Study says city should increase impact fees

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A home under construction in Whitefish. (Heidi Desch/Whitefish Pilot)

A study of Whitefish’s impact fee is recommending that the city increase the total amount it charges new development to pay for public improvements.

Impact fees are one-time charges for new development that increases the demand for city services. It applies to new units in subdivisions as well as new homes built on single lots and some remodeling.

FCS Group recently completed a study of the city’s impact fees. Whitefish’s impact fee for an average single-family home is currently $6,658, but the study is suggesting the city increase that fee by roughly $1,200 to a total of $7,942.

The city currently collects fees in seven areas — water, wastewater, stormwater, City Hall, Emergency Service Center, park maintenance building and paved trails — that make up the total impact fee.

The study says based upon calculations the city must reduce some of the individual fees, but is suggesting increases to others. Also, it is recommending that the city begin collecting park-related impact fees from commercial development.

City Finance Director Dana Smith said the study recommends the city retain all of its current impact fees based on the city’s long-term planning documents.

However, based upon what it’s allowed to collect, Whitefish must reduce the amount of its water, stormwater, City Hall and Emergency Services Center impact fees. It could increase impact fees for wastewater, park maintenance buildings and paved trails.

Whitefish began collecting impact fees in 2007.

“Whitefish has not increased impact fees since enacting them,” Smith said. “If you look at what’s being proposed for an increase that’s less than 2 percent growth per year for the last 11 years.”

Rates must be reasonably related to the impact from the development and be a proportionate share for existing versus new development, Smith noted.

“The impact fees update is made up of three components,” she said. “We have to look at three categories — reimbursement or the ability to recover cost for existing capacity, improvement or the ability to recover anticipated future costs of meeting additional capacity needed from growth, and customer base which determines the impact fee.”

The impact fee study notes that Whitefish could collect a total maximum fee of $9,234, but it is not being recommended at this time for the city to levy the maximum allowed.

City Council will eventually have to approve any adjustments to the fee schedule. A public hearing and vote on a proposed ordinance with changes won’t likely come before Council until October, but Council is set to discuss the study at its July 16 meeting. City staff is recommending that any changes not go into effect until Jan. 1, 2019.

The city can spend impact fees for public improvements, including planning, site improvements, land acquisition, construction or engineering. Impact fees can be used for public improvements and to recoup the costs previously incurred by the city.

Though impact fees vary based on a number of factors, to calculate the cost for an average single-family home the city used a home of 2,500-square-feet in size that includes four bedrooms, three bathrooms. For comparison, the total impact fee collected for the same home in Missoula would be $6,360, Bozeman would be $9,145 and Kalispell would result in a $9,466 fee.

The study recommends Whitefish increase three of its seven individual fees. For the wastewater fee, it suggests an increase of $2,134, for the paved trails fee an increase of $851 and the park maintenance building fee by $105.

The proposed increase in the wastewater impact fee is, in part, due to the city’s planned construction of a new wastewater treatment plant estimated at a cost of $18 million to meet stricter treatment standards.

“We looked at what our current facilities are and looked at what is available for future growth,” Smith said. “We looked at the growth we expect in the next five years. Based upon that we’re recommending implementing the maximum fee allowed, but it will be offset by decreases in other fees.”

The park maintenance building and paved trails impact fees adjustment is the result of planned longterm projects in the bike and pedestrian master plan. A park maintenance and paved trails impact fees is also suggested to be added to the impact fees collected on commercial development, as employees and overnight visitors use the city’s parks, Smith noted.

“There is demand from workers and lodging facilities who are promoting use of our trail systems, but prior to the study park impact fees were not paid by commercial development,” Smith said. “We would like them to share in the burden of future expansions of parks facilities.”

The park maintenance building fee and the paved trails fee are calculated based on the type of development including commercial, multi-family residential and lodging.

It is recommended for park maintenance that commercial development pay 1 cent per square foot, residential such as apartments pay $134 per unit, and lodging pay $61 per unit. For paved trails it is recommended that commercial development pay 12 cents per square foot, for residential units to pay $1,293 per dwelling unit and for lodging to pay $589 per unit.

Future trails during the next 20 years are eligible to be funded with only 46 percent of impact fees and the remaining 54 percent must be paid using other funding sources, Smith said, which has prompted a recommendation that the city collect less than the maximum allowed for that impact fee.

“Due to limited funding sources over the next 20 years, staff does not recommend implementing the maximum fee allowed,” Smith said. “We are recommending implementing the new fee at 50 percent of the total maximum allowed.”

The individual impacts fees planned to be decreased are water by $685, stormwater by $29, City Hall by $724, and Emergency Services Center by $386.

Under state law, the city is required to review and update its impact fee studies every five years.

The city’s impact fees for new construction first went into effect in November of 2007 following a growth spurt in the town when it was difficult for the city to keep up with infrastructure needs. Since then Whitefish has collected almost $5 million total in impact fees.

Whitefish collected about $650,000 in impact fees in fiscal year 2017 and it collected over $1 million in impact fees in fiscal year 2016.

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