NEW RICHMOND: Restructuring impact fees

Impact fees are one-time fees charged to developers as part of the building permit process for new construction and qualified renovation. The fees are used to pay for public infrastructure deficiencies “attributable to growth and development.”

The specific types of projects for which the funds can be used are defined by state law and restricted to: wastewater/water infrastructure; parks, playgrounds, athletic fields; solid waste and recycling facilities; highways, streets, transportation facilities; stormwater infrastructure; and fire, law enforcement and emergency medical facilities.

Funds cannot be used for vehicles, operational and maintenance expenses, purposes other than those for which the fees were collected and existing deficiencies.

Funds must be used for a specified project within eight years from the receipt of the funds. 

A needs assessment is typically conducted every three to five years depending on the rate of a community’s growth and development.  

Typically a needs assessment is commissioned to evaluate existing impact fees in relation to future capital improvement projects as identified in a community’s Capital Improvement Plan as well as how likely those projects are to be implemented within the next three to five years.

In 2022, the city hired Ehlers to conduct a needs assessment to evaluate eligible projects, analyze the existing impact fee schedule and recommend changes.  

Ehlers representative Jon Cameron explained that determining the portion of a specific project that can be funded via impact fees is a complicated process.

“You are going through a deficiency growth analysis to identify the share of a project’s cost that  is attributable to future growth. That is based on an identifiable service loan standard,” Cameron said. “Looking at the list of future projects and identifying a deficiency in a particular category, you have to be able to say, of this total cost, a certain percentage of it is attributable to meeting that existing deficiency and the remaining cost is attributable to meeting a future growth need within the city. That is the share of that facility cost that can be recovered through impact fees.” 

At the council meeting Monday night May 22, Cameron presented a summary of the analysis and recommended changes to the existing fee structure and how fees are calculated depending on the type of development.

Based on the last needs assessment conducted by the city in 2015, impact fees were used to fund projects in five specific categories: municipal buildings; transportation; parks; water; and sewer.

Based on the 2022 assessment, Ehlers has recommended that the city add two new categories designating the new library project and law enforcement as specific categories in addition to the original five categories.

Ehlers has also recommended specific changes to residential rates resulting in an increase for an average single family home totaling $2,211, from $4,400 t0 $6,611.

Municipal facilities, $733.

• Library, $1,694 ($1,694 increase).

• Law enforcement, $221 ($221 increase).

• Parks, $681 ($70 increase).

• Stormwater, $312 ($312 increase).

• Water, $1,312 ($334 increase).

• Sewer, $960 ($18 decrease).

• Transportation, $1,431 ($331 increase).

The rates are not based on the cost of the home and are the same whether the home cost $250,000 or $750,000 to build.

Ehlers recommended changes as well to the commercial/industrial rates and to how those fees are calculated.

Currently commercial/industrial (non residential) rates are based on the size of a business’s water meter with the categories of the library, law enforcement and stormwater being exempt.

The new recommendation would base rates on a combination of water meter size and square footage.

Water and sewer rates would continue to be calculated based on water meter size while for the categories of law enforcement, stormwater and transportation, rates would be charged based on square footage. 

Non residential example: 3,000-square-foot commercial building with 2 inch water meter. 

• Law enforcement, $270 ($270 increase $0.09 x 3000 square feet).

• Stormwater, $390 ($390 increase $0.13 X 3000 square feet.).

• Water, $10,493. 

• Sewer, $7.676. 

• Transportation, $1,789 ($1,789 increase $0.60 x 3,000 square feet).  

A public hearing is required before the council can decide whether or not to adopt the recommended changes. That hearing is scheduled to take place in conjunction with the council’s next regular meeting on Monday, June 12.