9/9 FRI 2:45 | How to Pay for Growth - Impact Fees 2

Clancy Mullen

2011 FAPA Conference, Palm Beach, FL

Impact Fees Under Siegeby Legislators and Local Governments

The Two-Front War

Legislatures restricting local authority 2006: WI prohibits county fees, rec facilities, vehicles 2007: NV prohibits jurisdiction-wide service areas 2009: FL puts burden of proof on local government 2009: AZ places 2-year moratorium on fee increases 2010: AZ extends moratorium of fee increases another year 2011: AZ prohibits gen gov’t, solid waste, regional park fees

Local governments bowing to developers Fees being suspended/reduced nationwide, but especially in FL 24 counties in Florida have suspended reduced fees since 2007

Collapse of Housing Bubble

Monthly Single-Family Building Permits, Florida & Arizona, 2000-2011

2011 Arizona Legislation

AZ municipal enabling act was much like FL Could address any “cost to the municipality” from growth Modest annual changes, starting in 2007

Locked in fees for 2 years at plat/site plan; required list of projects; lengthened time periods for notice and phase-in

SB 1525 prohibits fees after 1/1/12 (unless pledged): General government facilities Solid waste facilities Parks over 30 acres, rec centers over 3,000 sq. ft. Libraries over 10,000 sq. ft., books or furnishings Police/fire training facilities, administrative equipment

2011 Arizona Legislation

SB 1525 requires full compliance by 8/1/14 Land Use Assumptions Infrastructure Improvements Plan Refunds if actual costs exceed estimates Fees locked-in for 2 years at plat/site plan Credit for any “discriminatory” construction sales tax Advisory committee or biennial audit 8-month adoption process

Fees locked-in for 2 years at plat/site plan (2009 bill)

FL: Local Pressure to Reduce Fees

Developers/builders more aggressive Desperation: few projects still in process can’t compete with

falling prices of existing homes, trying to cut all costs possible

Opposition to growth weakened Taxes on existing residents no longer going up because of

unbridled growth; collapse of housing bubble has created more visible problems

Arguments for Fee Reductions

Need to be competitive to attract development Developers & businesses will go where fees are lowest

New housing can’t compete with existing housing

Might stimulate construction and create jobs What have we got to lose? (revenue low) If we don’t try it, we won’t know Worth it if it creates even one job

If it doesn’t appear to have worked... We don’t know how much worse it would have been We will be positioned for the recovery

Arguments Against Fee Reductions

Impact fees have never been shown to deter growth Development follows market opportunity, not lowest cost National chains not deterred by fees; “mom & pop” stores rent Industries want good transportation, labor force, low operating costs

Impact fees are visible, but not only development costs Developers will continue to make road and other improvements

If it does work, it will only make things worse Increase housing oversupply; depress housing prices

Reducing/suspending impact fees will create inequities Developers finding their credits devalued (recent flap in Volusia Co.) Builders who have paid fees competing with builders who did not

Funding for growth-related improvements will shrink

So Who is Winning the Argument? Brevard Co. – Mar 2009: suspended road fees for 2 years; extended to March 2012 Charlotte Co. – Jan 2008: rollback fees 2/3; June 2011: suspended non-road fees 1 year Citrus Co. – Jan 2009: reduced road fees 50%; suspended Apr 2010; reimposed June 2011 Clay Co. – Jan 2009: adopted/suspended road fees for 2 years; extended to July 2012 Collier Co. – Oct 2010: road & park fees reduced based on study, school fees halved Columbia Co. –2009: suspended fees adopted Feb. 2008; July 2011: extended indefinitely DeSoto Co. – Jan 2008: suspended fees adopted late 2006 and refunded fees collected Glades Co. – Nov 2008: all fees suspended, roads to be back to 50% in Jan. 2012 Hendry Co. – Sep 2008: all fees suspended until Jan 1, 2012, when come back at 50% Hernando Co. – Dec 2009: fees rolled back to 2001 levels for 1 year; extended to Dec 1, 2011 Highlands Co. – July 2009: all fees suspended Indian River Co. – Mar 2009: suspended 5 fees; extended 3 fees until March 2012 Lake Co. – Mar 2010/Jan 2011: road & school fees suspended until March/April 2012 Manatee Co. – Jan 2009: road fees halved until Jan 2013, school fees suspended Marion Co. – Jan 2010: road fees suspended 18 months; extended to Jan 1, 2013 Martin Co – July 2009: all fees suspended except roads & schools, reimposed Oct. 2010 Nassua Co. – July 2008: all fees suspended except schools until Jan 2012 Orange Co. – May 2011: fees reduced 50% schools & 25% others for 18 months until Nov. 2012 Polk Co. – Apr 2009: cut all fees but schools 50%; suspended all but schools until Aug 2012 Putnam Co. – Mar 2009: all fees suspended 2 years; 2010: extended to March 1, 2013 Santa Rosa Co. – Feb 2009: suspended road fees; extended twice until Jan 2012 Sarasota Co. – Dec 2010: school fees suspended for 2 years until Dec 2012 Volusia Co. – July 2011: road, park, fire fees suspended for 2 years in non-growth areas Wakulla Co. – Sep 2008: suspended fees – reinstated March 2010

FL County Fee Reductions, 2007-2011

FL County Fee Reductions/Suspensions

FL County Fee Reductions/Suspensions

Based on 2007-2011 Change in Fees

Research Design

Time periods Fee-reduction period: 19 months (Jan. 2008-July 2009) during

which a number of counties reduced their fees Year before fee-reduction period: 2007 calendar year Year after fee-reduction period: Aug. 2009-July 2010

Change in single-family fees Total non-utility fees (water/wastewater excluded)

Percent change in single-family permits

State-Wide Context

Sample Selection

Starting point 42 counties that charged fees in 2007

Exclusions 2 counties that adopted and suspended fees during the period 1 county that reduced fees, then increased them 3 counties that reduced fees after the period 8 counties with relatively low fees in 2007 6 slow-growth counties 2 counties for which building permits were not available

Sample Counties

9 fee reduction counties Brevard, Charlotte, Citrus,

Highlands, Indian River, Manatee, Martin, Nassau, Polk

11 non-reduction counties Collier, Lee, Miami-Dade,

Orange, Osceola, Palm Beach, Pasco, Sarasota, St. Johns, St. Lucie, Volusia

Sample County Characteristics

Population size and growth Fee reduction counties tend to be smaller (average 2008

population of 247,000 vs. 742,000) Both types of counties grew about 20% from 2000-2008

Single-family fees All sample counties charged at least $6,000 in 2007 Fee reduction counties tended to have lower fees in 2007

(average of $9,849 vs. $12,631) Fee reduction counties reduced fees an average of $4,000

Single-family permits Permits declined more in reduction counties (60% vs 56%)

Initial Regression Analysis

Not statistically significant Slope of line in expected

direction (bigger fee reduction = lower decline in permits)

Explains only 1% of variation 64% chance of random result Manatee County is a major

outlier distorting the relationship

Excluding Manatee County

Statistically significant Slope of line in opposite

direction (bigger fee reduction = greater decline in permits)

Explains 22% of variation 4% chance of random result

Conclusion No correlation between

reducing fees and issuing more permits

Regression Equations

Conclusions

Fee reductions are not an economic stimulus

Nevertheless Pressure to lower fees will continue Annual legislative battles will continue

But growth will return some day Few alternative funding sources to pay for growth Most suspension/reductions automatically expire Growth paying for growth remains popular