Category: impact fees

The ever-present dilemma of paying for transit

The topic of transit – or the lack of it – arose during public hearings on the vast new River District development that won city approval last month. The almost 1,400-acre development will grow west of the Charlotte Douglas International Airport in what today is a rural and thinly settled area.

The development is expected to generate 120,000 vehicle trips a day. That number got the attention of Charlotte City Council members, who talked about transit but did little beyond talk before approving the developers’ rezoning request.  That’s because the city’s plans for transit to that part of town are, for now, vague and – like most of the 2030 Transit Plan beyond the Blue Line Extension – unfunded.

The city isn’t allowed to impose impact fees without state legislative approval. And don’t hold your breath for that. Further, state courts struck down some counties’ attempts at adequate public facility ordinances – where developers either had to wait until local governments could afford to offer public facilities such as classrooms and police/fire service to serve the new development, or pay a fee to help the local government provide them.

So Charlotte can’t do what Sacramento, Calif., is proposing: a transportation impact fee on most new construction to fund
more and wider streets and improve biking and pedestrian facilities. See Sacramento asks developers to open wallets to keep city streets from clogging. (The Sacramento fee would range from a few hundred dollars for some rental units to more than $2,000 per single-family home in some areas. It’s expected to generate about $3 million a year.

But N.C. local governments still have negotiating power. In Charlotte, developments expected to generate a lot more motor vehicle trips have to pay for a traffic impact study, and talks between city planners and developers often produce a “voluntary” agreement for the developer to provide a turn lane or a traffic signal or some such. That’s called an “exaction,” although developers joke it’s more of an “extraction.”

As I listened at the River District public hearing in October, I wondered whether the city could put some transit funding on that list of negotiated agreements. It’s fairly routine for the city to ask for, and get, a slightly upgraded bus stop, generally a concrete pad to bus riders don’t have to stand in the mud in wet weather. But why not expand the menu for those asks, especially for a development expected to generate 120,000 trips in a part of town not built for that much traffic?

The city has a fee-in-lieu mechanism for its tree ordinance. Could there be something similar for transit needs?

Would that solve the cavernous funding gap between our local transit plans and our local transit revenue from the countywide half-cent sales tax? No. But it would help – and it would instill into local practice the idea that transit should be among those things developers could “volunteer” to assist with. 

N.C. court to counties: ‘Raise taxes, already’

In August,the N.C. Supreme Court threw out Cabarrus County’s adequate public facility ordinance. Here’s the Charlotte Observer article on the ruling: “Ruling favors developers.” You can download a copy of the ruling here, courtesy of Joe Padilla at the Real Estate and Building Industry Coalition (REBIC). 

The ruling is of interest, of course, but as a practical matter APFOs, as they are known, were already virtually dead in North Carolina, as Mae Israel wrote in June for the UNC Charlotte website I run, PlanCharlotte.org. (See “With ordinances dead or in limbo, planners ponder next steps.“)

Under APFOs,  the local government sometimes assessed a fee on development if, for instance, local schools were already overcrowded and the county did not have the money to build new ones, or the planned new schools weren’t yet built. Or the developers would delay building until new schools opened.

Since the ordinances were invented as a way to help counties (and a few municipalities) find some money to pay for the schools, parks, etc., the question arises: How does a fast-growing county like Cabarrus pay for the services its thousands of new residents require? A number of studies have shown that typical suburban-style large-lot subdivisions don’t generally bring in enough property tax revenue to pay for the services they use. (More expensive houses, obviously, produce more property tax revenue, and at some price point the housing will start to pay for itself.)

 It’s unusual to live in a state where developers essentially pay no impact fees. Whether that’s fair or not depends, of course, on what “fair” is. Typically the cost of building, which would include impact fees, is mostly passed on to buyers, although sometimes it can work backwards and affect what developers are willing to pay for the land they buy instead of raising the price point of the houses.

But in opposing both impact fees and the adequate facility ordinances, the state’s Home Builders Association and related lobby groups say it’s more fair to spread the costs around the community rather than imposing them directly on developers and buyers of new houses. The Charlotte Observer article quotes Gary Embler, past president of the Cabarrus County Building Industry Association, who “praised the ruling, saying: ‘Public education is the responsibility of the community at large, not just those building new homes.’ “

The community at large? That would be the general county taxpayers.

The question of which is more fair – impact fees for some or higher taxes for all – a meaty tax policy question. But no one should be surprised if this ruling means property taxes will rise to pay to build more schools, maintain more streets and provide more police and fire services. Did the high court just tell counties to raise taxes and stop whining?

Density pays off better than sprawl

A Colorado study for the Tucson-based Sonoran Institute by Asheville’s Joe  Minicozzi concludes that across the board, downtown commercial and mixed-use buildings outperform their big-box counterparts when comparing tax revenues per-acre. The study looked at properties in and around Glenwood Springs, Colo. (Hat tip to Planetizen.com for the link.) Minicozzi looked at both property tax and sales tax revenues.

I wrote a year ago about Minicozzi’s analyses of property in Sarasota County, Fla., and Asheville. It’s another way that public officials should think about “growth” as they decide which projects to approve and which ones not to. In that previous posting, Minicozzi added a reply to some of the commenters, saying:

“When we ran the model in Asheville, our numbers show that our downtown continually out performs suburban low-density time and time again. A conservative estimate on multi-family services of government (sewers, water, schools, etc.) shows the costs roughly to pencil out to $16k/unit in compact development vs. $28k for low density. The simple way of thinking about it is that mile of pipe picks up more people in compact development, than it does in the low density stuff.”

I recall that about 10 years ago, the town of Pineville outside Charlotte, a place known regionally for extreme sprawl retail, opted to reject a Wal-Mart Supercenter after running the numbers and concluding it would cost the town more in police and other services than the town would recoup in property and sales taxes.

In checking out the Sonoran Institute website, I noted this article from the Bozeman, Mont., Daily Chronicle in which a Sonoran Institute official points out that impact fees were a vital tool for the city. “There simply is no substitute,” he said. The article is about a spat among city officials and developers over the city’s hefty impact fees, which the city charges to cover the cost of roads, water, sewer and fire protection. “For the average single family home, impact fees cost $11,516,” it says. ” In Missoula, it costs $3,638 in impact fees for the average home.”

In most of North Carolina developers pay no impact fees. The N.C. legislature must approve any city or county’s impact fees on a case-by-case basis and hasn’t OK’d any in several decades. That’s just food for thought for anyone paying property taxes.