State Development Impact Fee Bill Exposed

The State Development Impact Fee Bill does not include adoption or approval information. ALEC has attempted to distance itself from this piece of legislation after the launch of ALECexposed.org in 2011, but it has done nothing to get it repealed in the states where it previously pushed for it to be made into law.

ALEC Bill Text

Summary

Development exactions have evolved from land dedication for subdivision roads into contributions of land or money for all manner of on-site improvements from water, sewers, roads, schools, and police and fire protection, to affordable housing and public are (sic) projects. Impact fees, when properly defined and administered, can provide an acceptable method for sharing development costs between communities and developers. However, the lack of effective enabling state legislation has left impact fees susceptible to abuse and expensive litigation. What is need (sic) is a more uniform procedural and substantive basis for development exactions to ensure a fair and equitable process.

This Bill authorizes development fees for specific public facilities and represents a public policy decision that the cost of new facilities is a joint responsibility between the public and private sectors. It also establishes procedural minimums for the preparation and adoption of development impact fees as well as substantive limitations that ensure that developers pay a fair share of the cost of required facilities brought about by new construction.

Model Legislation

{Title, enacting clause, etc.}

Section 1.

This act shall be cited as the State Development Impact Fee Act.

Section 2 {Legislative Findings.}

The legislature finds that an equitable program for planning and financing public facilities needed to serve new growth and development is necessary in order to promote and accommodate orderly growth and development and to protect the public health, safety, and general welfare of the citizens of the state. It is the intent of this Act to:

(A) Ensure that adequate public facilities are available to serve new growth and development.

(B) Promote orderly growth and development by establishing uniform standards by which local governments may require that new growth and development pay a proportionate share of the cost of new public facilities needed to serve new growth and development;

(C) Establish minimum standards for the adoption of development impact fee ordinances by local governments;

(D) Establish impact fees or in-kind contributions of system improvements authorized by an impact fee ordinance as the exclusive means by which a local government may impose development exaction for system improvements; and

(E) Ensure that new growth and development is required to pay no more than its proportionate share of the cost of public facilities needed to serve new growth and development and to prevent duplicate and ad hoc development exactions.

Section 3. {Definitions.}

As used in this Act:

(A) "Capital improvement" means an improvement with a useful life of 10 years or more, by new construction or other action, which increases the service capacity of a public facility.

(B) "Capital improvements element" means a component of a comprehensive plan adopted by a local government plan which sets out projected needs for system improvements during a planning horizon established in the comprehensive plan, identifies the size and general location of public facilities, including a schedule of capital improvements that will meet the anticipated need for system improvements, and a description of anticipated funding sources for each required improvement.4

(C) “Comprehensive plan” has the same meaning as provided for in [insert reference to planning statute if applicable.]

(D) “Construction” means any land clearance, drilling, dredging, filling, grading, or the erection of, or addition to, any buildings or structures or any other activity which directly creates additional demand for a particular public facility or facilities.

(E) “Developer” means any person or legal entity undertaking development.

(F) “Development” means any construction of a building, structure, or use, any change in use of a building, or structure, or any change in the use of land, any of which creates additional demand and need for public facilities.

(G) “Development approval” means any written authorization from a municipality or county which authorizes the commencement of construction.

(H) “Development exaction” means a requirement attached to a development approval, including but not limited to a building permit, plot approval, site plan approval, or a rezoning, which requirement compels the payment, dedication, or contribution of goods, services, land, or money as a condition of approval.

(I) “Development impact fees” means a payment of money imposed upon development as a condition of development approval to pay for a proportionate share of the cost of system improvements needed to serve new growth and development.

(J) “Development project” means a particular development on an identified parcel of land.

(K) “Development project improvements” means site improvements and facilities that are planned and designed to provide service for a particular development project and that are necessary primarily for the use and convenience of the occupants or users of the development project, and are not a component of a public facility system that provides general service to the community at large. Incidental use of improvements or facilities by the general public shall not make a development project improvement a system improvement unless the improvement or facility is included in a local governments capital improvements element and meets the definition of “system improvement” contained in Section 3 (u) of this statute. The character of the improvement in terms of primary use shall control a determination of whether an improvement is a development project improvement or a system improvement and the physical location of the improvement on or off the site of a development project shall not be considered determinative of whether an improvement is a development project improvement or a system improvement.

