Orange County

Orange County weighs its options after losing schools impact fee

State lawmakers voted in June 2017 to repeal Orange County’s authority to charge impact fees on new residential construction and use the money to pay for local schools construction needs.
State lawmakers voted in June 2017 to repeal Orange County’s authority to charge impact fees on new residential construction and use the money to pay for local schools construction needs. File photo

Orange County officials spent Tuesday morning running the numbers to see how the General Assembly’s repealing a local impact fee will affect taxpayers.

The state Senate voted 35-13 Monday to join House lawmakers in taking away Orange County’s authority to charge fees for new housing. The fee, which brought in nearly $2.8 million last year, helps build and renovate schools.

Senators who spoke against the impact fee said Orange County had abused its authority to levy the fee. Local representatives and their supporters argued the change would force the county to raise property taxes and cause budget issues.

The bill – HB406 – will become law once House and Senate leaders sign it, leaving Chatham County as the only other government with the authority to charge an impact fee for school construction.

An October report showed the impact fee has generated nearly $45.3 million for Orange County and Chapel Hill-Carrboro school construction since the state authorized it in 1987. County spokesman Todd McGee said they expect to have roughly $6.1 million in unspent fee revenues available through June 2019.

“As you know, the county has been using approximately $2 million to $3 million annually to pay for debt service related to new school construction,” McGee said in an email. “As those funds are phased out, we will need to engage the Board of Commissioners to determine a strategy for replacing them.”

The reserves will give the board time for those discussions, he said.

The change won’t stop the county from collecting fees that were levied before the repeal takes effect, McGee said, or construction projects included in a voter-approved bond referendum last fall.

The Orange County Board of Commissioners already anticipated adding 5 cents to the property tax rate, starting in 2018-19, to cover those projects.

Behind the fee

Orange County’s housing stock has grown significantly in the last three decades, according to a September impact fee report from TischlerBise consultants.

The report noted steady student enrollment growth in both districts since 2004 – averaging 1.1 percent a year in the Orange County Schools and 1 percent in the Chapel Hill-Carrboro City Schools. It predicted both districts would grow more slowly over the next decade, averaging roughly 0.7 percent a year in the county schools and 0.9 percent in the city schools.

While the county doesn’t track how many new students are generated by new housing, the consultants predicted the stock of single- and multi-family homes could grow over the next decade by 0.9 percent a year in Chapel Hill and Carrboro and 1.5 percent in rural areas.

Orange County’s fee was based until this year on the type of home and whether it was located in the city or county schools districts. The commissioners voted in November to link the fee amount to the number of bedrooms.

Surry County Republican Rep. Sarah Stevens first proposed the bill in March, in response to a Chapel Hill apartment owner who was concerned about how the county’s recent fee increase had tripled the amount owed for the Grove Park redevelopment project.

The property owner also filed an appeal with the Orange County Board of Commissioners, which agreed to give the owner more time to meet requirements that would keep the fee at the previous rate.

The board voted in May to roll back the impact fee increase and set a one-year moratorium so the county could study the issue. The decision mirrored a state House committee’s decision this spring to delay a second bill that Stevens filed.

That bill – HB436 – would have repealed impact fees in 11 communities. However, it was delayed while the state studies the impact fee issue.