ABQJOURNAL OPINION/GUEST_COLUMNS: Impact Fees Are Nothing More Than a Hidden Tax

Monday, July 19, 2010

Impact Fees Are Nothing More Than a Hidden Tax

By Dan Lewis
Albuquerque City Councilor
          Impact fees are a hidden regulatory tax. They are unfair, regressive and discriminatory.
        Last year the Albuquerque City Council approved a reduction of the negative hit that so called "impact fees" leave on small businesses and the local economy. The council will soon revisit the current one-year moratorium, and with our fragile economy we should make every effort to extend the freezing of this regulatory burden on those who would invest in home and business construction and jobs in our community.
        Most local government officials now recognize impact fees are having a very negative impact on local economies. Cities and counties are suspending these taxes to spur job growth and are giving local economies the break they now need.
        Even in the midst of a recession, the American spirit of entrepreneurship energizes courageous people to start new businesses and work to keep open and expand those they have begun. They need our support now more than ever.
        Now is the time for Albuquerque not only to extend the current moratorium on impact fees, but to work for a systemic change to these regulations and make sure people are not penalized simply for providing desperately needed residences, products, businesses and services to our city.
        Albuquerque's West Side has been especially hurt over the years with the unfair penalty of some of the highest impact fees imposed on renovations and new construction. For the last five years this regulatory burden has resulted in shuttered businesses because the order of the day was to charge people more and raise the price of going into business thereby virtually guaranteeing many would fail or never start at all.
        When I travel the West Side and see empty commercial buildings and stores that I once frequented now closed, I take it personally. I wonder how many restaurants and service-oriented businesses could have been saved and even expanded to create more jobs if only more of their dollars could have been invested in products and people.
        Impact fee proponents assert that residential development does not pay for itself. They justify a "special" fee on construction to offset the claimed "burden" on other taxpayers who they say are "subsidizing" new development.
        This assertion is simply not true. Not only does new residential and commercial development pay for itself, it is one of the economic engines of any area. Commercial development always follows residential development and produces great benefits and revenues to the entire city. There is no doubt residential and commercial construction generates more money in city revenues than what it costs to the city.
        Incredibly, however, highly paid consultants have influenced politicians to become addicted to the rush of increased taxes otherwise known as impact fees. They claim these taxes are internally absorbed by a business and none of it is paid by the consumer. But the truth is — we all pay. When impact fees increase the cost of starting a business, the business owner ultimately passes those costs on to us, and the price of everything goes up, while hidden taxation rises.
        Impact fees are unfair and regressive as they reduce the affordability of housing, especially for low-income families. For these families, impact fees are nothing more than an extra tax, tacking on several thousand dollars on anyone buying a new home, and on anyone starting or trying to expand their business.
        The fact is, most so-called "developers" are little guys: local enterprises trying to maintain a small business, employ a few people, and make a living.
        Infrastructure improvements benefit everyone in the community and, therefore, should be paid for by the public at large and not just one minority within a community. Many West Siders are longtime taxpayers, and the West Side has paid millions of dollars in taxes for public improvements that have benefited every area of our city — not just the West Side.
        The impact fee system also has caused city residents to resent those in other sections of the city and to point fingers of blame at one another. Those in established neighborhoods are led to believe that fees must be higher in areas of new development so they are not "footing the bill" for infrastructure that does not benefit them. But good policymakers should have the patience and intelligence to examine the long-term effects of the policy on everyone and not just one specific section of the city or group of people.
        Some impact tax proponents have argued that a moratorium is nothing more than a stimulus package giving developers a free pass. I call it making government take a break from something it should have never done in the first place.

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