(L) “Encumber” means to legally obligate by contract or otherwise contract to use by appropriation or other official of a municipality or county.

(M) “Feepayer” means the person who pays a development impact fee or his successor in interest, where the right or entitlement to any refund of previously paid development impact fees required by this chapter has been expressly transferred or assigned to the successor in interest. The right or entitlement to any refund shall be deemed to run with the land.

(N) “Impact fee” see “Development impact fees.”

(O) “Level of service” means a measure of service capacity and service demand for public facilities in terms of demand to capacity ratios or the comfort and convenience of use or service of public facilities or both.

(P) “Local government” means [insert definition].

(Q) “Present value” means the current value of past, present, or future payments, contributions, or dedications of goods, services, materials, construction, or money capacity on the basis of the local government’s borrowing rate for the preceding year.

(R) “Proportionate share” means that portion of the cost of system improvements which is directly and substantially related to the service demands and needs of a development project.

(S) “Public facilities” means [insert definition].

(T) “Service area” means a geographic area defined by a local government or by intergovernmental agreement in which a defined set of public facilities provides service to development within the area.

(U) “System improvements” means capital improvements that are public facilities and are designated to provide service to the community at large, in contrast to “development project improvements.”

(V) “System improvement costs” means costs incurred to provide additional public facilities capacity needed to serve new growth and development, including the cost of construction, reconstruction, or expansion of such facilities; design, surveying, and engineering fees, related land acquisition costs (including land purchases, court awards and costs, attorneys’ fees, and expert witness fees); expenses incurred for qualified staff or any qualified engineer, planner, architect, landscape architect, or financial consultant for preparing or updating the capital improvement element; and on-going administrative costs, provided that such administrative costs shall not exceed 3 percent of the development impact fees collected. Financing costs for the retirement of bonds, notes, or other financial obligations issued by or on behalf of the municipality or county to finance system improvements may be included as system improvement costs only to the extent that these costs are directly related to the provision of additional public facilities capacity.

Section 4. {Authorization; applicability.}

(A) local governments that have adopted a capital improvements element are authorized to impose by ordinance development impact fees as a condition of development approval on all development in accordance with the provisions of this Act. An adopted development impact fee ordinance shall be the exclusive means by which- the local government may impose development exactions for system improvements.

(B) Notwithstanding any other provision of this Act, that portion of a project for which a valid building permit has been issued prior to the effective date of a local government development impact fee ordinance shall not be subject to development impact fees so long as the building permit remains valid and construction is commenced and is pursued according to the terms of the permit.

Section 5. {Effect of payment of development impact fees.}

If a local government has established that adequate public facilities are a condition of development approval, payment of a development impact fee shall be denied to be in compliance with any local government requirements for the provision of adequate public facilities or services in regard to the system improvements for which the development impact fee was paid.

Section 6. {Minimum standards and requirements for development impact fee ordinances.}

(A) A development impact fee shall not exceed a proportionate share of the cost of system improvements.

(B) Development impact fees shall be calculated, imposed, and used on the basis of service areas.

(C) Development impact fees shall be calculated on the basis of levels of service for public facilities adopted in the local government’s capital improvements element that are applicable to existing development as well as new growth and development.

(D) A local government development impact fee ordinance shall provide that development impact fees shall be collected not earlier in the development approval process than the issuance of a permit authorizing - construction. The ordinance may provide for collection of the entire amount or payment in equal annual installments for a period not to exceed 20 years pursuant to an agreement.

(E) A local government development impact fee ordinance shall include a schedule of development impact fees specifying development impact fees for each public facility for various land uses per unit of development on a service area by service area basis. The ordinance shall provide that a developer shall have the right to elect to pay development impact fees according to the fee schedule as full and complete payment of the development project’s proportionate share of system improvement costs.

(6) A local government development impact fee ordinance shall include a provision permitting individual assessments of development impact fees.

