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HomeMy WebLinkAboutReso 2000-230 RESOLUTION NO. 2000-~ A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, AUTHORIZING AN AGREEMENT BY AND BETWEEN THE CITY OF SUNNY ISLES BEACH AND TISCHLER & ASSOCIATES, INC., ATTACHED HERETO AS EXHIBIT "A", TO CONDUCT AN IMPACT FEE FEASIBILITY STUDY; AUTHORIZING THE CITY MANAGER TO TAKE ANY AND ALL ACTION AS MAY BE NECESSARY TO EFFECTUATE THE RESOLUTION; PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, since its incorporation, the City of Sunny Isles Beach has experienced a significant amount of new growth and development; and WHEREAS, the City's Planning staff has determined that there is a need to initiate an impact fee feasibility study to determine the impact that the new growth has had on the City's limited resources; and WHEREAS, the firm of Tischler and Associates, Inc., is well qualified and has agreed to perform the impact fee study and related services in accordance with the proposal attached hereto as Exhibit "A". NOW THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, AS FOLLOWS: Section 1. Approval of Contract. The contract by and between the City of Sunny Isles Beach and Tischler & Associates, Inc., in the amount of Four Thousand Seven Hundred Dollars ($4,700.00) attached hereto as Exhibit "A," be, and the same, is hereby approved. Section 2. Authorization of City Manager. The City Manager is hereby authorized to execute said contract and do all things necessary to effectuate the agreement. Section 3. Effective Date. This Resolution shall be A TTEST:J . ~~~~~~ Richard~Bro~-Morill~, City Clerk Tischler impact ~e..c Feasiblity Study.res 5/10/002:09 PM ,".' P.Walker , 1 APPROVED AS TO FORM AND LEGAL S NC Vote: Mayor Samson Vice Mayor Morrow Commissioner Iglesias Commissioner Kauffman Commissioner Turetsky Tischler Impact Fee Feasiblity Study.res 5/10/002:09 PM P.Walker Moved by: Seconded by: ~(Yes) v (Yes) V (Yes) V(Yes) ~(Yes) 2 C. Ol'Y\tn_ K A\AFAtH\-IV C. t> l'V' W\. ~c..., L cr ~ I "ts:. _(No) _(No) _(No) _(No) _(No) .. ~ TISCHLER & AssocIATFS, INc. 4701 Sangamore Road Suite N210 Bethesda, MD 20816 (301) 320-6900 Fax: (301) 320-4860 80 Annandale Road Pasadena. CA 91105-1404 (818) 790-6170 Fax: (818) 790-6235 (800) ~24-4318 tischlerassociates.com Fiscal Impact Analysis . Capital Facility Analysis . Impact Fee Systems . Growth Policy Planning . Economic and Markel Analysis MUNIES. FISCAlS & CRIM Fiscal impact systems tailored for each community EXAi b,1 if} i April 17, 1000 BY FAX TRANSMISSION & US "MAIL 305/949-3113 Marla Dumas Director of Planning City of Sunny Isles Beach 17070 Collins Avenue, Suite 250 Sunny Isles Beach, FL 33160 Re: Impact Fee Feasibility Activities Dear Marla: It was good talking with you. On behalf of Tischler & Associates, Inc. (T A), it is our pleasure to submit this letter discussing a professional scope of services for conducting impact fee feasibility acti vities. We wiil advise the CIty on the desirabillty of calculating impact fees for various City services, as well as suggesting other steps that need to be taken to meet impact fee requirements. The work product will also indicate to the City the likely consultant costs to conduct the necessary work, suggest scope of work, time frame and other relevant topics. I. QUALIFICA TIONS '1-- T A, in business for over 20 years, is a fiscal, economic and planning consulting firm with offices in Bethesda, Maryland and Pasadena, California. The firm has a national practice and a particular niche in fiscal impact evaluations and impact fee analysis. T A has prepared over 300 fiscal impact evaluations of comprehensive plans, annexations, specific projects, etc. It has prepared over 400 impact fees for communities throughout the country. None of TA's public sector impact fees have ever been challenged. The firm has also critiqued impact fees on behalf of homebuilders associations. In all cases, the fees have been reduced after T A's critique. Recently, a court ordered the City of Beavercreek, Ohio to refund $2.5 million in road impact fees. T A worked on behalf of the plaintiff, the Dayton Homebuilders Association. Most recently, the court ruled that the City of West Des Moines, Iowa needed to refund over $2 millIon in impact fees. Mr. Tischier was an expert witness for the plaintiff, the Des Moines Homebuilders Association. Paul Tischler will conduct 90% of this work effort for T A. Mr. Tischler has over 25 years of consulting experience. He has authored articles on impact fees. These are "20 Points To Know About Impact Fees" and "Impact Fees - Understand Them or Be Sorry." He has also lectured on this topic at forums ranging from the American Planning Association to the National Association of Homebuilders. Mr. Tischler is on the faculty of the Lincoln Institute of Land Policy. 