Ordinance Provisions

Impact fee ordinances should at least include provisions for a fee schedule, fee methodology, benefit districts, offsets and credits, updating frequency, spending limits and refunding, phasing and indexing, independent fee studies, and definitions.

 

Most impact fees are paid at the time of building permit issuance. However, some fees are paid earlier at the time of subdivision or plat approval. A few are even paid later at the time of certificate of occupancy issuance. In the case of utilities, impact fees are usually paid at the time of actual connection or hookup to a water and wastewater system.

 

Changes in use within an existing structure usually are not required to pay an impact fee because the amount of time to monitor and administer such efforts rarely justifies the amount of return revenue. Modest additions or expansions to and the replacement or remodeling of existing uses or structures are also not usually charged.

 

Case law requires that impact fees be applied to all new uses in a “proportionate share” manner relative to their impact on public facilities. Therefore, no new use should be exempted from its impact fee obligation. In reality, exceptions or waivers are often made for low-income housing, non-profit, religious and governmental uses.

 

Since affordable housing creates a demand for public facilities just as does market-rate housing, they also have an impact fee obligation. However, there are several ways to reduce the “impact” of impact fees on affordable housing. First, variable rates based on unit size or number of bedrooms can recognize the lesser impact of smaller units on pubilic facilities. And second, local government can make a policy decision to pay the impact fees for affordable units from other revenue sources.

 

When a developer contributes actual off-site facility improvements or dedications that mitigate the impact of a particular project and the need for impact fee-related public facilities, the project’s impact fee should be reduced (offset) by the value of the improvement or dedication. Offsets are given to ensure that new development does not pay twice for the same facilities.

 

Credits are based on the amount of property and sales taxes paid or being paid by the new use for the same facilities and are incorporated in the impact fee schedule during preparation of the study. Credits are given to ensure that new development does not pay twice for the same facilities.

 

An independent fee study is a special professional and technical analysis of a specific use or project to determine if it has certain unique conditions, characteristics or considerations that would allow the charging of an impact fee other than that prescribed in the adopted fee schedule.

 

New fees are usually phased in over a period of months or years to soften their impact on the local real estate market. Indexing is the use of automatic annual fee increases based on the consumer price index (CPI) or other cost index to ensure that the fees keep pace with inflation

 

No, fee revenues must be earmarked and deposited in special dedicated accounts.

 

Yes, impact fee revenues should be spent within a reasonable period of time (usually six to eight years from collection) or be refunded to the fee payer.