Impact Fee BasicsImpact Fee Basics

Deborah Galardi, Galardi Consulting, LLC

Rick Giardina, Rick Giardina & Assoc.

Tyson Smith, Freilich, Leitner & Carlisle

20032003

Impact Fee Impact Fee RoundtableRoundtableOctober 16, 2003October 16, 2003

Presentation Outline

Trends Legal Environment Methodological Practices

– Fee Structure– Fee Schedule– Offsets/Credits– Exemptions & Waivers

Case Studies

IMPACT FEE TRENDSIMPACT FEE TRENDS

More States Adopting Enabling LegislationMore Local Communities Using Impact Fees Impact Fees Being Used for Greater Variety

of FacilitiesGreater Linkage Between Impact Fees/CIP/

Comprehensive Plans2nd and 3rd Phase of Program to increase

fees

WHY CONSIDER IMPACT FEES?WHY CONSIDER IMPACT FEES?

Significant Actual/Projected Growth RateNeed for Costly Public Facilities Due to New

GrowthNeed for Equity Between Existing Residents

and New GrowthLimited Alternative Revenue SourcesMaintenance of Quality of Life, as Defined

by Public Facilities and Services

Legal EnvironmentLegal Environment

General Legal ConsiderationsGeneral Legal Considerations

Implemented as a Regulatory technique, NOT a financing mechanism

Structured based on “impact” on facilities, NOT, e.g., on building value, frontage

Can NOT be used on existing or to increase LOS to existing development

Should be based on rational planning process and adopted CIP/capital budget

AuthorityAuthority

Home Rule Power– Ohio– Florida

Special Acts– North Carolina– Tennessee

Statutes– Georgia– California– South Carolina– Texas

Limitations on AuthorityLimitations on Authority

Reasonableness/NexusStatutory Limitations

3 Tests of Constitutionality3 Tests of Constitutionality

Specifically & Uniquely Attributable– Pioneer Trust & Sav. Bank v. Mt. Prospect, 22 Ill.2d 375,

176 N.E.2d 799 (1961) Rationally-Related

– Associated Home Builders v. Walnut Creek, 4 Cal. 3d 633, 94 Cal.Rptr. 630, 484 P.2d 606 (1971)

– Government Code sections 66001 thru 66005 Dual Rational Nexus Test

– Nollan and Dolan– Hollywood, Inc. v. Broward Co., 431 So.2d 606 (Fla. 4th

DCA 1983)

Dual Rational Nexus TestDual Rational Nexus Test

The local government must demonstrate a reasonable connection, or rational nexus, between:

the need for additional capital facilities and the growth in population generated by the subdivision; and

the expenditures of the funds collected and the benefits accruing to the subdivision

– Hollywood, Inc. v. Broward County, 431 So.2d 606 (Fla. 4th DCA 1983)

– HBA v. W. Des Moines, 644 N.W. 2d 339 (Iowa 2002)

Fee v. TaxFee v. Tax

Taxes – Primarily revenue-raising– Authority must be explicit– Proportionality not required

Impact Fees – Land use regulations that mitigates off-site impacts

– POLICE POWER– Authority may be implied– Rough Proportionality is required

“Planning is Politics …”

Dr. Ernest Bartley, PhD

Professor of Urban and Regional Planning

University of Florida

Methodological PracticesMethodological Practices

Improvements Required to Service New Development

Improvements Required to ServiceExisting Development (Deficiencies)

Excess Capacityof Existing Facilities(Recoupment)

Maintenance and Repairs

Costs Fundable by Impact FeesCosts Fundable by Impact Fees

No!

No!

Yes!

Yes!

Fee StructureFee Structure

System Buy-In (Recoupment) Approach

Improvements (CIP) Approach

} Combined Approach

Consumption (Level of Service/Demand) Approach

Fee Structure ConsiderationsFee Structure Considerations

What is standard in the industry/allowable by law? How is system planned/built?