1 E;(~--b;f i A 1 Our Florida impact fee clients include: . Deerfield Beach . Lee County School District . Sarasota County . Hillsborough County . Manatee County . Tarpon Springs . Key Biscayne . Pasco County School District . Venice Lee County . Polk County II. WORK SCOPE The work scope will focus on the feasibility of including different City services for impact fee calculations. The tasks are discussed in turn. 1. Review Relevant Published Material and Interview Service Providers and Personnel. T A will review relevant budgets, fiscal information, planning documents, past studies and other material so that meaningful discussions can be held. T A will meet with appropriate staff from the City. The interviews will focus on key questions pertaining to the approaches and other requirements of impact fees. The topics we discuss will pertain to current levels of service, future capital facility needs, geographic subareas, financing and other items relevant to meeting the requirem~nts of impact fees. 2. Prepare Feasibilitv Report. In this task we will prepare a report discussing the findings of the above tasks. This task will present recommendations and prioritize the services for impact fees. It will discuss how the proportional benefit and rational nexus (geographic location) issues and the other impact fee requirements can be met. Potential data limitations will also be discussed. The types of consultants and cost range to conduct a full study will be noted. In summary, this report will be a road map which discusses the suggested services and route to implementing new impact fees. III. TIME AND COST Paul Tischler will conduct the on-site analysis for this specific assignment. A draft feasibility report will be sent tu the client within three weeks after start-up. After mutually agreed changes are made, the final Feasibility Report will be issued. The cost for this assignment is $4,700 including out-of-pocket expenses. It will be billed on a percentage completion basis. Please let me know if you have any questions. SWWrtOh Paul S. Tischler 2 Tischler & Associates. Inc. j]:~i1~' ::r:merif15H'" . ~.~~tr~.;;' ...... ..",!i", r. S'.!$trn~ " ,"f#.,.,~""""", i: ::~'develonme -,,~~.;~ ;~:Uh'e""FISC ' h,_;:-,::.~..,~r:"~'~:::1it\~'-- " .' t() ,1I!".Yf-~ u ~':.:<~.~~~ ~~~';: ~:i:~~rr:: ..:~-Thenopo 0; :- ,:.;"''''i'''~'; ;~'"f<~.".a_"'''.''''"';';-';;::o;.~~: ~.;':;cover'the~adv.aniii"'es~d:.' 'r~' .,':ji~:-i\;;..:7iA1;"'i~,',1~'r"iil:<,. g:t'1i';'f~~' . ,':l:ffipa.c.t,tr~~J9~, pi'(!Kt.~,p..u -' . . -- ___ . ~ - ...... ......"':"".'.:..... , 1-' 10". :tieCiors~T K!Ii~~:c8iiaucie'E . .....'. .. ,.......'.'..,....~. ..,~' ..~.....l:1~~. :1;. .jV,' .... '.......f.'. ..... ~~. '. -}.... . '.. . .\1..,. 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"'....."..= "{:'fee"studies"include:thefoliownf~:~ ~?{';~:~~'i1i~lflt,~j >.';;- ,"; ~,C()loraao'4'';:~/f:-;- PeririsylvimHi ;0~lt~$~li1'~~~J!~~ ".. .,.'.;.:iJ...,Montana,~,..f.' >:~':aOntano,:Cana . >.":-. :~ .'> ~,/.+::;~:~~~.J~:~:~";' ~~1?~~~~'::~L;\'7~~l:~f<~~ "~:. '.:.z~-;:;~~~~;~~r,~~~~~~"s- >: Please call TAitt 800/424-~318' to-obtain '. -~~.:: .".', "",... ,.' "'._," ..;:.~..,....--".~...:-.. ,~4 '.-.w......-.......I_......:,a ..,further irl"formatiori' 'or to' disdiss:T Ns'im ).":' .:.. '.\.'.,". . ,.~~;,:".~.~,~-:,-,. .~'.""~.-'.-: ,~- . ...->....,~,...,~ .';':"~..:-'~.. ,. ,'~~f~e,;con~u.ltlOg ~~rylce~as )Vel)., asfuUJis ~','impaCt 'ey~luit.19IlS:.:.>i~ -. "~":7:(Y:'\"~~'~:~. s 20 Points To Know About Impact Fees' Impact fees are an increasingly popular new revenue source to local govemmehts. While there are a number of advantages to impact fees and related exactions, there are limitations. As communities and development groups become more sophisticated on what should be expected from a thorough impact fee study, they will become more critical and their level of expectation will increase. This article briefly notes 20 non-technical points of which ',one should be aware. 1.lmpactfees are viewed as afree revenue source without any constituency requirement. Impact fees may be voted in without an election, usually apply only to new development (which does not yet exist) and are perceived to exclude current taxpayers. Therefore, impact fees are a fairly painless and free revenue source since there is no obvious increase in cost to current voters. 2. Impact fees pertain only to new capital facilities which directly benefit the payer. Many people still believe that impact fees can be utilized for capital facilities which benefit exist- ing residents. However, expenditures utilizing impact fees must show a direct benefit to those paying. Under some statutes, an existing facility can generate impact fees if it was oversized to serve the new development. 3. The impact fees collected must be spent within a reasonable time period, A mandated or gen- eral rule-of-thumb is about six years, although (continued on next page) fen years may suffice: Inm6stcasesthe judsdic- ~ion must have a good idea that the money will be spent within the reasonable time period for a specific facility. This encourages capital im- provement programs to be prepared. 