(7) A local government development impact fee ordinance shall be adopted in accordance with the procedural requirements of Section 8 of this chapter.

(8) A local government development impact fee ordinance shall provide for a process whereby a developer may receive a certification of the application of the development impact fee schedule or individual assessment to a particular project, which shall establish the development impact fee for a period of one (1) year from the date of certification or for a longer period if the local government determines that a longer construction period warrants an extension.

(9) A local government development impact fee ordinance shall include a provision for credits against the payment of development impact fees in accordance with the requirements of Section 9 of this chapter.

(10) A local government development impact fee ordinance shall include a provision prohibiting the expenditure of development impact fees except in accordance with the requirements of Section 10 of this chapter.

(11) A local government development impact fee ordinance may not provide for the imposition of a development impact fee for system improvement costs previously incurred by a municipality or county.

(12) A local government development impact fee ordinance may exempt all or part of a particular development project from development impact fees provided that such project is determined to create extraordinary public benefit to the local government; provided that the public policy which supports the exemption is contained in a local government’s comprehensive plan; and provided that the exempted development’s proportionate share of system improvement is funded through a revenue source other than development fees.

(M) A local government development impact fee ordinance shall provide that development impact fees shall only be spent for the category of system improvements for which the fees were collected and in the service area in which the project is located.

(N) A local government development impact fee ordinance shall provide that, in the event a permit is abandoned, credit shall be given for the present value of the development impact fee which has been paid against future development impact fees which will be assessed for the same parcel of land or that a refund will be paid, as required under Section 11 of this Act.

(O) A local government development impact fee ordinance shall provide for a refund of development impact fees in accordance with the requirements of Section 11 of this Act.

(P) A local government development impact fee ordinance shall provide for appeals from administrative determinations regarding development impact fees in accordance with the requirements of Section 12 of this Act.

(Q) Development impact fees shall be based on actual system improvement costs or reasonable estimates of such costs.

(R) Development impact fees shall be calculated on a basis which is net of credits for the present value of revenues that will be generated by new growth and development based on historical funding patterns and that are anticipated to be available to pay for system improvements, including taxes, assessments, user fees, and intergovernmental transfers.

Section 7. {Development Impact Fee Advisory Committee.}

(A) Prior to the adoption of a development impact fee ordinance, a local government adopting a development impact fee program shall establish a Development Impact Fee Advisory Committee.

(B) The Development Impact Fee Advisory Committee must be composed of at least five, but no more than ten members appointed by the governing authority of the local government; at least 40 percent of the membership shall be representatives from the development, building, or real estate industries. An existing planning commission or other existing committee that meets the membership requirements may serve as the Development Impact Fee Advisory Committee.

(C) The Development Impact Fee Advisory Committee shall serve in an advisory capacity to assist and advise the governing body of the municipality or county with regard to the adoption of a development impact fee ordinance. In that the committee is advisory, no action of the committee shall be considered a necessary prerequisite for local government action in regard to adoption of an ordinance.

Section 8. {Procedure for ordinance adoption.}

Prior to the adoption of an ordinance imposing a development impact fee pursuant to this Act, the governing body of a local government shall cause two duly noticed public hearings to be held in regard to the proposed ordinance. The second hearing shall be held at least two weeks after the first hearing.

Section 9. {Credits.}

(A) In the calculation of development impact fees for a particular project, credit shall be given for the present value of any construction of system improvements or contribution or dedication of land or money required or accepted by a local government from a developer or his predecessor in title or interest for system improvements of the category for which the development impact fee is being collected.

(B) In the event that a developer enters into an agreement with a local government to construct, fund, or contribute system improvements such that the amount of the credit created by such construction, funding, or contribution is in excess of the development impact fees which would otherwise have been paid for the development project, the developer shall be reimbursed for such excess construction, funding, or contribution from development impact fees paid by other development located in the service area which is benefited by such improvements.

Section 10. {Earmarking and expenditure of collected development impact fees.}

(A) An ordinance imposing development impact fees shall provide that all development impact fee funds shall be maintained in one or more interest-bearing accounts. Accounting records shall be maintained for each category of system improvements and the service area in which the fees are collected. Interest earned on development impact fees shall be considered funds of the account on which it is earned and shall be subject to all restrictions placed on the use of development impact fees under the provisions of this Act.

