Transcript Impact Fees - UW-Extension Local Government Center
Financial Management Series Number 4
Impact Fees
Alan Probst Local Government Specialist Local Government Center University of Wisconsin - Extension
Definition
An Impact Fee is a charge to new development for public improvements that serve that development or that type of development * *“Capital Budgeting and Finance: A Guide for Local Governments” A. John Vogt, ICMA
USE
Impact fees offset the costs of expanded public service and infrastructure often needed in response to new real estate development
Rationale
Considered “pay as you go” approach
Proponents argue impact fees are fairer, more predictable, and encourage planning for growth
Place the burden on those receiving the benefits
Opponents argue could deter development
How imposed?
Residential development impact fees are commonly based on a specified dollar amount per residential unit
Industrial and Commercial development impact fees are commonly based on a per square foot of improved space basis
Who can impose?
Wisconsin counties may not impose impact fees
Municipalities may impose within limits
"Municipality" means a city, village, or town
Statutory Authority
State Statutes 66: General Municipal Law
SS. 66.0617 – Impact Fees
http://www.legis.state.wi.us/statutes/Stat00 66.pdf
Wisconsin Acts 203 & 477
Changed some aspects of Impact fees
Eliminated counties’ ability to impose impact fees
Set 7 year time limit for using impact fees, plus added potential 3 year extension (w/ municipal resolution)
Municipality must illustrate extenuating circumstances/hardship in meeting the 7 year limit in order to claim 3 year extension
Wisconsin Acts 203 & 477
Capital costs further defined to remove “vehicles” from eligibility
Athletic fields considered as part of municipal “parks & playgrounds”
Wisconsin Acts 203 & 477
Developer to pay impact fee within 14 days of the issuance of building/occupancy permit
Prohibits municipalities from imposing fees or charges as a condition of plat approvals for a development
Wisconsin Acts 203 & 477
Revenue and expenditure totals for each impact fee must be reported as part of the annual budget summary
Revenues from each impact fee must be placed in a separate account; cannot be lumped into General Fund
What may be charged?
Municipalities may only charge for capital costs (what it costs you to have them develop in your community)
Capital Costs
Costs to construct, expand or improve public facilities
May include cost of land
May include legal, engineering, and design costs
Capital Costs
Legal, engineering, and land cannot exceed 10% of capital costs directly related to necessary improvements
Does not include other non-capital costs associated with public facilities (ex. pays for fire house, not fire truck)
Cannot be used to cover any school district costs or existing deficiencies
Capital Costs
Capital Costs may include cost to construct, expand or improve public facilities such as:
Wastewater/Water Infrastructure
Parks, playgrounds, athletic fields
Solid waste & recycling facilities
Highways/other transportation facilities
Drainage facilities
Public Safety (fire protection, law enforcement emergency medical facilities)
Libraries
Associated land costs
Capital Costs Improvements must be directly related to (required for) new development
Steps to impose impact fees?
1.
2.
3.
•
Perform a needs Assessment Must be available for public review at least 20 days before public hearing Public Hearing
•
Pass Ordinance Ordinance must include appeals process
Process of Cost Allocation
•
Cost review (Needs Assessment)
•
Provide cost review to developer and ask for feedback (Public Hearing)
•
Written Agreement Terms (Ordinance)
•
Understand unforeseen situations may arise (Appeals process)
Needs assessment
• • •
Must Include: Inventory of existing public facilities Includes any existing deficiencies Establishes the rational relationship between the impact fee and the required upgrades (Note: Developers will resist impact fees that provide unnecessary improvements to public infrastructure)
Needs assessment
Identifies new public facilities necessary because of the new land development Detailed cost estimate of capital costs including the estimated effect recovering the capital costs via impact fees will have on the municipalities affordable housing supply Must be available for public review a minimum of 20 days prior to public hearing
Public Hearing
Public must be heard on impact fees
Public must have 20 days to review needs assessment prior to public hearing
On line version
Town Hall office copy
Library
If Needs Assessment requires revisions, another public hearing is required with 20 days to review revision
Ordinance
Cannot pass ordinance without Public Hearing
Specific language on how long impact fees may be held (7 years maximum*)
Specific procedure for process to appeal impact fees
Ordinance
States impact fee amount
Municipality may impose different impact fees on different types of land development
Ordinance may delineate geographical zones within the municipality (Example: Development on slopes >20%)
Must show in Needs Assessment why differentiation necessary
Ordinance
Municipality may provide an exemption/reduction in impact fees for “Low-Income Housing”
Impact fees cannot be shifted from “low income housing” development to any other areas in municipality
Standards for Impact Fee
Impacts fees shall bear a “rational relationship” to the need for new, expanded or improved public facilities
May not exceed the “proportionate share” of capital costs required to serve the land development when compared to the existing land uses within the municipality
Standards for Impact Fee
Impact fees shall be reduced to compensate for other capital costs w/ respect to land development such as special assessments, land dedications, and fees in lieu of land dedications
Impact fees should be reduced to compensate for Federal/State assistance
Shall be payable in full, within 14 days of municipality issuing building/occupancy permit
Impact Fees cannot:
Cannot be imposed to prevent or inhibit development (If pattern of development is undesirable, revise the subdivision code)
Cannot be used as a revenue source to cover existing deficiencies!
Impact Fee Management
Must be placed in a segregated, interest bearing account which is separate from other municipal funds
Impact Fees revenues (and interest) may only be expended for capital costs for which the impact fees were imposed
Impact Fees not spent within 7 years (w/ up to 3 year extension), must be refunded to the current owner of the property to which the impact fee was imposed
Special Assessments
Special assessments (by law) can only be imposed to properties receiving special benefit
Applied towards existing development Pays for improvements that directly benefit a specific property(s) within the municipality Special Assessments are made against the land being enhanced, and fixes as a lien on the land’s title
Special Service Areas
Another method of achieving similar results as impact fees and special assessments
Developer places money in a fund controlled by municipality
Municipality repays developer from fund when public facilities are completed
Not currently an option in Wisconsin
Summary
Must meet the “test of reasonableness”
Cannot be used to deter or prevent development
Calculated in the municipality’s “Needs Assessment”
Summary
Must be communicated through a municipal ordinance and passed following a public hearing specifically designed to hear comments on the reasonableness and allocation of the impact fees
May only be imposed to cover required capital costs associated with the development
References
“Capital Budgeting and Finance: A Guide for Local Government”, A. John Vogt, ICMA, 2004 “The Why’s and How’s of Impact Fees?” Karl Green, Department of Community Resource Development, La Crosse County UW-Extension, 2007 Ohm, Brian, Guide to Community Planning in Wisconsin, Chapter 7, http://www.lic.wisc.edu/shapingdane/resources/planning/library/book/ chapter07/chap7_4-4.htm
Robert Paolino, Legislative Brief 06-16, June, 2006 Wisconsin Legislative Reference Bureau State Statute 66: http://www.legis.state.wi.us/statutes/Stat0066.pdf
2005 Wisconsin Act 203 2005 Wisconsin Act 477