4. The electorate may think that impact fees will pay for all new capital facilities, therefore negating the needfor higher taxes. This expec- tation by the electorate could lead to long term negative political consequences. Even if impact fees are eligible to pay for all capital facilities, which is highly unlikely, they will not negate the need for higher taxes due to operating costs. I Educate the electorate on what impact fees do and do not accomplish. 5. Educate the electorate on what impact fees do and do not accomplish. Impact fees relate solely to capital facilities for new development. They do not pertain to rehabilitation, retrofitting, or replacement of existing capital facilities. Also, the greater cash cow of operating expenses must be explained to the electorate. Otherwise, their expectations will be artificially high. 6. The amount of impact fees must be politically acceptable. The amount that is politically acceptable will vary by state and jurisdiction. If an impact fee of $1,500 is the politically acceptable amount, while the maximum justifi- able is $8,000, it may not ~ake sense to pursue some impact fees. This depends on how much revenue can be obtained by impact fees and/or other sources. 7. The community should.be growing. A 3-5% growth rate may allow the community to raise a reasonable amount of revenues and also show the need for additional capital facilities due to growth. A very low growth rate will generate minimal revenues and new capital facilities may not be needed in the foreseeable future for most services. 8. Planni~g departments are ptobably-thiimost------- - appropriate center for managing impactfee activity. The calculation of impact fees is closely related to land use and rational nexus. Planning departments are the most appropriate center for managing activity. Impact fee calculations are not primarily an accounting or engineering exercise. Because rational nexus requires one to show a direct benefit of the impact fe~ to the capital facility or the particular service, land use issues are very important. Also, projections, usually provided by planning depart merits are very important. In jurisdictions where there is an active planning department, this department will probably be the most appropriate center for managing activity. This does not preclude other departments, such as finance and budget, from playing an integral part. I Current levels of service must 'I-t be met. 9. Current levels of service must be met unless there is a plan to address existing deficiencies. There is a tendency for communities and their consultants to assume the adopted level of service for the impact fee study. You can not extract a higher level of service and commen- . surate fee solely from new development unless there is an existing plan to address deficiencies . generated by the current population. I Do not r~ly solely on departmental assumptions. 10. Do not r.ely solely on departmental assump- tions; instead. obtain your own background information'. Because departments are not familiar with the requirements of impact fees, they are unlikely to clearly understand the difference between adopted and existing levels of service, service delivery areas and their relationship to existing and new capital facilities and several other issues. If the right questions are asked, they should be able to provide the information. The most fail-safe way to ensure uwu this is to obtain your own information from the departments. 11. Analy:e the capital improvement budget. The potential impact fee revenues will need to be related to the capital improvement budget or capital improvement element. It is important for the analyst to be familiar with this budget and its validity, both short and long term. 12. Be familiar with the possible geographic service areas in order to comply with rational nexus. As the development community becomes more concerned about pass-throughs due to tighter markets and fiscal constraints, they are more likely to look at the geographic service areas and their relationships to their project. There is a tendenc:' for jurisdictions to have larger service areas than may be appropriate. The service areas will vary by type of activity. 13. Can a jurisdiction provide the needed capitalfacilities? The recommended impact fees should have some relationship to what the jurisdiction can actually provide. Whether it is due to time lag, backlog of existing facilities, debt ratios or political constraints, the impact fee work will be diminished if the jurisdiction cannot provide the needed capital facilities (assuming that impact fees do not pay 100% of the new cost). 14. Beware of granting credits. In some state statutes, the future tax payments of a house or nonresidential property which are utilized for debt service of a particular capital facility will need to be credited on a discounted basis against the impact fee amount. Even in states where this is not required, the "spirit" of impact fees is to avoid any double payments. Therefore, credits will be granted in most cases. I What are the realities of charging nonresidential development? 