Impact Fee Basics Deborah Galardi, Galardi Consulting, LLC Rick Giardina, Rick Giardina & Assoc. Tyson Smith, Freilich, Leitner & Carlisle 2003 Impact Fee Roundtable October 16, 2003

Presentation Outline Trends Legal Environment Methodological Practices – Fee Structure – Fee Schedule – Offsets/Credits – Exemptions & Waivers Case Studies

IMPACT FEE TRENDS More States Adopting Enabling Legislation More Local Communities Using Impact Fees Impact Fees Being Used for Greater Variety of Facilities Greater Linkage Between Impact Fees/CIP/ Comprehensive Plans 2 nd and 3 rd Phase of Program to increase fees

WHY CONSIDER IMPACT FEES? Significant Actual/Projected Growth Rate Need for Costly Public Facilities Due to New Growth Need for Equity Between Existing Residents and New Growth Limited Alternative Revenue Sources Maintenance of Quality of Life, as Defined by Public Facilities and Services

Legal Environment

General 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

Authority Home Rule Power – Ohio – Florida Special Acts – North Carolina – Tennessee Statutes – Georgia – California – South Carolina – Texas

Limitations on Authority Reasonableness/Nexus Statutory Limitations

3 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 thru Dual Rational Nexus Test – Nollan and Dolan – Hollywood, Inc. v. Broward Co., 431 So.2d 606 (Fla. 4 th DCA 1983)

Dual 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. 4 th DCA 1983) – HBA v. W. Des Moines, 644 N.W. 2d 339 (Iowa 2002)

Fee 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 Practices

Improvements Required to Service New Development Improvements Required to Service Existing Development (Deficiencies) Excess Capacity of Existing Facilities (Recoupment) Maintenance and Repairs Costs Fundable by Impact Fees No! Yes!

Fee Structure System Buy-In (Recoupment) Approach Improvements (CIP) Approach } Combined Approach Consumption (Level of Service/Demand) Approach

Fee 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 (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 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 Schedule Scaling fees for sizes of developments Fees by development type System-wide fees vs. geographically differentiated fees Impact Fee Schedule $_

Fee 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/Credits Past payments by newly developed properties Future payments by newly developed properties Grants Contributions

Exemptions 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

Exemptions 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

Waivers 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 Tips Identify Policy Objectives Early Methodology Report should incorporate & cross-reference Policy Objectives Ordinance should adopt Methodology Report Forms and Administration

Case 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 (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)