Chalk Line

Olympia's Impact Fees Process Audited

Karen McClennen
OMB President

State Auditor Brian Sonntag's office recently revealed their audit findings and recommendations for five cities that had the state's highest impact fee revenue from 2004 to 2006.  Those cities were Olympia, Redmond, Vancouver, Maple Valley and Federal Way.

The Olympia Master Builders (OMB) has been interested in the audit's findings, because the purpose of impact fees is to help offset the costs of services associated with new development, such as roads, schools, fire facilities and parks. Even though our members pay the impact fees, often times there is no "explanation" for the amount of the fee, nor is there any accounting to our industry or the general public for the use of the fees collected.

The purpose of these audits was to see if the cities were collecting and administering impact fees appropriately and in accordance with state law and if the public was getting what it is paying for.

Here are some of the findings and recommendations regarding Olympia:

Park Zoning - "Olympia may not be spending park impact fees as effectively as it could, based on the results of a citizen survey and based on other cities' use of multiple park zones.  Olympia should consider removing "one-half to one mile" and "10-to-20-minute walk" from its definition of a "Neighborhood Park."  Olympia should consider dividing the city into two park zones to demonstrate a clear relationship between where impact fees are collected and spent."

In 2007 OMB agreed to a modest increase in the City of Olympia's park impact fee with the understanding that the city would be reassessing its park funding.  OMB has been working with elected officials and staff since that time to keep this issue on their radar and it is scheduled to be addressed in early 2009.

School Impact Fee Interest - "Olympia and Federal Way do not remit any interest they earn on school impact fees to the school districts; therefore, the interest income is not spent on the purpose for which the impact fee was imposed, as required by state law. Cities should allocate interest earnings on school impact fees collected and remit those interest earnings to the appropriate school district(s) so the interest earned on impact fees can be spent in accordance with state law."

OMB supports this audit finding.

Fire Impact Fee - "Olympia's fire impact fee schedule/calculation does not effectively demonstrate the connection between growth and system improvements.  Olympia does not take into account the cost of public facilities necessitated by new development or the availability of other financing...The City of Olympia should revisit its fire impact fee schedule and consider if it is suitable to continue charging the fire impact fee."

For the past few months, OMB has been working with the City of Olympia to have Fire Impact Fees eliminated. The City of Olympia Finance Committee will be recommending to the Olympia City Council eliminating the Fire Impact Fees effective December 31, 2008.

Permit System -"Vancouver and Olympia integrated their permitting systems with their accounting systems.  This is a leading practice that results in more effective internal controls and limits manual data entry."

I believe this audit gives OMB members and the general public the information they deserve regarding impact fees.  It's encouraging to see the City of Olympia already addressing some of the issues and OMB looks forward to continued dialogue with the City to ensure the audit's findings are implemented.  The entire audit can be viewed at: http://www.sao.wa.gov/Reports/AuditReports/AuditReportFiles/ar1000014.pdf.