Impact Fees – How Much is Too Much?

Less than one year ago Fayetteville voters approved a ¼ of 1% sales tax increase to pay for $65.9 million in bonds for street improvement projects.

Now Fayetteville residents are being asked to vote at a special election April 10th on the question of whether to impose an impact fee on builders to provide additional funds to improve roads.

If the impact fee passes, the additional amounts charged builders will vary from $2,363 for a single family detached home, to $1,319 per room for a hotel/motel, and on up to $2,701 per 1,000 square feet of commercial or office space.

As usual, there is more than one point of view when looking at this problem.

Does it make sense that the builder should be charged for the infrastructure that his project would necessitate? It’s easy to say “Yes, that sounds logical.” But look a little deeper into the problem and you’ll see it is the buyer or renter that will ultimately pay the fee. Homes will cost more and rents will rise.

I’ve written previously about the lack of affordable housing in NW Arkansas as a whole and Fayetteville in particular. Adding another $2,363 to the cost of each home only makes homes less affordable.

Another issue is whether increasing the impact fees already in effect will deter businesses from locating in Fayetteville. That issue, too, can be argued two ways. Some say that businesses seeking to expand or move to Fayetteville will look at other areas where fees are lower or nonexistent, and this has already happened.

If businesses locate elsewhere, Fayetteville’s sales tax receipts will decrease accordingly. Keep in mind that sales tax is a principal source of revenue for city capital improvement and schools. There has already been a decrease in sales tax revenues in the last quarter of 2006.

Others say look at Bentonville. The impact fee for a single home in that city is $4,750 and the city is growing at a major pace.

The new impact fee will make Fayetteville’s the highest in NW Arkansas at $4,897. Springdale has no impact fees and has completed major improvements on their artery streets, as well as neighborhood streets, by sales taxes voted by residents and by bond issues. Rogers charges a $2600 “sewer and water hook-up” fee, which some call a disguised impact fee and which has been challenged in court.

However, the bottom line here is that developers in Fayetteville already pay impact fees for new-construction, which are passed on to the consumers of these homes. Developers also are required to install (at their own expense) new roads and other infrastructure items, such as water lines, sewer lines, etc. An additional road impact fee will basically be another tax, not just on developers and builders of new areas but on everyone who lives in Fayetteville. It’s a case of double taxation, despite what those in favor of the measure say. And it puts the burden of street improvements for older areas of Fayetteville on the developers of new areas. Is that fair?

Ultimately, money for additional (and much needed) street improvements will have to come from somewhere. If taxes need to be increased, so be it—let the voters decide as they have in the past. But let’s be honest.

I have a great concern that Election Day is just around the corner, and I don’t believe the majority of voters have taken an interest in the matter at hand. I encourage everyone to become informed and vote his or her conscience. I personally am going to vote NO.

Here are some links for further information:

http://www.nwanews.com/nwat/News/51665/

http://www.nwaonline.net/articles/2007/03/25/news/032607fzroadfees.txt

http://www.nwanews.com/nwat/News/51598/

http://www.nwanews.com/adg/News/186156/

http://www.nwanews.com/nwat/News/51075

http://www.nwanews.com/adg/Special/182334

http://www.nwanews.com/nwat/News/51559

http://www.citizens4fayetteville.org/

http://voteforfayetteville.org/