Rebuilding Place in the Urban Space


Saturday, May 24, 2014

Development impact fees

One policy that DC and Seattle share is not charging development impact fees on new development projects.  The general idea is that new development "uses" existing infrastructure--not just roads but transit, and if residential, various civic facilities including schools--and the increased "load" eventually exceeds the current "carrying capacity" of the civic and transportation infrastructure and it will have to be expanded, which costs money.

Seattle Times' Danny Westneat suggests in the column, "One Seattle tax solution: impact fees," that Seattle should consider adopting impact fees to reduce the various taxing initiatives that the city resorts to to support parks, libraries, road and transportation facilities, transit, etc.  He contrasts Seattle to suburban Bellevue, which has impact fees and a program for facilities expansion funded mostly by the fee revenue stream.

Most of DC's suburbs, especially Montgomery County, charge impact fees.  DC does not and most of the elected officials believe that this gives DC a competitive advantage.  I wrote about this a few years ago here, "Times have changed with regard to funding infrastructure improvements that make land more valuable." This 2013 report, County Development Impact Fees and Building Excise Taxes in Maryland Amounts and Revenues from the Maryland State Assembly Department of Legislative Services lists the fees levied by each jurisdiction across the state and it's pretty eye opening.

In Maryland, the counties aren't systematic in the fees they charge.  For example, many don't have a fee for parks and recreation expansion, but some do.  Most charge fees for transportation infrastructure and schools.  Others may charge for public safety (most don't) and more specific fees for certain areas.

On the other hand, in DC we are running up against debt ceiling limits and there are proposals to change the city's practices with regard to taking on debt to be able to issue more bonds and for all of the money that the city has--the annual budget is about $11 billion--the city scrapes hard to identity a million here and a million there to accomplish various tasks, such as buying new garbage cans.

Development impact fees could help support the provision of robust infrastructure.

For example, while I do believe that DC has an obligation to support the provision of public space and facilities in all of its districts, many residents believe that it is "unfair" that the NoMA district (north of Union Station) is "getting a lot of money from the city to build parks" ("With $50 Million in Hand, NoMa Looks to Close “Parks Deficit”," Washington City Paper) while other areas have the same needs but no programs for addressing those needs.

On the other hand, were there a set of development impact fees, a goodly portion of the money needed to provide such facilities in NoMA could have been "self-generated" from such fees, given that the NoMA district is adding millions of square feet of office and 6,000 or so residential units in multiunit buildings.

Note that a few years ago when DC's Zoning Commission eliminated certain recreation facilities provision requirements for downtown properties, I recommended instead that those properties should have to pay parks and recreation space impact fees, and that DC should develop a plan for enhancing such facilities in the downtown district, including the development of an "urban" recreation center.

Athough many of the apartment buildings do provide those kinds of facilities, although on a privatized limited or no public access basis.

Speaking of impact fees, in a separate editorial, "Gorge Amphitheatre should pick up medical tabs from events like Sasquatch!," the Seattle Times suggests that the operator of the Gorge Amphitheatre, should charge a fee to concert goers to help subsidize the costs imposed on a local medical center for providing services for events.  Also see the ST article "Proposed $1 fee on Gorge tickets would pay for emergency services."

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At 10:23 AM, Anonymous Eric said...

While there are no direct impact fees, the city still makes more money from new development. A new apartment building generates far more tax revenue than the parking lot it replaced. Furthermore, these new residents tend to not have kids in public school or receive social services, so they are probably net tax contributors to the city.

At 10:34 AM, Anonymous charlie said...

You're getting to the place where I have been aruging for a while - that the problems of a new development are classic externality.

Average american mortage is 7 years. Not saying that applies in DC but a project that takes 1-2 years (say this road work around the west end/NH avenue which is coming up on 2) reduces your enjoyement of a property by close to 30%.

The general argument (city benefits, or that density will mean better stuff in the future) is weak sauce. If you can point to very direct benefits (and it seems there is a lot on community benefits packages) it helps.

For instance, forrcing anyone building a new buiding to do a real re-pave after construction. take that building up on Conn. Ave in CC that has caused so much controversy. That road is messed up and residents know DC is not going to repair it properly either after construction is done.

At 1:29 PM, Anonymous Richard Layman said...

1. Eric, see Charlie's comments... I know all those arguments btw.

2. wrt CBA, there is an interesting negotiation going on in SE DC. I tried to contact one of the principals for an interview but he blew me off.

3. But this general argument for me any way is more about general subsidy and less about individual loss of quiet enjoyment, although in specific situations I do think that projects rise to that level, and loss of "current value enjoyment" should be addressed.

e.g. when I was on ANC6C's planning committee, a developer wanted to close an alley during construction. this would have forced the loss of "parking privileges" on the part of the other abutting properties on the rear of their property.

I said they should have to pay for the cost of other alternatives for those property owners.

They refused, and instead came up with a plan to close only half the width of the alley, allowing egress from the other affected properties.

... another example includes taverns that abut residential areas, but there are many other examples. On one hand, I argue that if you live by a commercial district, you have to accept more noise and change. OTOH, certain commercial districts are set up more for "neighborhood related" uses and not "citywide uses" like "clubs", and there should be limits to the kinds of uses.

At 4:22 PM, Anonymous charlie said...

well I had a great insight the other day - then lost it before I could write it down -- in that the differences between taxes and fees is what you spend the money on. And in general I think more taxes - that is more money going into a general pot -- is better policy.

And so yes I am really asking for direct payment to affected homeownes, which is a pretty easy way to get into trouble. That is the problem with externalities, after all, is that unless you can create a market with them they are very hard to value.


I used to say a lot that "the great thing about DC is that we sell ourselves for so little," in part that referred to when the Uline was used as a trash transfer station and was smelly and the company paid for some air conditioning units for some of the affected households so they wouldn't feel compelled to open their windows.

2. on my neighborhood there is a discussion about The Atlantic article on reparations. Again, I do not favor paying reparations to individuals, but do favor Marshall Plan like programs in Wards 7 and 8 to reverse decades of multigenerational poverty that has been produced in part by institutionalized racism within American Society.

Generally, individuals are likely to "waste" reparations, when the point is to support structural changes or infrastructure investments that have long term benefits.

e.g., there is the example of John McDonogh's bequest to the school systems of New Orleans and Baltimore in the 1800s. He was born in Balt., but made his fortune in NO. When he died he gave big sums to each city to build schools. Balt. spent all the money on building projects right away. NO put the money into a fund and spent the interest. Over time, NO ended up with many more schools from the bequest than Baltimore did.

At 9:17 AM, Anonymous charlie said...

Yes, the same problem.

In terms of investments, the ones that would pay off:

1) Local schools

2) Transportation improvements (as I said, just properly fixing the roads would be priceless. Wiring up alleys or other aspects make sense as well)

3) Parks and recreation.

I'm sure there are others, but yes the problem is a 5K cash payment is more a bribe than an investment.


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