NC House backs off proposed ban on development impact fees

A bill that proposed to strip North Carolina counties and municipalities of their authority to impose impact and other regulatory fees on new construction was scaled back by a House committee on Thursday.

The new version of the bill approved by the House Finance Committee would prevent local governments from raising or enacting new impact fees and orders the Legislative Research Committee to study the issue and propose new legislation next session. Rep. Graig Meyer, an Orange County Democrat, introduced the amendment.

“I think that impact fees are a good way to raise the money that’s needed to pay for infrastructure that comes with rapid development,” Meyer said. “I ran the amendment because I thought the amendment would give us time in the legislature to study and talk about impact fees and not rush a bill that would take away one of the counties and municipalities very few revenue tools.”

The primary sponsor of House Bill 436, Republican Rep. Sarah Stevens, an attorney from Mt. Airy, has said impact fees have imposed unfair costs on development, and that some counties have broader powers than others to charge them. Another bill she filed specifically takes away the ability of Orange County to impose impact fees for school construction.

The home building and real estate industries have long opposed impact fees. Orange County real estate agent Mark Zimmerman, chairman of the N.C. Realtors Association’s legislative committee, says Realtors think it’s unfair to target fees to new developments, partly because there is no way of predicting how they will affect the cost of services in the future.

But cities and towns in the Triangle have come to rely on development fees to help pay for roads, utilities and other public services that their growing communities need. Local officials say doing away with fees on development will shift the burden of growth on existing taxpayers.

“Personally, I think the only people that it serves are developers,” Cary Mayor Harold Weinbrecht said.

HB 436 targets by name Triangle towns Carrboro, Cary, Chapel Hill, Garner, Knightdale, Pittsboro, Raleigh, Rolesville, Wake Forest, Wendell and Zebulon, as well as Chatham and Orange counties – places the General Assembly has authorized to impose impact fees of some sort. Most of these authorizations date back to the 1980s, and all would have been repealed under the original bill.

The regional Triangle J Council of Governments has estimated the bill could cost the 11 Triangle communities $28.9 million each year. Cary said it would cost the town $11.5 million per year, which equates to a 5 cent property tax increase. And Chatham County would lose $4.5 million per year.

“Whatever you feel about impact fees, the problem is that money has already been budgeted and spent for the most part,” Rep. Robert Reives, a Democrat who represents Chatham and Lee counties. “They’ve already committed that money, and then to cut off impact fees this year with no warning, no anything, I think that was a drastic move.”

Rep. Nelson Dollar, a Republican who represents Cary, said he was concerned with the original bill because it would most likely result in property taxes increases. But he said even though it was changed there is still support to address the problem made evident by a state Supreme Court decision that found the Moore County town of Carthage exceeded its authority when it charged impact fees to pay for expanded water and sewer service. While the decision in Quality Built Homes Inc. v. Town of Carthage affected only one town, it has raised questions about the authority of other cities and counties.

“I certainly think that we can work on those issues and come up with an agreeable resolution,” Dollar said. “And that’s where the bill sponsors wanted to go, but I certainly couldn’t agree with sort of the methodology that was behind that bill.”

In addition to HB 436, Stevens also filed House Bill 406, which would end impact fees that support Orange County school construction. That bill passed the House Finance Committee unchanged on Thursday and will head to the House floor.

Orange County representatives have said Stevens may have filed HB 406 in response to a recent change in the way the county levies its school impact fee on new residential construction. The developers of the Residence at Grove Park – formerly the Town House Apartments – in Chapel Hill complained because they missed getting approval for the project before the change went into effect, pushing their estimated impact fee bill of $300,000 to more than $1 million.

Earlier this month, commissioners agreed to extend the deadline for being grandfathered in under the old fee structure.

“And yet, this bill is putting at risk the county’s ability to use impact fees altogether,” Meyer said.

Orange County Commissioner Earl McKee said Thursday that the bill would take $2.5 million from the county budget. McKee said the county would be faced with either raising taxes or cutting services to make up the difference and that he hoped for the same sort of delay on the bill that the House committee agreed to on the statewide one.

This story was originally published April 21, 2017 at 10:16 AM with the headline "NC House backs off proposed ban on development impact fees."