The impact of fees 

Fees deter politicians, but not construction

After months of quiet consideration, the Missoula City Council’s Administration and Finance Committee has recently made proposed transportation impact fees on all new construction a priority agenda item.

Impact fees are construction taxes cities assess to cover the cost of providing expanded services like police protection, fire stations, and public parks to new areas as a community grows. Missoula began collecting impact fees in 2004. Presently all new development—whether commercial, business or residential—pays according to square footage for the estimated impact it will have on city services, though only new houses pay fees for parks. The city uses the money collected, about a half million dollars annually, to buy vehicles for the police and fire departments, offset the cost of new city facilities, like the Council chambers, and add new amenities to public parks, like benches and bathrooms.

City officials say the transportation fees would provide money for new city streets and would potentially eliminate the need for controversial special improvement districts, or SIDs, like the recently rejected proposal to improve Hillview Way by taxing residents of the south hills neighborhood the street serves.

Finance Director Brentt Ramharter told the Independent that even a single-family household generates an average of 10 car trips per day. A shopping center, he said, would obviously create even more traffic.

The proposed transportation impact fees would double or triple the current fee assessments on new homes, offices, and commercial buildings built within city limits. For instance, fees for a 1,700 square foot home would go from $824 to $1,638; a 10,000 square foot office building would increase from $6,690 to $20,050; a 10,000 square foot commercial center would change from $8,460 to $39,580.

Critics on Council worry that adding more government fees to the cost of building will dampen growth within the city, and push development outward into the county.

“I’m afraid [the fees] will discourage growth, I really am,” Ward 4 representative Jon Wilkins says. “We can’t keep raising fees on people.”

Ward 2 Councilman John Hendrickson, one of the lead critics of adding transportation impact fees, asked the city’s Chief Administrative Officer, Bruce Bender, to provide Council with information on the city of Bozeman’s growth and development since implementing similar fees in 1996.

Bender’s findings, reported to the Administration and Finance Committee on Nov 28, show that in 10 years of assessing impact fees on new construction, Bozeman has grown tremendously. Bender found that in 1996, 30 new homes were built in Bozeman, but in 2006, 90 new homes were built.
“That’s 10 years with the [overall] impact fees, and to look at how the community is doing, that community is thriving,” he says.

The transportation fees currently proposed total only half of what economic consulting firm TischlerBise advised the city to implement four years ago. The city’s Impact Fee Advisory Committee, comprised of city workers and local developers, suggested reducing the consultant’s recommended fee levels. Even after the reduction, the proposed fees will still generate $1 million a year in funding, Bender says.

“We could have gone for the larger amount, but we felt this was adequate for our needs,” Bender says.

Though the proposed transportation fees may seem to place substantial burdens on builders, the additional expense for even the biggest multi-million dollar projects that would trigger the highest fees would amount to just a small fraction of the total cost.

Colin Bangs, a broker with Coldwell Banker Steinbrenner Real Estate Inc. and a member of the Impact Fee Advisory Committee that drafted the proposed ordinance, says government requirements represent the fastest growing costs for new
developments.

“I’d rather we not have to [implement the transportation fees] but how else can we pay for road infrastructure?” he asks.

But added fees are only one part
of a complicated knot of policy considerations.

To add transportation fees, the city would need to alter its existing impact fee ordinance to comply with state law. A bill passed in 2005 no longer allows impact fees for parks without a two-thirds majority approval of the Council. And it forbids the purchase of items with useful lifespans of less than 10 years, which means fire and police vehicles currently purchased with impact fees would need to be paid for with money from another source.

“It is my understanding that we need to be conservative about this process and bring the ordinance into accordance with the law…we want to avoid any possible litigation [with the state],” Bender told the Administrative and Finance Committee.

Bender explained that the only way to adopt the transportation fees and retain impact fees for parks would be to create a separate ordinance for park funding, but that would require a super-majority of eight Council votes to win approval.

The Parks and Recreation Dept. currently receives about $150,000 per year from impact fees, which funds projects like the bathroom expansion at Playfair Park. That money would be lost if Council opts for transportation impact fees, but can’t muster the votes to maintain parks funding.

Yet without the transportation fees, funding for future road expansion will likely require equally complicated and controversial approaches.

“Without money from the state and feds for road construction, we have to find a way to start funding these projects,” says Bender.
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