My thoughts on a comment in the post below re: Erie's impact fees:
Alex - Don't presume my comments to be so personal. You asked, for the sake of argument, what's so wrong with making development pay its own way. So I'm responding. That concept to me is fraught with flawed premises. What may be described as taxpayer subsidies could also be a pragmatic give-and-take dynamic necessary to attract businesses that make a community more desirable. You have to give a little to get a little. Make it attractive and affordable for a business to locate and employ a few more residents. Have a few more dollars donated from said local company to a local charity, because they like the town. Take in a few more dollars in earmarked funds for open space. (This is in a small business realm, a la Jennifer McCallum's scenario, not Wal-Mart EDA scenarios. There you decide to give a lot and keep your fingers crossed.)
My problem with the "Make growth pay its own way" concept is the myopic viewpoint you must have to stand apart from a commercial development and point and say well, for the extreme privilege of doing business in our town, they must pay for their water connection, their street light, landscaping, etc.(whatever the fees are ostensibly meant to cover). In a bubble, where you are the only community where a business could locate, you could demand that such costs be borne by the developer. In said bubble, you have a cornered market- if they want to tap into your residents/visitors as a revenue source, they will pay whatever you charge right up to the tipping point of profitability, right?
But in reality, with other communities nearby offering similar customer and labor pools, it is spiteful and short-sighted for people to see such commercial growth fees as black and white. All things being equal, what does the community have to gain by the commercial development? You may lose the business to another community where the immediate, absolute cost is not what they are trying to cover. They are willing to take on some of that cost for the longer term impact of your goods/services/jobs. Erie seems to not be concerned with the potential for such loss.
Impact fees are just a couple of the variables to be considered by a business looking to expand or relocate. It seems to me a town would not want to be so measurably different from its immediate neighbors, when sales/use tax revenue is so coveted.
Are there jerks who run businesses who never contribute to local charities, never intern high school kids or care how much they contribute via taxes to open space? Sure, but I believe they're the minority. Why create spiteful policies based on those kinds of business owners? Make policies that show appreciation and the community will benefit in the long run.
Subscribe to:
Post Comments (Atom)
8 comments:
For what it's worth, even if I assume comments should be taken personally (which I usually don't), I assume I've invited that by participating in the forum. Don't worry about stepping on my toes.
What I object to in the extreme is the way any support of impact fees at all is being generalized to "spite" for commercial development. I just don't think that is a valid argument, even in Erie. Remember, there is a state statute that limits fees to the "nexus" of actual impacts. You also have former Trustee McCallum giving an explanation that probably applies to many of his collegues at the time, which is that they were looking for options and believed the staff had come up with a reasonable proposal. Whether or not Barbara Connors had a hidden agenda, I don't know - but for a community with such a poor tax base, the use of impact fees in Erie was certainly a reasonable option at the time.
Again referring to Erie, are impact fees now unreasonable? The give and take you mention becomes possible when, say, future sales tax becomes a replacement source of funds. Ironically, it is possible that taking away the impact fees might be the only way to push things in that direction in some communities, but I think we've seen ample evidence that Erie is not in such dire straights; commercial development is on the horizon for Erie, and those developers probably should "pay their own way."
It seems to me the issue in Erie, considering the small business angle, might be to tweak the system. The impact of expanding an existing office on Briggs Street, per square foot, is probably a lot less than adding the same square footage in one of the many greenfield flagpole annexations all around that town. There is a way to account for that through the fee structure, I'm sure, if not provide a credit or incentive for specific types of development outright.
Finally, it deserves mention that whomever in Boulder or Erie, or wherever, has inspired this commentary, Dan, "development paying its own way" comes up just as often, if not far more often, in the context of residential development. Councilor Bensman was right on the money when he brought that up in the previous thread.
My experience with "growth paying its own way" sentiments goes back to Erie circa 2001, and nearly my entire time living in Boulder ('87-'03). In any sprawl and environmental impact discussion, the phrase is thrown around. And my impression is that it comes from growth-weary residents regarding their concerns for previously undeveloped land (not open space agency-owned/managed land) being converted to commercial development.
Perhaps by the time one is elected to office the phrase is less legitimate. But amongst the citizenry I find this sentiment common. In most cases (i.e. the Lowe's annexation vote) the passion behind the phrase seems to come from deeper dissatisfaction with the specter of multinational corporate juggernauts and their environmental/social impacts. This arguably deserved dim view of corporate development is misplaced when it hinders the opportunities for small business growth.
There is a long history of impact fees as an academic subject. So while growth paying its own way may seem to be nothing more than a phrase co-opted by politically motivated interests, there is an entire universe of considerations - involving the funding of basic public infrastructure, mind you - that is being left behind if one chooses to allow these co-opters to define the dialogue.
You'll have to forgive me if I choose to ignore them. I think it's a very legitimate issue, though I do acknowledge that a purely academic view of the subject is just as much in a bubble as those who allow rabble-rousers to define critical public discourse.
http://www.planning.org/policyguides/impactfees.html
OK, help me understand the basics.
Tell me what I'm missing in the following:
There are, in basic terms, two types of expenditures a city incurs. 1)Capital Improvements, and 2)Maintenance Expenses.
Capital Improvements - CapEx in business jargon - are those costs to build infrastructure, streets, lights, water/sewer lines, water treatment plants, buildings for expanded services (i.e. fire stations, larger police facilities, etc.)
Maintenance Expense would be any costs to maintain a certain level of service in the community. These costs would include all costs to operate city departments, including salaries, etc.
