Uses of Fees or Alternatives to Fund Transit (2008)

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3 USES OF FEES OR ALTERNATIVES TO FUND TRANSIT By Jaye Pershing Johnson, Esq. I. INTRODUCTION Growth communities in the United States facing de- clining federal assistance for local public facilities, property tax revolts, and voter resistance to an increas- ing tax burden have turned to alternative techniques to finance growth-related capital facilities. Development impact fees are used to offset the consequences of growth.1 No fewer than 29 states have adopted impact fee enabling acts (for other than water and wastewater fees).2 These acts authorize localities to use develop- ment impact fees in connection with the process of land- use regulation and permitting to generate the financing needed for development of capital facilities that will be necessary to serve new development. Development im- pact fees are found primarily in the South and West and are relatively rare in the Northeast and Midwest.3 While courts are more likely to uphold a local impact fee ordinance if a state enabling act authorizes it, the absence of such enabling authority is not fatal to the validity of a local impact fee program. In several states, the use of development impact fees has been upheld absent state enabling legislation as within the inherent powers of the enacting governmental unit. A. Impact Fees Defined Impact fees are generally defined as a type of devel- opment exaction that is: • In the form of a predetermined money payment; • Assessed as a condition to the issuance of a build- ing permit, an occupancy permit, or a plat approval; *The author relied upon the experiences and information provided by the consultant community, particularly Clancy Mullen of Duncan/Associates in Austin, Tex. Much of this re- port is drawn from the experience of Randy Young, Principal, of Henderson, Young & Co., Redmond, Wash., Tom Noguchi of Mirai Associates, Kirkland, Wash., and Robert Spencer of Mu- niFinancial of Cal. Finally Jonathan Roberson, Senior Planner for Broward County Transit, provided information regarding the experience of Broward County, Fla., with its transit- oriented concurrency fee program. 1 Larry L. Lawhon, Development Impact Fee Use by Local Communities, in THE MUNICIPAL YEARBOOK 27-31 (2003). 2 Clancy Mullen, National Impact Fee Survey: 2007, Duncan Associates, Austin, Tex., Aug. 22, 2007; see also Mayor and Board of Aldermen, City of Ocean Springs v. Homebuilders Ass’n of Miss., Inc., 932 So. 2d 44, 51 (Miss. 2006). 3 Mullen, supra note 2. • Pursuant to local government powers to regulate new growth and development and provide for adequate public facilities and services; • Levied to fund large-scale, off-site, public facilities and services necessary to serve new development; • In an amount that is proportionate to the need for the public facilities generated by new development.4 “Development impact fee” or “impact fee” is generally defined in state law along the lines of “a charge or as- sessment imposed by a municipality or a county on new development in order to generate revenue for funding or recouping the costs of capital improvements or facility expansions necessitated by and attributed to the new development.”5 Generally, when differentiating “fees” from “taxes,” various courts have defined an impact fee as a type of exaction, which is a fee paid in exchange for a special service, benefit, or privilege not automatically conferred upon the general public. A fee is not a revenue measure, but a means of compen- sating the government for the cost of offering and regulat- ing the special service, benefit or privilege. Payment of the fee is voluntary—an individual can avoid the charge by choosing not to take advantage of the service, benefit or privilege offered.6 Development impact fees are assessed and dedicated to generate financing primarily for the provision of wa- ter and sewer systems, transportation, schools, public safety, parks, and recreation facilities.7 Impact fees for transportation are relatively common, but generally encompass financing for roads, streets, bridges, rights of way, traffic signals, and landscaping.8 Several states 4 Country Joe, Inc. v. City of Egan, 560 N.W.2d 681, 685 (Minn., 1997), citing to Brian W. Blaesser & Christine M. Ken- topp, Impact Fees: The ‘Second Generation,’ in ZONING AND PLANNING HANDBOOK 255, 264 (Kenneth H. Young ed., 1991). 5 N.M. STAT. § 5-8-2(i); PA. STAT. ANN. tit. 53, § 10502-A; TEX. LOC. GOV’T CODE ANN. § 395.001(4); VA. CODE ANN. § 15.2-2318; IND. CODE ANN. § 36-7-4-1305. 6 McCarthy v. City of Leawood, 257 Kan. 566, 581, 894 P.2d 836, 845 (Kan. 1995); see also Russ Bldg. P’ship v. City and County of San Francisco, 199 Cal. App. 3d 1496, 1505, 246 Cal. Rptr. 21, 25 (transit fee not a “special tax”; transit fees re- quired by the ordinance were limited to estimated costs to serve the increased ridership; none of the fees were earmarked for general revenue purposes; and fees exacted only if the de- veloper voluntarily chooses to create new office space.) 7 Mullen, supra note 2, at 29. 8 See ALA. CODE 1975 § 45-2-243.80; R.I. GEN. LAWS § 45- 22.4-3(5); MONT. CODE ANN. 7-6-1601(7); GA. CODE ANN. § 36- 71-2(8); IDAHO CODE ANN. 67-8203(9); N.H. REV. STAT. ANN. 674:21,V; 53 Pa. Laws 10502-A; S.C. CODE ANN. § 6-1-920(8).