Chalk Line

Options to increasing Impact Fees is the key

Will Stakelin
Government Affairs Director

As the economy continues to bring challenges to the building industry and state grant dollars are getting more and more difficult for local jurisdictions to land, there has been a deliberate shift to find project funding at the local level.  Funding sources at the local level have typically involved the collection of impact fees on new development for parks, schools, fire and transportation projects. 

The shift to find more local dollars has resulted in significant increases being proposed for impact fees and an example is the City of Olympia's proposal to increase traffic impact fees by 81%.  In July of this year, the Olympia City Council was presented with a Capital Facilities Plan (CFP) which constituted 234.5 million in Capital Facilities Projects. 

Since July, the city has re-estimated transportation project construction costs which resulted in a 25.8 million increase in which 24.9 million is representative of Traffic Impact Fee increases.  It's clear this re-estimation caught everyone off guard and the city is being challenged with growing project costs and funding deficiencies. 

The difficulty in securing state grant dollars has the city exploring funding options in addition to impact fees which, if successful, would help share the load of project costs community-wide and alleviate some of the current disproportionate costs placed on the building industry.  Local governments are being told that the best chance of maximizing the opportunity to secure grant dollars is to exhaust every local funding option they have available. 

The City of Olympia has heard this message loud and clear and should be commended for not automatically adopting the 81% increase calculated by their Transportation Plan consultant and deciding not to go hog wild at the impact fee trough.  Olympia Master Builders (OMB) is optimistic the council is trying to find an equitable solution to avoid an 81% increase and is seeking stakeholder involvement to gain valuable expertise and insight while aggressively exploring a number of funding alternatives.   

The council's Finance Committee, chaired by Councilmember Joe Hyer, has recommended the council begin discussions on forming a Transportation Benefit District (TPD) which would authorize the city to charge $20 per private passenger vehicles registered in the city.  Use of the funds is much more flexible than the restrictive parameters placed on impact fees.  If adopted, Olympia would be the first jurisdiction to take advantage of this local funding source which more fairly spreads the costs of transportation project costs across all local users living in the city and not solely on new development. 

Local government has the ability to institute a TBD, but other funding options such as a levy lid lifts and property tax must receive voter approval.  Local jurisdictions are often reluctant to pursue voter approval for things like an excess levy because project funding - especially due to new growth - is a hot political topic and often a harder road to travel than increasing impact fees on a specific industry. 

Olympia understood that an excess levy was the fastest way to secure funds for the construction of the city's badly needed fourth fire station.  The measure - Olympia Proposition 1 - was supported by OMB and received tremendous approval by voters during the August primary.

This secured the necessary funding for the fourth fire station and the city currently doesn't have another impact fee eligible facility slated for the next six years.  As a result, the council's Finance Committee recommended the elimination of fire impact fees on new development.  This saves approximately 16 cents per square foot or an average of $300 per new single family residences. 

Twenty-five percent of the construction costs will be paid for with existing fire impact fees and the remaining will be paid for from revenue collected from the excess levy.  It is anticipated the city will discontinue collecting fire impact fees effective December of 2008!

OMB is committed to working with local jurisdictions to find and support funding options that share costs proportionately amongst all users and reduce the dependency on impact fees.  OMB will be working with city staff, council members and other stakeholder groups to work collectively on exploring funding options that strike a balance between the goals of local government, the community and the building industry.