News & Info

What are Impact Fees?

Will Stakelin, Govt Affairs Director

With the Cities of Olympia and Tumwater proposing huge Parks Impact Fee increases recently, and a number of other jurisdictions proposing new impact fees, the issue is once again a hot topic. An impact fee is an onerous tax imposed by local government and school districts as a condition of approval to allow new construction to occur. The Growth Management Act (GMA) authorized impact fees are driving up the cost of new development while the waiting process for development permits stretches from months into years. The goals of GMA for affordable housing and timely permit processing are unattainable due to rising impact fees and growing governmental regulations making the GMA nothing more than a self-defeating system.

The calculation of these onerous impact fees is somewhat mysterious and often very complex. The majority of jurisdictions rely on consultants to craft the fee proposals and calculate the fee. The law requires the use of a formula to calculate the fee, but does not state what the formula should be. The task of reviewing and tracking how each jurisdiction calculates, collects and spends the money is a huge undertaking and rarely done.

Fortunately, as a result of Initiative 900 the state auditor's office has the authority to conduct Performance Audits of state and local government. Performance audits include, but are not limited to, identification of cost savings, services that can be reduced or eliminated, programs or services that can be transferred to the private sector, analysis of gaps or overlaps in programs or services and identification of best practices.

How does this process apply to impact fees? The state auditor's office is preparing to conduct a "comprehensive, independent performance audit of impact fees" of five Western Washington cities (Vancouver, Federal Way, Redmond, Maple Valley and Olympia). According to the state auditor's office, the objectives will be the identification of what method the city uses to calculate impact fees based on the direction in state law RCW 82.020.060 and how Olympia demonstrates these fees are appropriate. It will investigate how effectively Olympia uses impact fees for facilities that:

1. Correspond to the demand for public facilities from new development.
2. Benefit new development proportionate to its share of the financing of new or expanded facilities.
3. Are consistent with a comprehensive plan or a capital facilities element of a comp plan that has been adopted in accordance with state law.

The audit will "determine whether impact fees have been spent on facilities that relate to the additional demand for those facilities resulting from new development". It will be interesting to see what the resulting costs to residents are and what can be done to reduce those costs if Olympia doesn't meet these objectives.