“The Smiths” were born and raised here, and have just bought a brand new house. Should they pay a special tax over and above what you pay to have their child in public school? “The Jones” just downsized into a brand new retirement villa. Should they pay a special school tax? Or road tax? Or parks tax?
You may hear that Impact Fees (a local government tax on new construction to fund off-site public capital facilities such as roads, parks and schools) “make new growth pay its way.” But in Guilford County 68% of new homes, 65% of new apartments, and 84% of new office space is purchased or leased by EXISTING residents and businesses, not newcomers.
You may hear that impact fees “make developers pay.” But in reality, just like the cost of bricks, lumber and permits, impact fees are passed on to the consumer in the sale price.
You may hear that “residential development does not pay for itself,” but this is simply not true. Economist Dr. Don Jud studied the 2004 economic impact of real estate development in Guilford County and found that the average new single family home in Guilford County pays 16% more in property taxes than existing homes. And new development also already pays for all “on-site” and “at-site” infrastructure, such as streets, water and sewer lines, stormwater ponds, street lights, traffic lights and turn lanes. Many developments also provide recreation facilities that relieve burdens on public facilities.
Impact “fees” are a discriminatory tax on one small segment of the community: people who buy or rent new construction. Why single out construction customers to pay for public infrastructure? We don’t make Harris Teeter pay into the food stamp program. We don’t make newspapers give free advertising space for government legal ads. We don’t make families with kids in school pay extra for public schools.
Impact fees hurt affordable housing. Because impact fees cannot be scaled based on house size or price, they place a disproportionate burden on lower-income households. They increase down payment requirements and closing costs, which are based on a percentage of the sale price. A $1,000 impact fee adds $1,300 to the sales price of a home, and costs the buyer $2500 over the life of a 30year 5% mortgage.
Impact fees never eliminate keep taxes down because they never amount to enough to pay for all new capital facility needs. They also can’t be used for maintenance or operation, retrofit or replacement, or to fill a backlog of infrastructure needs. But they can erode public support for bonds to do these things.
There are other options that provide a more predictable, stable, and fair means of providing for infrastructure, such as revenue bonds, local option sales taxes, and special tax districts. Simply put, public infrastructure that benefits everybody should be paid for by the public at large.
Other Things You Need to Know About Impact Fees:
• Small projects or affordable housing projects cannot be legally exempted from impact fees.
• Impact fees can hurt economic development efforts and can actually exacerbate “sprawl”, as rising real estate prices send consumers to the next jurisdiction for lower prices.
• The local government must intend to and show how it will fund the construction, operation, and maintenance of existing and planned facilities to the same level of service that new development is being asked to fund through impact fees.
• Impact fees are not bondable because development is too cyclical to be a reliable revenue source.
• The State Legislature must grant statutory authority for impact fee programs.
• Impact fee programs must provide for variance procedures; vesting; allocation of interest; establishment of levels of service; exclusion of pre-existing deficiencies; establishment of zones within which fees collected must be spent; an examination of the use of all other funding sources available to the local government; credits for all other taxes paid, including future payments to cover bonded debt, in order to avoid illegal double taxation; and refunds if fees aren’t spent in a “reasonable” time frame, usually a 5-year CIP window.
Triad Real Estate and Building Industry Coalition ♦ Home ♦ Contact Us ♦