is $20,000, that is the impact fee.  If ninety-nine percent of the material is recyclable, the fee is reduced ninety-nine percent to $200.  This idea imposes the fee on irresponsible construction, from a community standpoint, and rewards construction that complies with the wishes of the community to recycle.

It is a complex way to impose fees, to say the least.  The current draconian method is much easier to administrate, but does little to serve the greater good.  After all, serving the greater good is the reason we accept government in the first place.  New construction should bear the cost of its impact on the community, but only its true cost.  Impact fees used to subsidize budgets or cover shortfalls only push problems down the road.  We need ordinances that encourage the type of building we want rather than one, across the board, fee that only siphons money from the public.  The budget simply cannot be balanced on the back of new construction, at some point, the use of the impact fee band-aid will fail.

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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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