Canyon County

Cities ask newcomers to pay for growth — but that could raise home prices for everyone

Meridian, as well as the Ada County Highway District, are considering increasing their impact fees, which they charge developers to pay for the cost of new improvements needed to accomodate growth.
Meridian, as well as the Ada County Highway District, are considering increasing their impact fees, which they charge developers to pay for the cost of new improvements needed to accomodate growth. kjones@idahostatesman.com

Longer wait times for fire and police. Backed-up traffic. Crowded parks. As the Treasure Valley’s population has exploded in the last decade, the growth has put a strain on every city’s fire services, roads and police.

”As we see growth in Idaho ... how do you pay for the road improvements and the infrastructure that’s aging?” said Nampa City Councilman Randy Haverfield. City councilors like him are promoting a similar message: Growth should pay for growth.

In a region generally allergic to raising taxes, cities like Meridian and Nampa are looking to do what Boise has done previously and Meridian already did just this year: raising impact fees. Instead of taxpayers, it’s developers who pay these fees, based on the size and type of new construction. Under Idaho law, cities can use the revenue only on capital expenses, like new parks or fire stations.

The fees are passed on to buyers, raising the costs of new homes and commercial buildings. Including current impact fees, Nampa’s proposed increase would add $5,459 to the cost of a $200,000 house. Meridian’s latest impact fees, adopted earlier this year, add $2,017 to the cost of a $300,000 house, and Boise’s add around $1,800 to a $330,000 home.

In Ada County cities, builders also pay impact fees to the Ada County Highway District: about $3,000 for a single-family home, bringing the total cost in line with Nampa’s new fees. Canyon County’s municipalities control their own streets.

Developers say higher impact fees put affordable housing even further out of reach.

Bryan Wright, owner of Intermountain West Homes, a Nampa homebuilder, said impact fees unfairly place a burden on new residents.

“We’re working hard to get affordable housing,” Wright said. “The impact fees affect that in the long run.”

Cities could save up some of the revenue coming into their general revenue for capital projects, but many officials believe they can’t afford to wait. In the next decade, for example, Nampa is projected to absorb 20,000 more residents, 10,000 new residential units and 4 million square feet of new commercial and industrial development.

That growth, which outpaces estimates from previous years, will force Nampa to spend $256 million on capital investments, according to a new study commissioned by the city, which also included the growth figures.

Reconsidering impact fees

Most impact fees work by charging developers based on the number of residential units they construct, but some cities are thinking differently.

Rather than charging based by unit, Meridian is looking into rules like Boise’s, which charge developers based on square footage, said Todd Lavoie, the city’s chief financial officer. That solution is seen as more equitable, given that larger units bring more people who demand more services.

Miguel Gaddi, a real estate development consultant who has worked on projects in Boise and Nampa, offered another option. Gaddi suggested an impact fee system that would charge developers less for building close to existing services, given that those residents or property owners could be served by the parks and fire stations already there.

“Why do I have to pay the same impact fee if I’m not putting a burden on the infrastructure?” he said.

In some ways, Boise’s density helps solve that problem, too, said Boise’s communications director Mike Journee. Smaller units pay less in impact fees, because the city assumes they will house fewer people. And by building within city limits, Boise doesn’t always need to build more fire and police stations in areas with new development, as Meridian and Nampa have had to.

“Working to create more dense development helps us keep our taxes lower, because we’re not having to build a lot of new amenities to support that growth,” Journee said.

Impact fees are levied differently against commercial and residential developers. For example, only developers building new residential units must pay impact fees to build new parks in Nampa, Meridian and Boise. It’s assumed that commercial development contributes little to parks usage.

Anne Wescott of Boise-based Galena Consulting works with cities on impact fees. She said developers can always ask a city for an individualized assessment if they feel their development would put a different strain on city resources than the norm. For example, nursing homes have previously been able to get out of paying for parks, too, given that the nursing homes’ residents don’t use them, Wescott said.

Do the fees discourage development?

With construction costs the same throughout the Valley, developers might not think their investment is worth the return in a city like Nampa, where the property taxes are higher and the commercial rents and housing prices are lower, said Gaddi.

“The reality is, I have to pay the impact fees no matter what,” he added.

Cities are treading carefully so as not to halt development.

“As we raise rates, it becomes a deterrent to someone who wants to come here to Nampa, and by extension create jobs,” said Haverfield, the Nampa councilman.

Nampa and Meridian have made sure to include builders and contractors associations in their public hearings on impact fees.

“We want to bring them on board,” said Lavoie, Meridian’s financial officer, who leads the city’s impact fee advisory committee.

Meridian developers may be surprised to see a new study of impact fees, given that the city just raised rates in March. That is because nearly five years ago, when the city did its study on the fees as required by state laws, the City Council decided not to increase them to the recommended amount. But in January 2018, the City Council revisited that 2014 study and decided to fully adopt its recommendations.

The council in 2014 had compromised with developers to implement fees incrementally rather than all at once. But after seeing its capital-project needs balloon, they decided to raise the rates.

In January, Council President Joe Borton told the council, “I detest impact fees ... but part of the problem is created by us in a sense.” A city’s capital needs increase proportional to its growth, he continued. “That number is really big ... it’s because we are growing really quick.”

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Hillsdale Park in Meridian was built with partial use of impact fees, which developers pay to help the city pay for the capital improvements it needs to accomodate new growth. Kate Talerico Kate Talerico


Nampa’s increased fees

Cities raising their impact fees must first show the extent of capital improvements they expect. Wescott, the consultant, estimates that in the next decade Nampa will need 70 new acres of park land, two new fire stations and $194 million in street improvements. She proposed impact fee increases that would fill the city’s funding gap for those projects.

“It’s designed to not let the level of service decline because of growth,” Wescott said in a phone interview.

Currently, just general revenue and grants go to road improvements like widening, and developers pay the cost of any new streets they build. With the new system, developers would instead pay a fee that would cover the costs of both roads and improvements.

Tom Points, director of public works for Nampa, said that with traffic backed up and potholes scarring Nampa streets, improvements are top of mind for city residents.

“This allows the city to pool the city street funds and the developer impact funds and build the highest priority intersections, which will have the biggest benefit in moving traffic,” he said in a phone interview Thursday.

Nampa is in desperate need of funding for street improvements, Wescott’s report indicates. To make the capital improvements necessary over the next decade, the city will need nearly $20 million per year. Currently, Nampa funds the streets with just $3.5 million per year from city property taxes.

Even with higher impact fees, the city would need to nearly double the allocation from property taxpayers, she said.

This story has been corrected. An earlier version included an incorrect attribution for Mike Journee.

Kate Talerico: 208-377-6292; ktalerico@idahostatesman.com, @k_talerico
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