Council tentatively approves changes to local impact fees, capital improvement plan

The procedures used to collect fees for new construction in Mountain Home, theoretically to offset infrastructure costs to handle that growth, could see significant changes after the city council tentatively approved an overhaul of those laws last week.

During a public meeting Dec. 9, the council voted in favor of new statutes involving local impact fees as well as the city's capital improvement plan.

Last week's vote comes 10 months after city leaders imposed a moratorium on collecting impact fees for new housing and commercial construction retroactive to Oct. 1, 2012. The temporary measure also required the city to pay back more than $50,000 in impact fees on 12 residential projects that fell within that time frame.

Impact fees are included in each building permit for commercial and residential construction to specifically pay for projects outlined in the city's capital improvement plan.

Those projects are designed to offset the demands that urban growth places on local roads and infrastructure, current fire and police services as well as public parks, and other city facilities, based on future estimates.

In short, the impact fees are intended to allow the city's growth "to pay for itself," according to Geoff Schroeder, a representative with the city's impact fee advisory committee.

"Whenever the population of a city increases, the costs to keep that city going also increase," Schroeder said.

For example, if a developer builds a new multi-unit subdivision in one part of town, the question becomes how many additional police officers, firefighters and community parks will Mountain Home need to accommodate those additional residents.

While existing buildings and new construction in town also generate tax revenue every year, it can take up to 10 years of tax dollars from new growth to pay for those new expenses.

A discussion on impact fees took center stage Feb. 11 as members of the city's impact fee advisory committee met with the city council during a public hearing. Mandated by state law, the annual meeting outlined several proposals specifically aimed at fostering commercial growth.

The issue of the fees "went critical mass" earlier this year as the city faced the possibility of losing at least two commercial ventures and the new jobs they would generate, according to Mayor Tom Rist.

For example, a site selection committee representing one major company looked at Mountain Home to build a new plant that would've added hundreds of jobs here. However, the company turned its attention to Nampa or Caldwell instead. That decision was largely based on how much Mountain Home was going to charge them for impact fees, according to the mayor.

"As soon as they saw our impact fees, we didn't have a chance," the mayor said during that previous council meeting.

City council president Russ Anderson aired similar concerns at that meeting regarding the impact fees.

"It runs people off before we can sit down with them and discuss options," he said.

According to the mayor, the city's own capital improvement plan was at fault. It actually caused Mountain Home to charge more in impact fees than other communities across southern Idaho.

Changing that flat rate was one of the major revisions included in the new law.

"We went from having a flat impact fee, which was basically an assumption that if you do 'X' then it's going to cost you 'Y,' in addition to (paying) taxes," he said.

Schroeder emphasized that cities can only collect impact fees to pay for capital infrastructure directly needed to support new growth. For example, if the city needs to build a new fire station because the current one is old, it can't use impact fees to rebuild that facility unless a part of that construction can be attributed to that new growth.

Even then, the impact fees can only go toward the part of the project directly linked to that new residential or commercial development.

Local streets are another dilemma, according to Schroeder. While many of the existing streets in Mountain Home need significant repairs, the city can't use impact fees to fix them since revenue should already be set aside to make those repairs.

It's not fair to put those costs on the backs of new residents or businesses, Schroeder said.

The state passed the statute governing impact fees 21 years ago. The law was drafted after communities in eastern Idaho deliberately imposed higher fees on developers to keep them from building in these cities.

According to Schroeder, the state law seeks to strike a balance between allowing a city to grow while ensuring a community has the financial resources to deal with that growth.

Cities can't "unfairly stack the deck" to prevent this growth from happening by slapping a heavy impact fee on developers to discourage them from building in a particular city, he said.

In the case of Mountain Home, the city's existing law was also charging impact fees on previously developed areas in town, which didn't make sense in many cases, according to Schroeder.

The new Auto Zone shop on Airbase Road fell into that category. While the area already had infrastructure in place with access to police and fire services, the retailer was still required to pay impact fees.

The revised law eases or eliminates impact fees in cases like that. In short, it encourages developers to tear down existing homes or buildings and replace them with something new since they will likely be exempt from paying impact fees, he added.

"Common sense would tell you that if I have a vacant lot... the city is already obligated to provide police, fire and other services," he said. "I'm not adding anything new."

There are exemptions to that rule, Schroeder emphasized. For example, if a single home is torn down and two take its place, the developer would pay impact fees for that second residence since it increases the number of people living in that part of town.

At the same time, if someone wants to demolish buildings in another part of town and put in a large-scale nightclub, the city would likely need to charge impact fees, Schroeder said. Simply put, a place like that would drive the need to increase the level of police protection along with other requirements.

"If you can show us that you're paying your way, then you won't be paying any extra (in impact fees)," he said.

But if a developer wants to come here and build a subdivision or business in a previously undeveloped part of town, "then you are going to have to pay what it's going to cost to take care of that new area," Schroeder said.

However, the revised plan does protect the city in the event of some types of development. For example, a plan to build a large-scale retail business on one of the city's main roads would likely include a requirement to add a traffic light around that business to deal with the projected increase in vehicle traffic.

Impact fees charged to the builder would help offset the expense to install that traffic light.

The city council unanimously approved the revised ordinance during an initial reading on Sept. 9. Both both that and the capital improvement plan need to go before two additional readings with the council voting in favor of their passage before they become law.