The next phase of the debate over impact fees is just beginning. Mayor Jackie Biskupski’s office has released a draft plan for implementing impact fees as the city council approved moratorium is set to expire in November. The plan is available for public comment via Open City Hall, the city’s online discussion forum, before heading to City Council for additional input and a final vote.
Impact fees are one-time payments developers make to the city to offset the impact of new construction projects. The city uses impact fees to maintain levels of service in areas experiencing additional demand from development growth.
The draft plan was completed by contracted financial consultant, Lewis Young Robertson & Burningham, Inc. and is intended to replace the current Impact Fee Facilities Plan adopted in 2012.
Impact fees are regulated by state statute that allows the fees to only be used toward projects in service areas that include: public utilities, roadways, parks, and police and fire facilities. The City’s current Impact Fee Facilities Plan specifies particular areas in the City where impact fees can be collected and spent.
The draft plan recommends fees be based on a review of historic impact and service use and be collected and spent citywide. Before the moratorium, transportation fees could only be collected and spent in certain areas.
Last year the City Council approved a year moratorium after developers complained that the city wasn’t effectively using impact fees.
Developers disliked the limitations of the original impact fee program. Because transportation fees must be matched by the city, many fees went unspent. Under state statute, impact fees must be spent in six years or be refunded to the developer.
Developers also questioned the fairness of fees that weren’t necessarily spent on areas adjacent to their projects.
Under the draft plan, impact fees for commercial and industrial development would go down while the fees from residential developments will increase.
If Council adopts the draft plan, builders of single-family homes would be most affected. Impact fees for single-family homes would increase 62 percent from $3,459 to $5,598. Developers of multifamily projects would see fees increase 5 percent from $3,284 per unit to $3,456 per unit. Fees for Office, Commercial/Retail and Industrial projects would be reduced 81 percent, 45 percent and 87 percent respectively.
Mike Akerlow, the director of housing and neighborhood development, argued that the change in fees reflects the reality of how impact fees can be spent.
“We know what we can and can’t use impact fees for,” said Akerlow.
The reduced fees for commercial and industrial development reflects a reduction in transportation fees and an increase in the parks fee. Commercial, office and industrial developments are exempt from the parks fee. According to Akerlow, because transportation projects must be matched by the city if impact fees are used, the plan reduced transportation fees to better reflect the city’s ability to spend them.
The draft plan would make the parks service area citywide. Impact fees can go toward the expansion and maintenance of existing parks or the land acquisition for new parks.
During a presentation to developers and business leaders hosted by the Downtown Alliance, a representative from City Creek Reserve questioned if it was fair to charge a downtown developer a parks fee if the downtown area has limited park space.
Akerlow mentioned that the city is currently looking for land downtown to add a new park and that impact fees could go toward proposed improvements to Pioneer Park.
The city anticipates over 28,000 new residents and 7,610 residential units. The 7,610 units could be a conservative estimate. Building Salt Lake estimates that there are currently 2,700 multifamily units currently under construction, with another 2,300 units expected to start construction within the year.
According to a multifamily marketing report by CBRE, there are 8,894 multifamily units under construction along the Wasatch Front. Based on CBRE estimates, Salt Lake City accounts for over a third of the multifamily units under construction.
The draft plan is intended to be more flexible in how and where parks fees can be used and how those fees are applied. For example, the city could use residential impact fees as an incentive to developers to include affordable housing in new development.
“It is a great incentive that can save developers a lot of money,” said Akerlow.
The city is holding the second of two public open houses, Thursday, September 22 at 6 p.m. in the City County Building.
City residents will have until September 30 to comment on the draft document through Open City Hall. The comments from Open City Hall and the open houses will be presented to the mayor who will then make final draft recommendations before turning the draft plan over to the City Council.
Council members will have the final decision on how impact fees should be administered. Council could adopt the draft, continue the moratorium or decide to return to the 2012 plan.
“The mayor is looking to the legislative branch to decide if that program should extend past November,” said Ackerlow of the moratorium that is set to expire November 2nd.
There will be a 90 day waiting period before implementation if Council decides to increase impact fees from their previous level. If Council decides to lower fees, the city can implement fees immediately.
The city expects a surge in building permits before the November deadline. Developers must obtain building permits before the day the mortarium expires to avoid paying impact fees.