Bear with me - a long post, on an interesting regional issue regarding small business development, the true engine of America's economy.
I received an analysis of Erie's Impact fees from a business owner looking to expand in that town who has been distressed at the disincentive the fees are to remaining in her town. Jennifer McCallum is a lawyer who wrote a letter to her fellow Erie Chamber of Commerce members describing the following:
"I plan to add an additional 5,000 sq ft onto my existing building (2500 sq ft on two floors). When I began to investigate the costs of building this expansion, I learned that the fees associated with building in Erie are much higher than in the surrounding communities. The cost per square foot of building in Erie and two of the surrounding communities are below:
Erie: $10.37 per sq ft
Broomfield: $3.35 per sq ft
Lafayette: $4.06 per sq ft
When I began to investigate the reason why the costs of building in Erie were so much higher, I learned that Erie has impact fees that equal$7.33 per sq ft. I then investigated the cost of the fees in the three surrounding communities with and without their respective impact fees. The results are below:
Total Erie Fees: $10.37 per sq ft
Total Erie Impact Fees: $7.33 per sq ft
Total Erie Fees Without Impact Fees: $3.04
Total Broomfield Fees: $3.35 per sq ft
Total Lafayette Fees: $4.86 per sq ft
Total Lafayette Impact Fees: $0.80 per sq ft
Total Lafayette Fees Without Impact Fees: $4.06
"I wanted to share this information with you as I was shocked to see that there is a disincentive to growing your business in Erie. This may affect you if you are also thinking about starting and/or expanding your business here. I had no idea that Erie had impact fees that were different than those in the surrounding communities. I assumed the costs of building a structure in Erie were similar to building in the neighboring communities but, they are drastically different. I will be very sad to have to consider moving my business out of Erie. " She continues: "This is my home and I have enjoyed starting and growing my business here. But, as you will likely agree, I need to at least consider this option as the impact fees in Erie are exorbitant and add significantly to the costs associated with building the addition my business needs to survive."
Mayor Moore has responded to the assertions in part through his newsletter:
"We all share the desire for transitioning Erie into a high quality, commercially robust community. To achieve that vision the BOT has spent the last three years committed to distinguishing Erie from nearby cities by focusing on quality growth and upscale community amenities. A commitment to quality has a price. Town impact fees, on new construction and development help pay for roads, bridges, flood control, parks and other public infrastructure improvements desired by Town residents. The improvements help market the Town for quality commercial projects. State law requires impact fee charges be based on public project costs. The impact fees that help pay for and enable the construction of these public improvements are an alternative to higher property taxes for all of our residents.
"Some have implied our fees are too high. Because state law requires a nexus between fees and costs any subsidies would have to be made up through other means. With that in mind, the BOT has commissioned an independent consultant to review of Erie's impact fees by analyzing our current situation. I anticipate the results coming to the BOT in August. This information coupled with the Ad Hoc Economic Development Committee plan, due in September, should give the BOT information needed to consider and make appropriate policy changes. I look forward to getting the study data so I can form my own view." Read his full commentary on impact fees as part of his Moore Info Newsletter.
Some impact fee context from a 2003 article in the High Country News about Erie: "During [Barbara] Connors’ first months in office, she turned the town’s pro-development establishment on its head. The outspoken Manhattan transplant fired the town’s administrator because "he was one of their boys." She raised impact fees on building permits and placed a moratorium on new permits until the town ironed out questions about the capacity of its sewage treatment plant. "
I bring this up as some history to Connors' tenure as she may be a name you see re: the County Commissioner seat mentioned below.
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11 comments:
My guess is that Erie does this because it has a very low sales tax base. So they try to make it up that way.
I have also heard Vista Ridge has a Residential Improvement District which in effect hammers homeowners.
By contrast, Lafayette homeowners bear a greater burden of paying for public safety than commercial property owners do.
You don't have to guess, Kerry. These fees were instituted with no regard to sales tax or anything else. Simply an attempt to stop any growth at all.
