Commentary: Councilman Pete Hoffman on Impact Fee Urban Legends

Councilman Pete Hoffman comments on the Impact Fees

Bill 304, draft 3, establishing a County-wide Impact Fee, received a favorable recommendation from the County’s Planning Committee on 8 Sep.  It will appear on the Council agenda on 21 Sep. and I anticipate the bill will stir considerable discussion.  I welcome comments from constituents and interest groups alike, but in my seven years on the Council, I have not seen the creation of as many “urban legends” surrounding any bill as the Impact Fee ordinance generated.  I don’t deny the bill is a complex document and demands close reading to understand its intent and structure.  Hopefully, those commenting on the bill will have read it carefully before expressing support/opposition.  With this in mind, the following summarizes some of the ‘myths’ that plague reasonable debate on this issue in the expectation that all will arrive at a better understanding of this critical piece of legislation.

IMPACT FEES WILL STOP DEVELOPMENT:   Clearly such a statement can’t be supported in light of the rampant development that has occurred in so many communities that already have adopted impact fees as a vehicle for infrastructure funding.  In fact, the creation of effective planning, which such an ordinance generates, has increased/enhanced development rather than stopped it.

IMPACT FEES ARE HARMFUL TO CONSTRUCTION JOBS:  On the contrary, impact fees paid up front and used as a funding resource for County infrastructure would permit more projects, especially in difficult economic times.  Unions in particular have welcomed impact fees in mainland communities.  Job creation is increased if impact fee monies are available for County use to promote projects.

ADOPTION OF BILL 304 WILL CAUSE INDIVIDUAL LOT OWNERS TO STOP BUILDING THEIR HOMES:   Adoption of the bill could add a cost for all construction.  But each home does cause some impact.  However, Section 36-10 of the bill specifically allows a qualified lot owner the option to have the County pre-pay the impact fee.  The prepayment, interest free, becomes a lien on the property and is repaid only at time of sale of the property or when the home ceases to be the principal residence of the lot owner.  For most individual lot owners, no impact fees would be paid at time of construction.

THE IMPACT FEE ON A SINGLE FAMILY RESIDENCE IS TOO LARGE:    Bill 304 establishes five categories for impact fee assessment based on the square footage of the home.  This is not a ‘one size fits all’ program.  Further, the proposed bill sets the fee at approximately 50% of the amount currently charged in the so-called ‘fair share program’.  That figure can also be adjusted by Council at regular intervals, as is done in all mainland communities with an impact fee ordinance.  Finally, the collection of fees is based on infrastructure projects that are approved on the County’s Capital Improvement Project list.  If a project is not on the list, impact fees for that category of infrastructure cannot be collected (per State law).

THE IMPACT FEE ORDINANCE ONLY COLLECTS 50% OF THE CURRENT “FAIR SHARE SYSTEM”   The current ‘fair share system’ is certainly not fair.  The County collects only a fraction of what is assessed, leaving little to complete any project.  Further, ‘fair share’ does not assess commercial or industrial construction, only residential units are assessed.  Bill 304 would correct this obvious unfair situation and, without doubt, would increase the County infrastructure funds almost immediately.  Finally, if the percentage assessed is considered too low or too high, change it in Council.  Nothing prohibits such flexibility.

I’VE PAID PROPERTY TAXES FOR YEARS ON MY VACANT LOT. WHY MUST I NOW PAY AN IMPACT FEE?   The impact fee is assessed because the construction of a residence/business has a direct influence on the County’s infrastructure.  A vacant lot has no such influence.  However, State law (HRS 46-143(d)(5) does allow that property taxes collected over the previous five years can be credited against the impact fee assessment.  For example: if an individual lot owner paid $2,500 in property taxes in the previous five years ($500 per year), the impact fee assessment could be reduced by that amount.

WHAT ABOUT PAYING FOR ROADS OR OTHER FACILITIES IN PRIVATE SUBDIVISIONS?  No.  Impact fees can only be assessed if the facility is listed on the Capital Improvement Project (CIP) list.  No project – no fee!!  The County does not approve private roads or other private facilities for funding.  These projects cannot appear on the CIP.

IF ADOPTED, DOES BILL 304 MEAN I HAVE TO PAY AN IMPACT FEE IF I WANT TO ADD A LANAI?   No.  Impact fees are assessed only when new construction to an existing home results in an additional dwelling unit, i.e. bedroom and cooking facility.  The addition of a garage, dining area, lanai, dog house, etc. does not trigger impact fees.

ADOPTING AN IMPACT FEE WILL CAUSE A SIGNIFICANT ADDITION IN COUNTY STAFFING: Simply not true. That hasn’t been the case in other municipalities that have impact fees.  Computers do most of the work, and while one or two individuals will likely be charged with periodic work on the implementation of the program, experience shows that no community has had to dramatically expand resources to operate the system.  The additional funds obtained more than adequately pays for any increase or software expenditures.

Pete Hoffman

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