Councils OKs moratorium on impact fees

During a special meeting Thursday evening, the city council approved a plan that would temporarily halt the need for developers to pay certain fees on new construction here.

The move is ultimately designed to sharply reduce impact fees charged developers because the city believes its current fee rate is stifling new business development.

On a unanimous vote last week, the council approved a 12-month moratorium that suspends a requirement for the city to collect impact fees over a 12-month period, retroactive to Oct. 1, 2012.

The temporary measure comes as city officials seek to revise local laws regarding impact fees as well as Mountain Home's long-range capital improvement plan.

Since Oct. 1, the city has received more than $50,000 in impact fees on 12 residential projects. In addition, the city has applications pending on three commercial projects and 14 more residential developments.

The temporary measure adopted during Thursday's special meeting would require the city to refund the fees collected since Oct. 1, the start of the current fiscal budget year..

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, based on future estimates.

In short, the impact fees are intended to allow the city's growth "to pay for itself," according to city planner Bonnie Harper. Although the city can use tax revenue from commercial and residential projects to pay for the types of improvements listed in the city improvement plan, it often takes years to actually receive from taxes the funds needed.

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 impact fees "went critical mass" earlier this month as the city faced the possibility of losing at least two commercial ventures and new jobs here, according to Mayor Tom Rist.

They became the "tipping point that broke the camel's back," he added. "It was time to make a quantum change on how we're (collecting impact fees)."

According to city economic development director Paula Riggs, it's not the first time this has happened. City officials have seen too many instances in recent years where potential businesses and industries were discouraged from coming here after they learned how much they would end up paying in impact fees, she said.

"It's too easy for these companies to head down the road," Riggs added. "Is it worth losing a business over $30,000 in impact fees?"

For example, a site selection committee representing one major company looked at Mountain Home to build a new plant that would have added hundreds of jobs here. However, the company is now considering whether it will go to Nampa or Caldwell, instead. That decision was largely based on how much Mountain Home was going to charge them on impact fees, according to the mayor.

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

During the Feb. 11 public hearing, city council president Russ Anderson aired similar concerns regarding the fees, saying that "it runs people off before we can sit down with them and discuss options."

"Our own (impact) fees are killing us," added councilman Jimmy Schipani.

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

In short, every item included in the capital improvement plan causes the city to raise the amount it charges in impact fees, according to the mayor. However, in many cases, the plan includes projects that fall well outside the realm of possible growth.

Case in point: The capital improvement plan currently includes a provision to install seven more traffic lights in Mountain Home. However, expected growth in the next few years would only require no more than two traffic signals, including one at the corner of American Legion Boulevard and North 18th Street.

That new traffic light is intended to ease traffic congestion on the city's east side, which was expected to grow in the form of new restaurants and businesses north of the interstate.

In addition, the capital improvement plan didn't factor in the recession that brought commercial and residential development in Mountain Home came to a near-standstill in 2010. Before the local housing market crashed, the city received a record number of building permits that included hundreds of applications in 2005 and 2006. In comparison, the city received 80 permits in 2009 and those dropped to just 15 in 2010.

As a result, the capital improvement plan became a liability for encouraging businesses to come here, according to the mayor.

Prior to last week's council meeting, city officials met to review Mountain Home's impact fee ordinance. According to city planner Bonnie Harper, the law isn't clear on whether or not developers need to pay impact fees on previously developed property in town. Since the fees are designed to pay for public services needed to accommodate growth, if a building, for example, already has those services (such as sewer and water lines), should it pay an impact fee if a new company moves into that building? The city's review has raised questions on whether or not the ordinance needed more clarity.

During the Feb. 11 council meeting, impact fees advisory committee representative Geoff Schroeder initially outlined a plan that would allow the city to stop charging impact fees in previously developed commercial or residential areas within city limits.

"If someone tears something down and builds something new, they shouldn't have to pay impact fees," Schroeder said. However, those wanting to build something on undeveloped land would "pay the whole freight."

Councilwoman Alain Isaac agreed with the proposal to encourage the use of previously developed areas in town, which would cut down on encroachment into undeveloped areas of the city, she said.

Questions were also raised at the Feb. 11 meeting regarding the city's industrial park area. One local company renting a section of that property was looking to expand but was facing the possibility of paying impact fees before construction could start.

The company contends that they don't fall under the provisions of paying impact fees since the city owns the land.

Anderson agreed that companies wanting to build there should be exempt from paying impact fees since the city developed the industrial park area precisely for that type of growth.

Originally, the mayor suggested the city look at imposing a temporary moratorium on impact fees for commercial and industrial development on previously development areas in Mountain Home. However, he felt that existing fees for residential development should remain in place.

During the discussions at the Feb. 11 hearing, councilman Richard Urquidi said it's important to have impact fees but felt there was room to negotiate the rates.

"I'd just hate to get rid of them all together, Urquidi said.

"Impact fees stifle growth," Isaac said. "It scares everybody off. We're showing them the back door."

Over the next six months, city officials will refine the capital improvement plan to create a more realistic guide for future development here. In return, the city gains the ability to lower its impact fees "to make them more reasonable," the mayor said.

In addition, the fees may be adjusted depending on the type of project and where it's located.

Impact fee committee representative Gary Bermensolo recommended breaking out the fees based on different types of commercial and industrial development, as well as residential construction. He contends that each project drives different types of needed improvements to the city's infrastructure and public services.

According to the mayor, the moratorium may encourage developers specializing in residential projects to take advantage of the impact fee freeze and submit new housing permits. However, he emphasized that the Sept. 30 deadline will not change.

Construction on residential units must start before the end of this fiscal year to take advantage of the moratorium, Rist said.