The proof would be found in Board of Trustee (BOT) minutes taken during the tenure of Barbara Connors as Mayor of Erie.
The High Country News would, of course, label the pre-Connors establishment in Erie as pro-development. HCN is a little slanted.
However, the "old guard" as they were referred to back then, were simply doing their best to control growth, and to use the resulting fees to provide basic services. The streets of old town Erie weren't even paved until 1999. This only happened because Erie was finally getting new developments built and had the money to do so.
They also used the resulting fees to improve their infrastructure which was in dire straits. Water/sewer lines and facilities hadn't been updated in decades.
Connors was part of a small backlash anti-growth group who barely eked out a victory and gained power. They so abused their power, most of them were booted out after one term.
But, during her tenure Connors fought hard to stop growth in Erie. Impact fees instituted during her tenure are an example.
Connors is the typical out of state transplant who wants every thing to be frozen in time, to stay the way it was when she moved in. As I've stated before, she's also the typical anti-growth hypocrite in that she lives in a cookie-cutter suburban sprawl neighborhood.
I'd be surprised if the Boulder Dems selected Connors to fill the vacant commish seat.
d-b,
Connors got appointed as a County Planning Commissioner on March 8th, 2007. Toors made the motion seconded by Perlman. Approved 3-0.
So how did that happen?
Since I don't know the details behind this, I can't say for sure.
Don't know how many applied for the vacancy. I do know this is not a highly sought after position. Several times there have been openings on the BC Planning Commish with only 1 or 2 interested parties.
But, let's see - Connors endorsed Toor when he ran for Commish. so maybe it was paybacks. But Chris Berry and Don Brown also supported Toor, so don't count them out.
Connors was only appointed in March, and spent only a few years previously in Boulder County politics. Aside from thinking she's too extreme, I don't think she's paid her dues.
Just for reference, here is a state statute that would apply to the impact fees in Erie:
29-20-104.5(1) (Impact fees). Pursuant to the authority granted in section 29-20-104 (1) (g) and as a condition of issuance of a development permit, a local government may impose an impact fee or other similar development charge to fund expenditures by such local government on capital facilities needed to serve new development. No impact fee or other similar development charge shall be imposed except pursuant to a schedule that is: legislatively adopted; generally applicable to a broad class of property; and intended to defray the projected impacts on capital facilities caused by proposed development.
The point of the statute is that impact fees in Colorado must be limited to defraying the costs of actual impacts. This is a fairly recent statute, so the case law is slim, with no reported appellate cases to demonstrate how effective this statute is (or is not) at deterring abuse of impact fee authority. It sounds like Erie might have been a target given the political motivations of those who bumped those fees up to their highest level.
So the question is: Why hasn't a developer challenged Erie on the fairness of their fees?
Could it be that the fees actually do defray the cost of development? I don't actually know what component fees feed into the totals cited here, so I can't say. Nonetheless, if that is the cost to make developmnet "pay its own way," in accordance with state law, then I think it's hard to be too critical of Erie trying to set appropriate policy. While this might serve the interests of "BANANAs" and other extreme anti-development advocates in the short term, setting impact fees wherever those costs may come out is good policy for the town in general considering the dismal revenue structure that might have only been compounded if those costs had been allowed to accrue to the Town (and build and build in deferred maintenance, deferred service expansion) like they had been doing.
While I'm at it, I should also propose, for the sake of argument, that Lafayette's lowest rung status on this list might not be such a badge of honor. I'm not sure (again, having no detailed knowledge of Erie's fee structure) that we want to more than double fee costs in Lafayette, but it wouldn't surprise me if it were pretty simple to show that taxes are being used to cover in Lafayette what is covered by one-time fees in other jurisdictions. In other words, Lafayette provides services at a higher level than the fees that developers pay are able to account for.
Well, Alex, you raise an interesting question. A couple of years ago the council pressed the city admin to revamp the fee structure. So there is work done to compare all of them. So I don't know how valid the assertion is that we are that low. I don't recall Erie sticking out that high.