15. What are' the realities of charging nonresi---uo dential development? In many states the juris- diction may not discriminate between different types of land use for the same service. In one county, a road impact fee was not implemented because the officials did not wish to add another fee to nonresidential development. This particu- lar jurisdiction wanted to attract as much non- residential development as possible. The ques- tion of charging nonresidential development should be raised and answered near the outset of the study in order to avoid extra work if the answer is no. 16. Be aware that some new home buyers are already residents within the jurisdiction. In some jurisdictions 50-70% of new home buyers are trading up within the same jurisdiction. The reality is that these people have been paying for capital facility needs through their existing tax ~.ase from the time they were in the community and are now being asked to pay a second time. As a point of information, elected officials should understand this. 17. Decision makers should be aware of the "intergenerational equity" issue, a negative aspect of impact fees. In many cases, impact fees mark the change from intergenerational equity to site-specific equity. Many of us and almost all of our parents lived in a community where the capital facilities were paid as part of the regular tax burden. The use of impact fee and other exactions means that those who move into the community are now buying into the capital facilities with a one time fee. I Educate elected officials on impact fees. 18. Educate elected officials on impactfees. For many elected officials the term impact fee means a new revenue source that can be utilized in tight times. The only thing they may know about (continued on next page) impact fees is that existing taxpayers will not have to pay them. However, there are important pluses and minuses to the use of impact fees which have been noted above and which should be conveyed to elected officials. I Including a public/private sector advisory group may ease the acceptance process. 19. Including a public/private sector advisory group may ease the acceptance process. Using this type of group educates everyone on the openness of the process and reasonableness of the data as well as providing a means to reveal, before the end of the study, any major oversights which might have been made. Tischler & Asso- ciates, Inc. recommends this process to its clients and in over 90% of the cases it is accepted. By coming to closure with such a group prior to the final report, there are fewer acrimonious hearings and less chance of litigation. I Garbllge In - Garbage Out. - - ------- 20. Garbage III - Garbage Out. The above 19 points focus more on the non-technical issues; however, they allude to a number of technical issues, such as rational nexus. As noted, com- munities and development groups will become more sophisticated regarding the substantiation of impact fees. The relationship of level of service, geographic areas, capital improvement budgets, and comprehensive plans are all critical in devising a solid impact study. Perhaps most important is the need for the analyst to "get his feet dirty" by reviewing the local data to ensure that it is valid to be included in the study itself. An adopted recreation plan does not necessarily mean the data is valid for impact fee calcula- tions. Overcrowded school conditions may need to be reflected in the level of service definitions. '1" Garbage in will result in garbage out. IrE] Tischler & Associates, Inc. 4701 Sangamore Road, Suite N210 211 S. Manhallan Place, Suite 3 Bethesda, MD 20816 Los Angeles, CA 90()()4 Providing Solutions for Growth S E R V ICE S . Fiscal Impact Analysis · Capital Improvement Programming · Impact Fee Modeling . Revenue Strategies . Economic Development AnalYSIS . Growth Policy Studies · MUNIES . FISCALS . CRIM . CIPS BULKRAlE U.S. POSTAGE PAID PERMIT #108 ALEXANDRIA, VA ~J1lIJI8.liopment Dear Reader: This article is from the National Association of Home Builders quarterly magazine, Land Develop- ment. Tischler & Associates, Inc. (TA) is a fiscal, economic, and planning consulting firm specializ- ing in fiscal impact analysis and the development/ critique of impact fees. Our other major services are market feasibility studies, economic develop- ment analysis, capital improvement programming, revenue strategies, and growth policy planning. TA has analyzed impact fees for the following services: . schools . roads . water . sewer . libraries · parks and recreation . police . fire · general government · transit TA's impact fee studies include the following states: . Arizona · Montana . California · New Mexico . Colorado · New York · Georgia . North Carolina . Idaho . Pennsylvania . Florida . Virginia . Maryland · West Virginia Our private sector impact fee clients include: Home Builders Associations; NAIOP Chapters; Private Developers; Senior Housing Corporations; and others. Given the recent Dolan v. Tigard Supreme Court decision, Nancy Stroud, a partner in the legal firm of Burke, Weaver and Prell, provided these comments. "In Dolan v. Tigard, the court adds another part to the