INC NEWS - great column on school impact fees (Indy Weekly)

[John Schelp]

A must read.

~John Schelp
Durham, NC

****

Burtman: Sudden impact
The Independent Weekly, 16 February 2005

The state budget crisis is coming home to roost at
almost every level of government. Rather than
proposing any real solutions to the billion-dollar
deficit, lapdog legislators seem poised to spend much
of their time this session juggling the demands of the
lobbyists who hold their leashes. Having decided that
"no new taxes" is actually the long-lost 11th
Commandment, they propose bizarre measures--such as
cutting corporate taxes and fattening the state's
runaway incentives program--that any grade schooler
could see make no sense right now. Scientists seeking
to identify a leadership gene would do well to study
North Carolina legislators, in whom the trait is
almost universally absent.

In one way or another, of course, the fiscal burden
created in Raleigh filters down to the masses. Cities
and counties, facing their own budget shortfalls, have
nowhere to turn for relief but the taxpayers. How best
to pay for such basic needs as new schools, roads,
water and sewer, parks--and spread the pain
equitably--is the daily grist of councils and
commissions.

Durham County has repeatedly sought one such method,
an impact fee on residential construction to help pay
for new schools necessitated by the county's rapid
growth the past few years. It's well established that
residential growth doesn't pay for itself; the basic
idea behind impact fees is that people who move to a
community should pay more of the costs incurred by
their arrival than existing residents.

Orange and Chatham counties have had school impact
fees for years; Chatham commissioners just announced a
substantial fee increase. But the legislature has to
authorize counties to levy the impact fee, and
Durham's measure has been rejected (most recently last
year) despite the consistent support of the county
delegation. The reason: The state homebuilder and real
estate interests don't like impact fees, and having
purchased the fealty of key members of the General
Assembly, they consistently manage to derail whatever
bills rub them the wrong way.

Faced with the prospect of having to raise property
taxes again, Durham simply passed its own ordinance
that went into effect the first of last year. A group
of developers sued, saying the statute was illegal
without legislative blessing, and Judge Orlando Hudson
ruled in their favor last month. The case will be
appealed to the state Supreme Court if necessary,
according to Durham County Attorney Chuck Kitchen.
Meanwhile, the county will again appeal to the
legislature to approve the school impact fees.
Prospects for passage are dim, however, unless
development interests relax their uncompromising
opposition to impact fees. One way to leverage a
compromise might be to slap a moratorium on new
development, a possibility the county will consider as
a last resort.

The legal fine points offered by the opposing sides
aren't the issue here, though it's interesting to note
that the homebuilders have argued conflicting views
depending on the forum: On the one hand, they claim,
the impact fees are simply passed along by the
developer to the homeowner, making the cost of housing
less affordable to po' folks and the middle class. Yet
two of the plaintiffs in the Durham lawsuit filed
affidavits stating that they could not pass along
those fees and had to eat them, reducing their profits
to the point of hardship.

Nor can one take seriously the common homebuilder
argument that impact fees will strangle growth. Orange
and Chatham continue to expand at a rapid clip despite
their fees; Durham County housing starts increased in
2004--after its fee went into effect--and show no
signs of abating. Impact fees are commonplace in 31
states; about 60 percent of U.S. cities with more than
25,000 residents use some kind of impact fee,
according to federal statistics. Homebuilding remains
one of the strongest and most resilient sectors in the
national economy.

Legitimate arguments against impact fees do exist. As
critics point out, immigrants to a community who buy
an older home don't pay the impact fee; conversely,
existing residents who upgrade to a freshly built home
do pay the fee even though they're not generating any
new demand for services. And the tax is
regressive--new-home buyers generally pay the same
impact fee whether the home costs $100,000 or $1
million.

That's one reason why Orange County would prefer an
alternative revenue generator, a deed transfer tax
that would be applied to every real estate
transaction. The deed tax, while still not perfect,
would ease some of the equity concerns. Orange County
number-crunchers have discovered another benefit of a
deed tax: It will likely raise more cash than the
impact fees have.

Such a concept isn't novel--six North Carolina
counties already employ a deed tax, and a seventh has
the coveted legislative approval but hasn't yet
implemented it. Not coincidentally, all seven are
concentrated in the northeast corner of the
state--Senate President Marc Basnight's turf. But deed
taxes are as repugnant to homebuilders and real estate
agents as impact fees, and while Basnight has the
political clout to clear a path for legislation that
development interests don't like, few others do.

Basnight isn't the only one who has been able to
grease the wheels for select communities. Cabarrus
County received legislative approval to collect school
impact fees last summer thanks to a provision in a
budget bill inserted by Sen. Fletcher Hartsell of
Concord. The Orange and Chatham approvals came in the
early 1990s courtesy of power-brokering local reps.

So legislators have created an absurd patchwork of
local revenue options, approving some and denying
others, another demonstration project in their living
realpolitik laboratory. Their inconsistency in that
regard has not been matched, on the other hand, when
it comes to passing expenses along to the city and
county levels. Local governments are already
struggling to pay for the legislature's recent mental
health "reforms," especially since the state has
failed to stock a mental health trust fund as
promised. The governor's well-intentioned but unfunded
mandate to reduce class sizes in grades K-3 has
created new demands for classrooms and teachers that
counties must cover. State-granted exemptions from
sales taxes on materials used to build new industrial
facilities have further drained local coffers. The
list goes on.

The North Carolina Association of County Commissioners
has a simple proposal that would enable local
governments to determine for themselves how to pay
their bills--whatever revenue options exist in one
community should be available to everyone else. That
local governments should be able to choose their
methods of revenue generation (within the confines of
the state and federal constitutions, of course) is
hardly a radical idea. If the citizens object to the
methods of choice, they can always use the democratic
process to make changes come election time.

Several bills toward that end are likely to be
introduced this session. But the usual suspects will
oppose any attempt to level the playing field, and the
political will to defy them and do the right thing has
yet to materialize.

The homebuilders and real estate agents would prefer
that all the costs of development be funneled to a
single source: property taxes. Undeterred by the
facts, they offer a host of specious arguments that
impact fees and deed taxes will cause the wheels of
progress to grind to a halt and destroy life as we
know it. Why it's fair for a homeowner in downtown
Durham to subsidize schools they'll never use near
Treyburn or Southpoint, for example, is a question the
development interests have yet to address.

It would be far more honest for the homebuilders to
acknowledge that their primary objective in opposing
impact fees or deed taxes is simply to maximize their
profits at the expense of those who pay property
taxes--the homeowners. But no one wants to admit
they're motivated by pure greed. 


source:
http://www.indyweek.com/durham/2005-02-16/burtman.html