– Large blocks of capacity– Incrementally, as growth occurs

Where will capacity for growth come from?– Existing available capacity (recoupment)– Future capacity (improvement/CIP based)– Combination

Fee Structure Considerations Fee Structure Considerations (Continued)(Continued)

What data is available to support the methodology?– Existing inventory/assets (recoupment and

consumption approaches)– Long-term capital improvement plan (improvement

approach)

Fee Structures Other IssuesFee Structures Other Issues

System Buy-In (Recoupment) Approach– Selection of system valuation approach

Improvements (CIP) Approach– Allocation of improvement costs between growth and

existing system users Combined Approach

– Explicit calculation of capacity needed for growth Consumption

– How does planned LOS compare to existing?

Fee ScheduleFee Schedule

Scaling fees for sizes of developments

Fees by development typeSystem-wide fees vs. geographically

differentiated fees

Impact Fee Schedule

$_ $_ $_

Fee Schedule ConsiderationsFee Schedule Considerations

Defensibility/Legal Requirements– Standard and uniform application – Fees relate to potential use/benefit

Administrative feasibility– Fee assessed before use occurs– Ongoing information requirements

Offsets/CreditsOffsets/Credits

Past payments by newly developed properties

Future payments by newly developed properties

Grants Contributions

Exemptions and WaiversExemptions and Waivers

Exemptions – Uses to which the impact fee ordinance does not apply, based on a finding of No Impact

Waivers – Uses otherwise subject to the impact fee ordinance, but for which payment is not required, in order to advance Planning objectives

ExemptionsExemptions

No Impact on Facilities Senior Housing on Schools Commercial Uses on Schools Nonresidential Uses on Parks Suburban Residential Uses on:

Neighborhood/Urban Parks Central Sewer

Jurisdictional

WaiversWaivers

Statute-driven Schools Governmental uses

Smart Growth-driven Affordable Housing Infill/Compact Development Economic Development

Jurisdiction/Authority-driven

ADMINISTRATIVE ISSUES

Earmarking of funds Expenditure of funds Offsets Credits Refunds Appeals/Administrative Process/Protests Administrative Guidelines Annual Audit and Report

Practice TipsPractice Tips

Identify Policy Objectives EarlyMethodology Report should incorporate

& cross-reference Policy ObjectivesOrdinance should adopt Methodology

ReportForms and Administration

Case StudiesCase Studies

Intergovernmental Consistency

Preserving the “essential nexus.”

St. Johns Co. v. Northeast Florida Builders Ass’n, Inc.

“Needs” Prong met “Benefit” Prong not met Fee v. Tax Free Public Schools Uniform School System

583 So.2d 635 (Fla. 1991)

but see, Cherokee Co. v. Greater Atlanta HBA, 566 S.E. 2d 470 (June 13, 2002)

Fee Structure

Accounting for capacity.

Oregon Home Builders Association vs. City of Newberg

Double charging for capacity by charging both:– Buy-in fee (based on existing system TOTAL value

and capacity)– Improvement fee

Methodology revised to:– Explicitly calculate available capacity in system

components– Spread available capacity and new costs over

projected growth

Fee Schedule

Estimating claims on capacity.

Krupp v. Breckenridge Sanitation District (Colorado)

1999 case before Colorado Supreme Court Key Issues before the Court

– District policy that growth pays for growth– Controversial single-family equivalent assessment

schedule for Plant Investment Fee (PIF)– Krupp et al. argued unconstitutional taking, i.e.,

that Nollan and Dolan applies

The Colorado Supreme Court Decision

The District’s PIF is a “service fee” The setting of service fees is a legislative

function that involves many questions of judgment and discretion and the court will not set aside the methodology chosen unless it is inherently unsound

Service fees are valid if they are reasonably related to the overall cost of the services provided

The Nollan and Dolan test does not apply to service fees like the District’s PIF.

Credits/Offsets

A question of reasonableness.

Valley Children’s Hosp. v. Madera Co., 2002 WL 31484784 (Cal. App. 5 Dist.)

“approved roads” entitled to road impact fee credit

“Approved Road” defined:– Constructed by a non-governmental agency– Listed in the “Road Impact Fee Study”

“… an additional two lanes…” Strength of CIP-based approach Importance of Study

Incorporate Policies Include Basis for Terms

Exemptions

Volusia Co. v. Aberdeen at Ormond Beach

Covenants, Conditions, and Restrictions 30 years a magic number? Unit not the user “Potential” impact Community-based analysis rejected Specific Need/Special Benefit adopted

– a.k.a. “subdivision-based” standard

760 So.2d 126 (Fla. 2000)