constitutional test, requiring that the degree of exaction be 'roughly proportional' to the impact of the development. The 'rough proportionality' requirement appears to be the same 'rational nexus' or 'reasonable relationship' test that Florida and the majority of other states have evolved for dedica- tions, impact fees and other exactions. . . . The Court has also made it clear that the burden is on the government to prove the requisite nexus. As a result, governments need to be more careful in preparing and implementing regulatory conditions such as impact fees and other exactions." Please call TA at 800/424-4318 to obtain further information or to discuss TA's impact fee consulting services as well as fulI fiscal impact evaluations. IMPACT FEES- UNDERSTAND THEM OR BE SORRY by Paul S. Tischler Anyone who has developed land in the last 10 to 15 years knows that the popularity of impact fees as a local government revenue source has skyrocketed. The three major reasons for the proliferation of fees are state and local limitations on tax hike,S; federal, state, and local mandates against increasing costs with- out a concomitant increase in accompanying revenues; and, perhaps most importantly, the great reluctance of elected officials to raise taxes. Impact fees are espe- cialIy appealing because they are passed onto future 'to Development impact fees are growing increasingly attractive to local governments. Developers need to understand impact fees if they are to spot illegal uses and improper calculation of the fees. (absentee) voters. Therefore, it is imperative that de- velopers understand fees or risk becoming the victim of either their illegal use or the improper calculation of fee amounts. This article provides some examples of illegal fees, discusses caveats pertaining to the cal- culation and use of impact fees, and offers a set of recommendations for ensuring the equitable applica- tion of fees. lIIegallmpad Fees Hundreds of today's impact fees are probably il- legal; yet, for two major reasons, the fees remain largely unchallenged. First, the fee amounts are no- ticeably small and thus are not particularly burden- some. Second, developers and builders are fearful of delaying development by bringing a legal challenge against a fee. One of the more blatant examples of an illegal fee is the fee for public art in a California juris- diction. The impact fee, calculated only against non- residential space, pays for art exhibited in such public (continued on next page) spaces as museums. Rationally speaking, such a fee- if it is to be imposed at all-should probably be as- sessed against residential units. After all, it is residents who generally find the time to visit museums after work or on weekends. Less subtle and unsupportable examples of illegal fees include the imposition of police and fire fees against housing, but not against nonresidential devel- opment. (Impact fees should not discriminate by type of land use.) Or how about the calculation of park impact fees based on desired levels of service rather than on lower, existing levels of service? Another ex- ample pertains to school impact fees, which have his- torically accounted for the highest fee amounts. Col- lecting impact fees for a geographic area that will not generate the need for any increase in school facilities is verboten as is the application of hypothetical future student generation rates, which are considerably higher than the actual rates experienced by the jurisdiction. Flaws in the methodology of calculating fees or inac- curate data assumptions can result in hundreds or, in some cases, thousands of dollars per house in unsub- stantiated fees. Monitor the Process Increasingly, state law requires fee-imposing ju- risdictions to include representatives of the private sector on fee review or liaison committees. This is cer- tainly an important step in making sure that private as well as public sector interests are accorded the oppor- tunity to participate in the review process. Often, how- ever, the few private sector representatives are as over- whelmed as the other committee members by pages and pages of text, reams of d:lta, and maybe even un- decipherable computer printouts. Consequently, the committee, including its private sector representatives, simply takes the path of least resistance and agrees to a consultant's methodology, data, and technical rec- ommendations. Given that the actions of ~he committee automati- cally vest the fees with a measure of credibility, it is imperative that all interested parties monitor the im- pact fee process. If local builders defer their involve- ment until fee amounts are detennined, they will be faced with an uphill struggle to amend the impact fee report and its recommendations~specially if the other members of the committee and the larger public have already "bought into" the methodology and its data assumptions. Major Caveats Even though impact fees raise several questions regarding their technical aspects, they also point to several caveats that are particularly gennane and