(B) Expenditures of development impact fees shall be made only for the category of system improvements and in the service area for which the development impact fee was imposed as shown by the capital improvement element and as authorized by this Act. Development impact fees shall not be used to pay for any purpose that does not involve system improvements that create additional service capacity available to serve new growth and development.

(C) As part of its annual audit process, a local government shall prepare an annual report describing the amount of any development impact fees collected, encumbered, and used during the preceding year by category of public facility and service area.

Section 11. {Refunds.}

(A) A local government that adopts a development impact fee ordinance shall provide for refunds upon the request of an owner of property on which a development impact fee has been paid, if:

(1) Capacity is available and service is denied; or if

(2) The local government, after collecting the fee when service is not available has failed to encumber the development impact fee within six years after the date that the fee was collected. In determining whether development impact fees have been encumbered, development impact fees shall be considered encumbered on a first-in, first-out (FIFO) basis.

(B) When the right to a refund exists due to a failure to encumber development impact fees, the local government shall provide written notice of entitlement to the current owner of the property for which the fee was paid. Such notice shall also be published within 30 days after the expiration of the six-year period after the date that the development impact fees were collected and shall contain the heading “Notice of Entitlement to Development Impact Fee Refund;”

(C) An application for a refund shall be made within six (6) months of the time such refund becomes payable under Subparagraphs (A)( 1) or (A)(2) of this Section or within one year of publication of the notice of entitlement to a refund under this Section, whichever is later.

(D) A refund shall include a refund of a pro rata share of interest actually earned on the unused or excess development impact fee collected.

(E) All refunds shall be made to the property owner within 60 days after it is determined by a local government that sufficient proof of claim for a refund has been made.

(F) The current owner of the property for which the impact fee has been paid shall have standing to sue for a refund under the provisions of this Act if there has been a timely application for a refund and the refund has been denied or has not been made within one year of submission of the application for refund to the collecting local government.

Section 12. {Appeals.}

(A) A local government that adopts a development impact fee ordinance shall provide for administrative appeals of a determination of the amount of development impact fees for a particular project or any other interpretation of the fee to the governing body or such other body as designated in the ordinance.

(B) A developer may pay a development impact fee under protest in order to obtain a development approval or building permit, as the case may be. A developer making such payment shall not be stopped from exercising the right of appeal provided by this Act, nor shall such developer be stopped from receiving a refund of any amount deemed to have been illegally collected.

(C) A local government development impact fee ordinance may provide for the resolution of disputes over an impact fee by binding arbitration through the American Arbitration Association or otherwise.

Section 13. {Intergovernmental agreements.}

Local governments that are jointly affected by development are authorized to enter into intergovernmental - agreements with each other, with other governmental authorities, or with the state for the purpose of developing joint plans for capital improvements or for the purpose of agreeing to collect and expend development impact fees for system improvements, or both, provided that such agreements comply with applicable state laws.

Section 14. {Other powers and rights.}

(A) Nothing in this Act shall prevent a local government from requiring a developer to construct reasonable development project improvements in conjunction with a development project.

(B) Nothing in this Act shall be construed as the prevention or prohibition of private agreements between property owners or developers and local governments or other governmental entities regarding the construction or installation of system improvements and providing for credits or reimbursements for system improvement costs incurred by a developer including interproject transfers of credits or providing for reimbursement for project improvements which are used or shared by more than one development project.

Section 15. {Transition.}

This Act shall not be construed to repeal any existing laws authorizing a local government to impose fees or require contributions or property dedications for capital improvements; provided, however, that all local ordinances or resolutions imposing development exactions for system improvements shall be brought into conformance with this Act no later than two years from the effective date of this Act. After two years from the effective date of this Act, notwithstanding any other provision of law, development exactions for system improvement shall be imposed by local governments only by way of development impact fees imposed pursuant to and in accordance with the provisions of this Act.

Section 16. {Severability clause.}

Section 17. {Repealer clause.}

Section 18. {Effective date.}