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Infrastructure Financing Impact Fees • What Are Impact Fees? • Why Do We Have Impact Fees? • Local Government Fiscal Stress and the Rise of Impact Fees Sienna Legal Concepts of Impact Fees • Authority to Impose Impact Fees • Impact Fees as Unlawful Taxes • Federal and State Constitutional Issues Sienna Economic Implications of Impact Fees • Who Ultimately Pays an Impact Fee? • Implications of Higher House Prices • Are Impact Fees Really Necessary? Summerlin Impact Fee Technical Studies Things to consider: • Methodology • Population and Land Use Assumptions • Levels of Service • Credits • Construction and Land Costs • Offsets • Credits • Service Areas Becker at Porch Street on Adele, TK Images Impact Fee Technical Studies Things to consider: • Transportation-Related Issues • Legitimacy of Growth-Related Costs • Proportionate-Share Impact Fees • Discount Impact Fee Schedules Eastmark Commonly Found Errors • Construction Cost Estimate and Adopted Capital Improvements Plan Inconsistencies • Impact Fee Alternatives Not Considered • State Stature Compliance • Current Levels of Service Not Properly Documented and/or Applied • Misappropriation of Impact Fees • Funding Offsets Ignored or Improperly Applied • Inflated Land and Building Cost Estimates • Math Errors • Correcting Existing Deficiencies Definition of Capital Costs Generally accepted cost items include: • Land • Buildings • Durable Equipment and Machinery • Grading • Paving • Landscaping • Associated Energy Costs The use of impact fees to pay the interest portion of debt service for capital facilities is controversial. Camelia at Summers Corner, Johnson Pictures Inc. The Comprehensive Plan and Capital Improvement Plan • The public facility needs assessment should not be a "wish list.“ • The comprehensive plan is the benchmark by which nexus is measured. • The capital improvement plan (CIP) or capital budget will attach a cost to the facilities identified in the comprehensive plan and match the facility to an appropriate funding source. Alto at Midtown, Jeffrey Aron Photography Independent Fee Calculation Study An applicant commissions and pays for a study which may entitle the applicant to a reduction in impact fees if it convincingly shows that the project will require less public capital expense than assumed in the impact fee study. Some ordinances specify exactly how an independent fee study must be conducted and some even require that the government hire a consultant to conduct an independent impact fee study, although the applicant must pay the consultant's fees. Firethorn at Summers Corner, Johnson Pictures Inc. When Fees Are Due, Accounting, and Refunds • From the building industry's point of view, it is preferable for the impact fee amount to be determined at the earliest possible time (i.e. development agreement or plat map recordation) but to fall due and payable at the latest possible time (i.e., certificate of occupancy). • Unlike tax revenues, which are deposited in a general fund to be spent with broad discretion, impact fees must be separately accounted for and expended for the specific purposes for which they were collected. • When the government collects an impact fee for a specific purpose but does not spend it for that purpose, it has no choice but to refund the fee because it may not be used for any other purpose. Credits, Reimbursements, and Exemptions • A developer may agree to provide land or to construct facilities of the type for which impact fees would be charged. In such cases the developer is entitled to receive a credit or reimbursement equal to the market value of the land or facilities provided which is subtracted from his impact fee bill. • Credits should also apply when there is a change in existing land use. For example, if a land use is changed from residential to commercial, there will be an impact due to increased traffic. But the impact fees should not be based on the total number of trips generated by the commercial use but on the net increase in trips. • One example of exempt land use might be affordable housing for low- and moderate-income households. Alternatives to Impact Fees • • • • • • • • • Taxes General Obligation Bonds Revenue Bonds User Fees Special Taxing Districts Tax Increment Financing Private Exactions Partnership Schools Small-Scale Water and Wastewater Systems • • • • • • • Certificates of Participation Community Development Districts Design-Build Electronic Road/Toll GARVEE Bonds Municipal Lease Finance State Infrastructure Banks and State Revolving Loan Funds Infrastructure Financing Challenge • • • • • Development more complicated and riskier today Limited commercial lending for new development Government revenues remain strained too How to finance infrastructure efficiently and effectively without driving up housing costs More and better financing mechanisms are needed today than ever before Eastmark The Search for Solutions • • • Need to better understand available tools and where they have been used successfully Rethink assumptions and better leverage available existing resources Requires innovation and collaboration between public and private sectors Eastmark Latest in NAHB’s Series of Reports States that Allow Use of Key Tools Change in Enabling Authority 2007-2012 Many States Now Allow the Use of Special Districts Good Climate for Collaboration! It’s hard work, no question! But: • Public & private sectors realize they cannot do this on their own • Public-private partnerships manage risks and rewards for both partners Sienna Questions? Add Contact Info