understandable to the interested party. A few of these are discussed below. . o Recognize that impact fees pertain only to new capital facilities that directly benefit the payer. Many observers still believe that impact fees can be used for capital facilities that benefit existing residents. In'fact, impact fees are assessed and collected to fund only those capital facilities whose need is generated by new Knowledgeable and willing home builders must participate in and evaluate all of the relevant information related to the I., impact fee determination process. development. Further, expenditures based on impact fee . collections must demonstrate a direct benefit to those paying the fees. Under some statutes, an existing facil- ity is eligible for impact fee financing if it was deliber- ately oversized to accommodate new development. II Be aware that the impact fees collected must be spent within a reasonable time period. A mandated or general rule-of-thumb holds that about six years is a reasonable period in which to expend fees, although 10 years may suffice. In most cases, the jurisdiction must operate on the good faith assumption that the money will be spent for a specific facility within the mandated period. The time limitations encourage or require the preparation of capital improvement plans. D Educate the electorate on what impact fees do and do not accompli.sh. As already noted, fees fund only those capital facilities necessitated by new develop- ment. Fee collections cannot be allocated to rehabili- tation, retrofitting, or replacement of existing capital facilities. The greater cash cow of operating expenses must be explained to the electorate. Otherwise, the public will wrongly expect that impact fees can solve the full range of local fiscal problems. II Make certain that fees are assessed only to main- tain current levels of service-unless ajurisdiction has adopted a plan to address existing deficiencies and is actually implementing this plan. 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 , . Further, it is important that the community imposing an impact fee is experiencing significant growth. If not, the jurisdiction will be unable to generate enough revenues to make the impact fee process worthwhile. Impact fees incur a set of administrative costs and, in most cases, are legally required to be segregated from the general fund by type of account, type of activity, and geographic subarea (where appropriate). For home builders, two nontechnical points are worth noting. First, several of the homebuyers assessed im- pact fee payments are already residents within a given jurisdiction. In some jurisdictions, over 50 percent of purchasers are trade-up buyers and therefore have been paying for capital facilities through the property tax from the time they started residing in the community. Elected officials should be aware of this conundrum. In some cases, those preparing the fees hide behind "sophisticated" models and use them as an excuse not to explain the methodology and the supporting data, Second, impact' fees give rise to an "intergenerational equity" issue. Many of us and almost all of our par- ents lived in a community where the capital facilities were paid as part of the regular tax burden. The in- creasing reliance on impact fees and other exactions means that households moving into a community must now buy into the capital facilities with a one-time fee. Steps to Take From the outset, a private sector advisory group should be convened to participate in the impact fee review process and to ensure that private interests present their concerns as a unified front. Experience suggests that such groups allow for more ration~! input into the fee determination process, help avoid method- ological flaws in setting the fee, and ensure the applica- tion of relevant data. All members of the advisory committee should be able to understand the data used to justify the fee. "Garbage in" will produce "garbage out" and wiII generally lead to unjustifiably higher impact fees. Paul S. Tischler is a principal of Tischler & Associ- ates,lnc., afiscal, economic, and planning consulting firm with offices in Bethesda, Mal)'land and Los An- geles, California. The firm has prepared over 75 im- pactfeesfor communities around the country. None of the public sector fees has been challenged. in repre- senting the private sect01~ Tischler has succeeded in reducing impactfee amounts 01~ in one instance, elimi- nating afee altogether. Note: Please let us kno\v if you would like to receive a copy of "20 Points To Know About Impact Fees", a reprint from Planning Magazine. ~ Tischler & Associates, Inc. Providing Solutions for Growth 4701 Sangamore Road · Suite N210 · Bethesda, MD 20816 Also: Los Angeles, CA S E R V ICE S . Fiscal Impact Analysis . Impact Fees . Capital Improvement Programs . Revenue Strategies . Market & Economic Feasibility . Growth Policy Studies . MUNIES . FISCALS . CRIM · CIPS (800) 424-4318 BULK RATE U.S. POSTAGE PAID PERMIT #293 " MERRIFIELD. VA REPRINT "IMPACT FEES-UNDERSTAND THEM OR BE SORRY"