We did find that commercial developers never contributed to the PRAD fund for park development though homebuyers did. That was fixed. We added a public arts tax too.
And since we have no public safety tax, commercial property pays little if anything for police and fire.
Just in case Doug Bruce starts lurking here, we should be clear about "fees" versus "taxes." Lafayette implemented a modest public art fee, for new development proposals; a public art or cultural arts tax was just asked about in a recent public survey but has not been mentioned before that I'm aware of. I'd be interested to know the results of that survey (and I'd be surprised if a statistically valid community survey showed overwhelming support for such a tax).
Impact fees (in Lafayette, at least) have received some measure of attention in recent years. I think it was in 2004 that PRAD was finally made applicable to commercial development, which was an important step. And some adjustments to other fees were recommended by the City staff and acted upon as a result of the same on-going process. Lafayette may no longer be low (even relative to Broomfield, as in Dan's post), and it's even possible that Lafayette is close to having the optimum fee schedule to achieve its goals.
The unanswered question is whether land development pays for itself, in terms of its increased demands on public services. As a matter of public policy, I understand that what Erie has done with fees may stifle economic growth (or certain segments, like the small business example), but I appreciate any attempt to quantify development impacts. Moreover, when park development was the big issue in Lafayette a couple years ago, funds were moved in from sources other than PRAD; when a new police station and fire station were built, the bonds relied on the pledge of tax streams, not cash accounts built up by incremental development fees. I’m still surprised when someone on the City staff tells me what the Service Expansion Fee pays for, because it’s not much (and it actually has to do with utilities), when it could be much closer to the actual cost of, for example, developing a fire precinct in the Exempla area.
Initially, when the City studied fees, it assumed that the existing fees were the only point of reference, and that the scope of that fee was not subject to change. PRAD was an exception, where the City determined that recreational impacts were coming from (and serving) commercial development as well as residential development. The new stormwater fee is also an exception, with revenues now coming in to cover a program that was largely unfunded for years.
A Public Safety Tax is something we should look at in Lafayette. I do have to wonder how much of this would go to capital costs that might have been assessed as a fee during the development process.
Alex, to my knowledge the only General Fund money not going to operations is in the emergency reserve.
Why not query other council members as to why a public safety tax is not on the table?
The only thing I know about public safety tax is what you've said here, Kerry, and general knowledge about the safety budget (police, fire, ambulance - all of which have significant funding needs). If there is something specific proposed, or there is "on the table" or "off the table" status from the City's perspective, I'm ready to be enlightened.
Having watched 1A and other tax issues go down in flames last year, I wouldn't be surprised to hear that any tax issue has been deemed a non-starter this year. Correct me if I'm wrong.
But back to fees, does anyone have a break-out of the Erie fees and what they fund? With that knowledge in hand, it would be interesting to compare with what Lafayette budgets out of tax-derived revenues.
Why is there no Public Safety Tax? Hmmm, maybe because in the past we did not need one, and adding more taxes on the back of the residents has never has been a high priority of mine. Lafayette has and continues to evolve, and if it becomes a justifiable need then I am sure we will look at it. No conspiracy, no mystery, no FUD.
Thank you for the straightforward answer.
Since a tax would have to be approved by the voters, I think the one and only job of the council is, as you say, to determine if there is a need.
Given a huge backlog of road repairs, uncertain sales tax revenues, a recent history of providing rebates to new tax producers, and the oft-repeated piece of analysis that Lafayette provides a level of services beyond its means, what is the tipping point for sending something to the voters?
While I would think hard about a new tax, I would certainly think about it. The one advantage of a bond is that it is not a new tax, but I get the sense that this is not really solving the budget problems, only pushing them off into the future. Am I wrong?
If we have the choice between solving a problem now or passing the buck, doesn't a safety tax (as proposed by the Fire Chief or formulated otherwise) deserve a closer look?
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