ANALYSIS | Dave Yochum

May 20. It’s the most logical thing in the world: Assessing impact fees for new commercial and residential developments that place new burdens on infrastructure like schools and roads.

Thing is, in North Carolina, they’re illegal. The NC Supreme Court disallowed impact fees after rulings in two cases. Municipalities were abusing their authority and were utilizing them outside of their intended use.

Ultimately, the impact fees caused the price per house to skyrocket, according to NC Sen. Vickie Sawyer, a Republican who represents parts of Cornelius and Iredell County in Raleigh.

Impact fees, intended to help pay for the impacts of new development on public infrastructure are one-time charges paid by developers as part of the development approval process. The primary purpose is not to generate revenue but to pay for improvements to roads, sewer, water, schools and police and fire.

They’re considered unconstitutional in North Carolina.

“In an environment where government regulations are approximately 16 percent to 20 percent of the cost of the home, adding impact fees will essentially price out many families from our communities,” Sawyer said, citing a NC Realtors study.

Rapid development

Cornelius, not to mention much of the Charlotte region, has been in the cross-hairs of intense market forces for years, driving  residential growth and commercial development—and traffic.

Cornelius-based developer Jake Palillo is in favor of impact fees. The developer of Bailey’s Glen in Cornelius and the new Symphony senior living resort in Huntersville says states like Florida and Texas have these fees and are still growing.

The fees set by each county will help fund “great roads, schools and parks,” Palillo said.

“Just imagine if every new home built paid a $30,000 impact fee, every new apartment development paid a $3,000 to $5,000 per unit impact fee, every new office building and commercial project paid an impact fee,” Palillo said. “Every county in the state would generate millions of dollars to build roads and infrastructure. Build schools and pay great wages to teachers. Hire more police to keep our communities safe.”

To a small extent, there are impact fees already in place. If a municipality operates a water and/or sewer system they charge the home or business to tap onto the system or to cover the cost of providing the service to their business, Sawyer explained. “In a way, there are impact fees already assessed but just for water and sewer connectivity.”

The real problems are around school construction and roads.

Sawyer said it’s time “to revamp how we fund and implement” both of those areas.

New schools

With school construction, she’s in favor of taking a page from charter school construction by establishing a public private partnership.

“In essence, the system will rent the property from a private entity who is responsible for the maintenance of the property and can eventually purchase the property if desired,” she said.

A school system is allowed to use capital money and/or lottery funds for the lease of those properties.

“The old tax and spend model for school construction is outdated,” she said.

Then too, the process for school construction with the NC Dept. of Public Instruction is “just mired with red tape,” causing the cost per square foot of any school building to balloon because of outdated practices, Sawyer said.

And, if you want to support affordable housing, waive impact fees for new homes priced under, for example, $300,000 as well as other carve-outs like first responders and teachers, Palillo said.

Roads

Sawyer wants to overhaul road construction funding as well. “The local governments that are approving the development should be given some tools to help with road construction that affects their citizens,” she said.

She has introduced Senate Bill 172 that would allow local municipalities to construct road projects using local dollars borrowed from the private sector that will be reimbursed by the state when it is time for that project to be developed on the cumbersome NC Strategic Transportation Improvement Program.

Doing so could shave years off a road project like widening West Catawba from Jetton to Sam Furr.

“It is cheaper to construct roads now instead of 10 years from now, so why not let the local governments that can manage a large project to front load the money and professional expertise to build and then get fully reimbursed by the state,” Sawyer said.

Cooperation

Drew Thigpen is the developer behind Greenberg Gibbons’ plan to build a commercial business park on Bailey Road east of Hwy. 115 opposite the entrance to Bailey Road Park. Although there is opposition to the development, mostly due to traffic, Thigpen says he’s willing to do something about it right now.

‘We are willing to provide seven figures worth of immediate transportation improvement to this area in the form of a new dedicated left-hand turn lane at Bailey Road and 115 and the elimination of the site distance issues along Bailey Road,” he said.

The new turn lane would provide traffic relief sooner rather than later—and it’s an improvement that is not currently being considered by the Town or NCDOT.

While that’s for neighbors, the Planning Board and the Town Board to decide, it shows what cooperation can accomplish.

“If anyone is looking for real infrastructure improvements, the only immediate tangible solutions are with this project,” Thigpen said.

Susan Johnson, a member of the Town Board as well as a former chair of the Planning Board, said impact fees should be allowed in North Carolina.

“Most developers have the ability to make infrastructure improvements much more quickly vs. how long it takes to go through the current funding process,” Johnson said.

Property owners have rights and farmland here no matter how lovely won’t be the highest and best use again, so what’s left of empty spaces will be developed with or without new roads.

What’s next

Dave Gilroy was a long-time member of the Town Board and still watches proceedings carefully.

“The only solution is for our town board to utilize every land use and planning tool available to protect our quality of life long term. If we can include a traditional, proven tool like impact fees in that tool kit, then we must,” he said.

Sawyer said the the Mecklenburg sales tax initiative is an idea that could be expanded to all 100 counties in the state.

“Allowing for local governments to identify and fund projects through a referendum lets the people decide if they want to use sales tax dollars to construct badly needed road projects,” Sawyer said.

Johnson hopes SB172 gains support.

“To date there has not been enough support from the legislature to consider allowing impact fees to be lawful. The only way I can see a change to the current law regarding impact fees is for all of the town and county leaders within North Carolina to unite in support of impact fees. Local developers have been very vocal about their willingness to pay impact fees however this needs to be a broader initiative where all developers are on board with paying these fees and support a change to the current law,” Johnson said.