If costs are divided this way, seems to me the CapEx costs would be the costs paid for by Impact Fees. Most of these fees would be paid for by residential developers, but commercial developers would pay as well. Some sort of graduated fee schedule depending on what sort of commercial development the town desires would be appropriate.
In essence, when you buy a new home you're paying your share of the Impact Fees as those costs would be built in.
Part of the cost of the impact is replacement. So, forecasting is critical. And, the Impact Fees should be high enough so as to build an infrastructure fund over time to be drawn on when infrastructure upgrades are needed.
Property and Sales/Use taxes would pay for the routine maintenance expenses. If a town decides they don't want a lot of retail, they pay more in property taxes to maintain a desired level of service.
Would this scenario price a town way above surrounding towns in total Impact Fees? Probably. Would commercial development go elsewhere? To a certain extent. But if that's what the citizens want, so what? If they understand the cost of not attracting retail or other commercial, that's their choice.
If Erie doesn't depend on sales/use tax for revenue, perhaps it's in a better position then having to subsidize the world's largest retailer to entice them to stay.
I think that's just about right, Doktorbombay.
The capital costs of building a city can be fairly distributed amongst private developments (typically upon conversion to urban use), if there is a fair and equitable accounting system for impacts and credits. That is, in theory.
Most impact fee programs are, in fact, a crude sketch of impacts, which may overexact or, in a vast majority of cases, undercollect impact fees. There are Constitutional issues, as well as statutes that control fees and exactions, as in Colorado.
Ideally, the program allocates costs to residential development when impacts to a given area are clearly residential in origin, and costs to commercial development over all the areas where commercial development has an assignable impact.
Some areas would involve blending of many different fees, but many areas of the city would be paid for by a dominant land use. Where blending of multiple sources is necessary, over a span of time, to build a major improvement, an escrow fund would be funded by a sequence of developments...
But back to reality: Lafayette is struggling to fund needed improvements. Erie just erected a signal at 111th and Arapahoe. As Doktorbombay notes, Erie's situation isn't necessarily a bad thing.
Truthfully, I do not profess to know the right answer for impact fees. Nonetheless, revenue and capital budgeting are critical issues in both Erie and Lafayette.
I think it's very easy to attack the concept of impact fees, but what body of electors would rather pay taxes on their home than have a new developer in town pay for the infrastructure needed to serve their development? This perspective is essential: Unless you really want to slash the budget or find money elsewhere, most voting taxpayers would rationally rather have a developer come to the city with resources, rather than paying for capital costs out of the tax funds of the city.
D-B.
Good job.
Unfortunately I am not aware of any such theoretical model being built, let alone followed. Even the concept of building such a model has faced fierce resistance down at city hall. I have my own theory as to why.
You would find that many public entities have no money reserved for infrastructure improvements. HOAs ironically have to do so by law. Back in 2001, Lafayette decided to invested $5M in econnomic development rather than create such a reserve. (Financially that hasn't worked out yet, especially since the principal is at risk and it crippled the Urban Renewal Area. The latter had to be known.) Fast forward 6 years and the city admin wants the city to borrow forward $6.8M for road repairs and traffic control. BVSD got a voter approve huge bond for infrastructure improvements.
Revenue and capital budget in are indeed always critical for cities. In many ways, they make them that way. Often looks intentional.
Take Louisville. They knew a couple of years that Home Depot was building their Boulder store. And Superior/Lafayette were growing retail capability. But Louisville ignored that. "Suddenly", a budget crunch??
Andrew Moore asked me when the Super W*M was opening. Erie is budgeting a 20% decrease in sales lost by Safeway to W*M. He is a businessman and understands. Lafayette on the other hand believes no such thing about KS and Albertsons.
So regardless of the theoretical models, the real world as we've acknowledged doesn't work that way. Especially when the fox is guarding the hen house.
Thanks Alex and Kerry for the confirmation. I wanted to know how close public funding mirrored private business. Theory aside, it sounds like many of the challenges in public funding, as in private business, are created by those who preceded us. Prior decisions can limit our options.
Like paying for road repair with bonding. This should be paid out of current sales/use/property tax revenue. Not with debt. This could be a never ending, and losing, battle to keep up with road repairs.
But, if previous admins/councils didn't properly plan for future expenses, you don't have many choices.
Separately - Anyone who believes KS and Albertsons will not experience a dropoff in business because of the SuperCenter is dreaming. A certain percentage of shoppers at both KS and Albertsons only shop there because of the convenience. Given a lower cost (or perceived lower cost) option, they'll take their dollars across the street. Several other KS and Albertson's shoppers will try WM out of curiosity. Some will return to KS/Albertson's, some will not.
There will be an increase in total grocery sales in Lafayette when WM opens. That doesn't mean all grocers are healthy, and it certainly doesn't mean Lafayette residents are eating more.
Erie is very prudent in forecasting a 20% decline at Safeway. To do otherwise is foolish. I'm guessing Erie is hoping that it's not more than 20%.
D-B,
Separately - KS and Albertsons are expected to respond with promotions and more coupons. Good for the consumer. But it will lower sales tax on the existing base, including garden, pharmacy, auto supplies and service, etc. (unless folks upgrade what they buy or food prices keep climbing based on the ethanol effects.) But the money to the city does not flow based on total retail sales for W*M. It flows based on the EDA. A separate item is what will happen to Albertsons and Waneka Market Place. Stay tuned on that one.
Aug 8th is rapidly approaching.
Post a Comment