Impact Fee Basics. Legal Considerations. Tyson Smith, AICP, Esq. White & Smith Planning and Law Group Charleston, SC

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1 Impact Fee Basics Legal Considerations Tyson Smith, AICP, Esq. White & Smith Planning and Law Group Charleston, SC November 4, 2010

2 What Is An Impact Fee? monies collected through a set schedule spelled out in a local ordinance levied only against new development to support infrastructure needed to serve new development to cover a proportionate share of an identified portion of that infrastructure

3 Impact Fees: Implemented as a Regulatory technique, NOT a financing mechanism Based on impact on facilities, NOT, e.g., on building value, frontage NOT to be used for existing needs or to increase LOS to existing development Should be based on rational planning process and adopted CIP/capital budget

4 Authority Home Rule Power Ohio Florida Kansas Statutes -Alabama -Georgia -Arkansas -California -South Carolina -Texas -Utah -Massachusetts (CCCA)

5 Limitations on Authority Types of Facilities Allowed Fee versus Tax Challenge Statutory Limitations

6 Fee v. Tax Taxes Primarily revenue-raising Authority (usually) must be express Proportionality not required Impact Fees LU regulations that mitigate off-site impacts Authority may be implied Rational nexus required

7 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)

8 How Rational Does My Nexus Have to Be? Georgia reasonably related to Nevada - necessitated by and attributable to Florida necessitated by Arizona reasonable relationship Montana reasonably related to and reasonable attributable to Cape Cod a rational nexus

9 Capital Improvement Program New Development Need Benefit Capital Improvement Program

10 Applicability Time of Assessment Time of Imposition/Collection Type of Development Affected Redevelopments/Replacements Ancillary Uses & Structures Exempt Developers: Preferred Land Uses Government

11 Geographic Adjustments Varying Infrastructure Needs User characteristics (e.g., trip length) Policy incentives (e.g., downtown revitalization)

12 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 Policy objectives

13 Exemptions No Significant Impact on Facilities: Senior Housing on Schools Commercial Uses on Schools Nonresidential Uses on Parks Rural Residential Uses on: Neighborhood/Urban Parks Central Sewer Jurisdictional

14 Waivers Statute/Case Law-driven Schools Governmental uses Policy-driven Affordable Housing Infill/Compact Development Economic Development

15 St. Johns Co. v. Northeast Florida Builders Ass n, Inc., 583 So.2d 635 (Fla. 1991) Free Public Schools Uniform School System Needs Prong met Benefit Prong not met

16 No Impact Fee Schools City Development Benefit County Development Impact Fee

17 Disproportionate Benefit No requirement that every fee payer benefit or that each person who benefits pay. But substantially all of the population that benefits must pay the impact fees for that facility.

18 Alternative Views St. Johns Co (Fla.): must charge in city Cherokee Co (Ga.): okay not to charge in city (Cities and Co. authorized) Jefferson Co. (WV): can and must charge in city. (Counties only authorized)

19 Fee Schedule Issues 100% of Maximum Legal Amount? By Unit (e.g., $9,000/SFR) By Square Footage/Number of Bedrooms (e.g., $3.21/s.f.) Address Affordable Housing Geographic Distinctions Escalating/Indexed Fee Schedule

20 Herron v. Annapolis 2006 WL School Impact Fees paid by the Developer Spent outside of Attendance Zone Alleged taking Herron s Standing to Sue

21 Impact $ fee? Who paid the fee? $ Students

22 Evidence (or Incidence) of Injury Refund Provision to the current owner of the property Impact Fee Committee Report assumed the fee was passed through to Buyer; and tracking the fee payer too cumbersome

23 Evidence (or Incidence) of Holding: Injury Ordinance & Committee Report are not evidence of Injury to Homeowner Fee: Could be passed to Homeowner ( D, S) Could be absorbed by Developer ( D, S) Absent Collusion, implausible to assume fees were passed through

24 District No. 6 $ S. River High School Annapolis High School $ Old Mill High School

25 Dolan applies $ Annapolis High School S. River High School County must have flexibility..." $ Old Mill High School mere rough proportionality is required

26 MBA v. Germantown 698 N.W.2d 301 (Ct. App. Wis. 2005) Can a municipality spend aquatic center impact fees on something other than what was originally contemplated?

27 Impact Fees Adopted, 7 years to spend Timeline & 99 A pool might be nice. Needs Assess ment Two Referenda

28 No Timeline New Needs cont d Assessment $103,000 in fees collected (Year 6) How about a spray ground? (w/ 2 year extension)

29 Statute/Ordinance: Must be Spent on capital costs for which the impact fees were imposed. Fee Basis: the Cost of an Aquatic Center/Youth Center ($1.8 Million) MBA: the particular $1.8 M Swimming Pool Village: a category of facility

30 good faith and informed estimate of the sort of cost it expects to incur for the kind of facility it plans to provide. a municipality must be allowed flexibility to deal with contingencies in planning

31 Practice Tips Address Gimmes Before Rollout, e.g. Exemptions? Time of Collection? Methodology Report cross-reference Policy Objectives Develop Capital Improvement Plan Forms, Administrative Manuals, Staff Training Emerging Issues: Delayed payments, suspensions, and reductions Failure to Pay Changing CIP needs ( and benefits)

Impact Fee Law State to State

National Impact Fee Roundtable 2008 Impact Fee Law State to State Tyson Smith, AICP, Esq. White & Smith Planning and Law Group October 9, 2008 The Usual Suspects Impact Fees ad hoc Exactions the unruly