How To Grow Without Raising Taxes
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Regulatory Mechanism or Taxes? It has been established by case law that impact fees are considered regulatory actions and are not taxes. Impact fees are authorized through the police power; not the taxing power. They are part of the development approval process. Requiring an impact fee to provide adequate public facilities is similar to meeting site planning and zoning requirements. As such, Amendment 707 to the Alabama Constitution provides home rule and regulatory powers that the county may use to enact impact fees without having to submit to legislative influences. Shelby County has home rule. Amendment 707 in part: Section 2. Supplementary powers. (a) The Shelby County Commission, in addition to, and supplementary of, all powers possessed by or conferred upon Shelby County or otherwise provided by general law, may by ordinance or resolution exercise the following powers, provide and regulate the following services, activities, programs, and facilities related thereto, and establish and provide for civil penalties for violation of its ordinances, rules, and regulations applicable thereto: (1) Police and fire protection. (2) Garbage and solid waste collection and disposal. (3) Public health facilities and services, including hospitals, ambulance and emergency rescue services, and control of dangerous animals and animal nuisances. (4) Public street and road construction and maintenance, including curbs, sidewalks, street lights, and devices to control the flow of traffic. (5) Parks, recreational areas, programs, and facilities. (6) Storm water and sanitary sewage collection and disposal systems. (7) Development, storage, treatment, purification, and distribution of water. (8) Public housing, public buildings, and parking facilities. (9) Public transportation. (10) Libraries, archives, and arts and sciences programs and facilities. (11) Economic development and tourism initiatives, developments, and projects. (12) Adoption of codes, including building, housing, plumbing, and electrical codes for the protection of the public. (13) Litter, trash, and rubbish regulation and control on or adjacent to public roads, streets, or highways, or on or in public buildings, public parks, and public properties. (b) Unless otherwise provided by an act of the Legislature in effect upon ratification of this amendment or unless otherwise provided by general law, Shelby County may not exercise any of the powers listed in subsection (a) or provide any service listed therein inside the corporate limits of any municipality or within any other territory in which a municipality or an instrumentality of a municipality is authorized by an act of the Legislature to exercise the power or provide those services, or within any other county, except by contract with the municipality, municipal instrumentality, or county affected. |
Legal Precedent Beginning in Florida, the legality of fiscal impact fees has been tested throughout the nation. Approximately 25 years ago, Florida experienced the beginnings of an enormous period of growth that continues today at a somewhat slower rate. Florida residents realized that the existing infrastructure (utilities, police, fire protection, and roads) would have to be expanded and enlarged—at significant cost to the taxpayers—to accommodate the rapid influx of new citizens. When existing Floridians refused to bankroll new developments for incoming migrants, the idea of impact fees was born: Let new growth pay for itself. Needless to say, many land developers, builders, landowners, and special interest groups initially were adverse to the concept. Taking an adversarial posture, these groups litigated impact fees on an individual basis—school impact fees, road impact fees, sewer impact fees, fire impact fees—sending the cost of litigation soaring. Rational Nexus Trial courts to the Supreme Court have ruled that approved impact fees must be based on a rational nexus test. This test requires an established connection (nexus) between new development and the new or expanded facilities required to accommodate that development; identification of the cost of the new or expanded facilities needed to accommodate the new development; and appropriate apportionment of that cost to the new development in relation to benefits reasonably received. State courts across the country have validated extradevelopment capital funding payment requirements as part of a particular governmental entity's land use regulations. If impact fees are to be considered land use regulations, they must constitute a reasonable exercise of police power. The tests that the courts have recognized in determining the "reasonable exercise of police power" requirement are:
By Malcolm R. Smith, CCIM
RECOMMENDATIONS FOR SUCCESS Don't use impact fees as a method of growth control. Use the impact fees to contribute the financing to provide the public facilities necessary to accommodate the growth in the community. The impact fees should merely accommodate the growth envisioned in the community's general or comprehensive plan. If that growth is inappropriate, change the plan. Determine capital improvement needs through build-out. It is essential to have complete information on capital needs. Many communities do not have a practical capital improvement plan that addresses the public facility needs for even the next five years. Impact fees based on incomplete Capital Improvement Projects will not generate sufficient revenues to assure that development pays its own way. Show all capital improvement needs, including those not being financed with impact fees. The identification of projects necessary to overcome existing deficiencies is needed to show the development community that they are not being asked to correct existing problems. A corollary is that the community must demonstrate that they are using impact fees exclusively for growth-related projects. Other sources of revenue must be found for projects benefiting existing residents. Develop long-range financing strategies for projects not financed with impact fees. Projects that are not financed with impact fees will need to have other sources of revenue for construction. The agency should try to identify potential sources of revenue that will be used to build nongrowth projects. The extent that the agency is successful in identifying specific sources of revenue may be an indicator to the reality of achieving the ultimate goals of the community's general or comprehensive plan. Do not attempt to finance operations or current deficiencies with impact fees. Impact fees justified by the need to offset the effects of growth should not be used for operating expenses. To do otherwise would be unethical and could result in a loss of faith by the community. Produce a comprehensive impact-fee report, including rationale and calculations, make the report readily available to the public. Performing an extensive study prepares the agency to answer questions about the way the fees were calculated and the use to which the fees will be put. Complete documentation can be a powerful form of defense against challenges to the agency's ability to impose impact fees. Update the impact fees periodically. Impact-fee calculations should be updated often to ensure that the assumptions are still valid. The projected growth of the community, the facility needs, and the cost for providing those facilities should be verified. Reviewing the impact-fee calculations together with the capital improvement plan or budget would be ideal. At a minimum, the impact fees should be reviewed every two years, or whenever a major change occurs (e.g., major annexation or general plan revision) in the community. Ross & Thorpe, Impact Fees: Practical Guide for Calculation and Implementation, Journal of Urban Planning and Development, Sep, 1992, http://www.revenuecost.com/imp_fees.html |
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