Repeal of Impact Fees Would Have Major Impact on Chatham
What would House Bill 436 do if passed?
Introduced by Rep. Sarah Stevens (Surry County), HB 436 would immediately repeal the authority for local governments to collect any type of impact fees. While most of the local governments with impact fees are towns and cities, a few counties have authority to levy impact fees.
What are impact fees?
These are fees levied on new developments to help pay for the impact of that development, such as school construction or expanded water capacity. Without the impact fee, all property owners in the county would share in the burden of paying for service needs created by the new development. The school impact fee is flat rate per single-family dwelling or dwelling unit for multi-family construction and is usually paid by the builder or homeowner near the end of the construction process. Developers usually pay the water impact fees.
What impact fees are levied by Chatham’ County?
Chatham County has an impact fee for school facilities and water infrastructure. Chatham County still bases its school impact fees on 1996 construction costs. The school impact fee has not been increased since 2008 and water impact fees have been the same since 2006. Chatham County has had authority to collect school and water impact fees since 1987, when the county was granted authority through the legislature.
How much revenue would Chatham County lose?
Chatham County would lose $2.8 million per year in school impact fee revenue and $1.7 million per year in water impact fee revenue, a total loss of $4.5 million per year. This is equal to 4.7 cents on the tax rate. For schools alone, we would have an immediate loss equivalent to 3 cents on the property tax rate.
How are the impact fee revenues used?
As part of the county’s 7-year Capital Improvement Plan, school impact fee revenues are already budgeted to pay debt service on past, current, and future school projects, including Virginia Cross Elementary, Margaret Pollard Middle, and a new high school and elementary school. The water impact fee revenues are slated to cover Chatham County’s share of a future regional water intake and water treatment plant on the west side of Jordan Lake. The county’s share of that regional water project is estimated at $70 to $80 million. Future residential, commercial and industrial development will rely on these facilities being available.
What does this mean for a fast-growing county?
Chatham County is one of the fastest growing counties in the state, often in the top five. Chatham Park alone, the largest mixed use development in the state’s history, is just getting started and expected to create the need for 9 to 11 new schools. While Chatham Park’s water will come from the Town of Pittsboro, other expected development in the county will place major pressures on public water needs. Without impact fees, other revenue sources would be needed to fill the gap or the county would have to delay or cancel some facility projects.
What other revenues could be used if impact fees are repealed?
Across the state, counties generally have very limited authority for revenue options. Chatham County would be placed in the position of either delaying or cancelling projects or considering increases in the property tax rate or reductions in existing services. Because Chatham has a fairly low percentage of commercial & industrial property tax revenue, an increase in property taxes would shift the tax burden to all residential homeowners, regardless of income. Customer water rates are already on the high side for our region, so raising these is problematic.
What is the current status of HB 436?
On April 20, the House Finance Committee approved a substitute bill that is much more favorable. It calls for a legislative study committee to be formed to look at impact fees. It also would freeze existing impact fees at their June 30, 2016 level, pending the results of the study committee. The substitute bill is expected to be voted on by the House of Representatives the week of April 24. We hope that lawmakers will approve the amended version.
One-Page Summary of House Bill 436
Click here to view and print a summary of the potential impact of HB 436.