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r--------~-----------------------------, : ~ TiscWer & Associates, Inc. CAll TOll-FREE (800) 424-4318 I . I Please send the following: 4701 Sangamore Road, Suite N210 o Reprint "20 Points to Know About Impact Fees" Bethesda. MD 20816 I 0 (301) 320-6900. Fax (301) 320-4860 Recent TA Fiscal & Economic Newsletters I Also: Los Angeles. CA I Information about TA Consulting Services: o Fiscal Impact Analysis I 0 Impact Fee Modeling and Critiques I 0 Capital Improvement Programs I 0 Revenue Strategies I 0 Growth Policy Studies I 0 Economic Development Strategies o Market and Financial Feasibility Studies I 0 Infonnation about MUNIES. FISCALS & CRIM City State _ Zip L______________________________________~ Some communities and their consultants tend to use a level of service met elsewhere in the jurisdiction. It is illegal to extract from new development fees to pay for a higher level of service unless the jurisdiction is using other funds to bring other parts of the jurisdic- tion up to this same level of service. D Do not rely solely on the jurisdiction's assump- tions; instead, obtain your own background informa- tion. Various local government departments may not be familiar with the requirements of impact fees and are therefore unlikely to understand clearly the differ- ence between adopted and existing levels of service, the relationship between service delivery areas and ex- isting and new capital facilities, and several other is- sues. If builders ask local jurisdictions the right ques- tions, they should be able to extract the needed infor- mation. Some of the questions to ask are: What is the basis for the land use projections? How were service areas ascertained to meet the rational nexus requirements? How were levels of service and cost factors deter- mined? How have credits for other payments been considered? II Analyze the capital improvement budget. Poten- tial impact fee rev.enues need to be related to the capi- tal improvement budget or capital improvement plan. That is, there should be capital projects in the plan that' can legitimately use impact fees. It is important for builders to become familiar with this budget and its validity over both the short and long terms. II Be familiar with the likely geographic service ar- eas in order to evaluate the rational nexus requirement. In summary, rational nexus requires a reasonable rela- tionship between the need for the capital facility and Name the use of impact fees directly benefitting those pay- ing. To show a direct benefit to the development pay- ing the impact fee, jurisdictions tend to describe larger service areas than may be appropriate. D Can a jurisdiction provide the needed capital fa- cilities? The recommended impact fees should dem- onstrate some relationship to what the jurisdiction is capable of providing. Whether due to time lag, back- log of existing facilities, debt ratios, or political con- straints, the effort that goes into setting an impact fee will be diminished if the jurisdiction canno.t,provide the needed capital facilities in a timely fashion (as- suming that the impact fee does not pay 100 percent of the new cost). II Understand the importance of granting credits. Un- der the provisions of some state statutes, the future tax payments of a house or nonresidential property that are used to cover the debt service of a particular capi- tal facility need to be credited against the impact fee amount on a discounted basis. Even in states that do not require the granting of credits, the "spirit" of im- pact fees is to avoid double payments. ',., Reality Testing As already mentioned, impact fees are popular be- cause elected officials perceive them as a free revenue source not paid by current constituents. As a practical matter, several of the flawed impact fee meth- odologies gained acceptance because the fee amount ultimately proved to be much lower than the amount discussed in the impact fee report. Of course, in some jurisdictions, lower fees are subject to annual increases. Agency Title Telephone Street