Deborah Martohue: Impact-Fee Explosion

Deborah Martohue: Impact-Fee Explosion

Remember when there was no such thing as an impact fee? Relatively speaking, it was not that long ago.

Remember the good 'ol days when government's responsibility was to provide public services and facilities for the greater good, paid for by our taxes?

Then came impact fees of a few hundred dollars, and then a few thousand dollars. Less than a decade ago, impact fees were supplemental revenue to help offset the cost of infrastructure.

Brace yourself: In 2004, when Osceola County increased its school impact fee from $3,000 to $10,000, there was outrage and litigation. Now Lake County has proposed a school impact fee of $17,500, about one-third attributed to borrowing costs and with zero credits.

Citrus County recently claimed a 900% increase in student station costs in just over five years to justify its fee increase. Sarasota County adopted a transportation impact fee that jumped from $2,900 to $8,100 for a single-family home in March. More than 75% of that increase resulted from including state road and road reconstruction costs.

To put it bluntly, Florida has an impact-fee crisis. On average, impact fees in Florida are some of the highest in the nation with no cap in sight.

How did these fees jump so dramatically in the last two to five years?

Borrowing costs included

No longer just supplemental revenue, county commissions have implemented a politically popular view that impact fees should be the only revenue to build, replace and reconstruct infrastructure. Couple that policy change with new consultant-driven policies to include costs that were never included before, such as borrowing, reconstruction and state road costs. The result is an impact fee explosion. New homeowners aren't here yet to vote, or maybe the result would be a different.

You've heard the mantra: New growth must pay for itself. Do you really think student station costs rose 900% in five years? Did your construction costs rise 900%? Or is it more likely that upgrading 50- to 60-year-old infrastructure by calling it reconstruction and recouping costs for impacts not ever paid for by existing residents or exempt government property might be buried in these new fees?

Should impact fees include borrowing costs? The industry isn't borrowing, it's paying the full cost of its impact upfront. When you include borrowing costs and reduce or eliminate credits that ignore future tax revenue paid by new development, that is tantamount to taxing new development twice for the same impact.

Impact fees that include reconstruction costs mean that new development is paying for both the costs of new capacity and reconstructing the existing capacity, even if that includes improved levels of service. Is that equitable?

New trend: zero credits

Another new trend is to include state road construction costs - those used to be paid for by federal and/or state funding. Elected officials blame Tallahassee and justify these costs, claiming the state won't prioritize local road projects unless there are local matching funds. Local officials won't raise property taxes, Tallahassee won't ante up its fair share, so impact fees are the new source. Adding to the crisis are decreasing credits and, more often lately, zero credits.

Counties considering these dramatic impact-fee increases are told by their consultants, it's OK, everyone else is doing it; and so the impact fees grow higher and spread from county to county as each county sets the new standard for the next county to beat.

What about the impacts caused by "newcomers" who buy existing homes that don't pay any impact fees? Do they not use the roads, schools, parks, water, sewer, police and fire? In Florida, impact fees have become somewhat of a penalty for buying a new home instead of an existing home. Why? The construction of a new home generates jobs and revenue that contribute to our economy.

All of this has created enormous tensions between Florida's second-largest industry - construction/development - and local governments. Both sides should step back and regroup.

Like it or not, the building industry and local governments are in an arranged marriage of necessity. Government needs the construction industry to keep the economy growing, or at least afloat with revenue (permits, impact fees, increased property taxes, sales tax) and jobs. With less construction revenue, there likely will be fewer services and/or higher property taxes. The building industry, meanwhile, is beholden to local government for zoning and permit approvals.

To be sure, this is one tough relationship, and as in most marriages, when the balance of power is uneven and one partner has full control of the other's checkbook, it turns ugly. It becomes time for crisis counseling and serious negotiation. As in all marriages, negotiation, setting boundaries and communication (including listening) is crucial, or the marriage fails.

Communicate at every stage

The industry needs to communicate with local governments at every stage of the process, not just two weeks before the impact-fee hearing. The industry needs to present analysis that supports its position and provide options, not just complaints.

Local government needs to do a better job of listening to fee payers, not just constituents when it comes to decisions for the greater long-term good. Figuring out how to share infrastructure costs equitably is a good start. Acceptance of the idea that people who live in homes built before impact fees also use "new" infrastructure should be considered.

Our elected officials should stay clear of supporting their decisions on basis that "everyone else is doing it."

Business interests must pick their battles, build coalitions and set boundaries. Industry is a partner is this marriage. It would be helpful if the construction/development industry built an industry coalition and with local governments lobbied Tallahassee for fairness and to bring the money that rightfully belongs in local coffers back home.

The industry also needs to engage on the back end when the impact-fee money is being spent. If government is paying above-market costs for construction, find out why. Overspending will create a funding deficit and local government will look at increasing impact fees, not taxes, to replenish their coffers, blaming unforeseen high costs.

Every marriage has its costs. Divorce is a higher price to pay.

Deborah Martohue, founder and managing partner of the Martohue Land Use Law Group P.A. in St. Petersburg, practices throughout Central and South Florida. She can be reached at 727-321-5263, or [email protected].

HOW IMPACT FEES COMPARE BY GULF COAST COUNTIES

Single-Family home (3-BR, 2,000 square feet, valued at $200,000). Fees from 3/23/2006 to 7/12/2006. Some fees have increased more than once in the past year.

Total Fee

Charlotte $8,380

Collier $30,273

Hillsborough $5,624

Lee $9,498

Manatee $11,420

Pasco $12,989

Pinellas $2,275

Sarasota $10,276