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Monday, July 29, 2002


Impact Fees Crux of Proposed Growth Plan Debate

By Lloyd Jojola
Journal Staff Writer
    At the CopperWynd subdivision on the Southwest Mesa, $79,990 can get you a 945-square-foot home with two bedrooms, two bathrooms and a one-car garage.
    "With that you get a washer, dryer, refrigerator, miniblinds, microwave you get the full appliance package, every appliance you're going to need," said Robert Lupton, director of planning and site development for Sivage Thomas Homes.
    Take a closer look, and you'll also find that the purchase price pays for a lot more. It carries the standard $2,619 fee per-house to link up to the city sewer and water system and $278 in fees earmarked for city parks.
    Also built into the cost is its share of approximately $315,000 the developer spent to build three new roads and install a traffic light to support the subdivision work done outside the boundaries of the 91-home community near Tower and Unser SW.
    Ask people in the development community whether new growth pays its way, and the unequivocal answer is "yes," as they point to numbers like those listed above.
    They add that raising those fees could add thousands of dollars to a new home's price tag.
    But some city councilors argue that existing fees don't cover the real costs of providing services to new areas and that people throughout the city end up covering the difference.
    Some argue that impact fees should cover all the costs of water and sewer service, storm drainage, streets, police and fire services, schools and the purchase of water rights.
    That is at the heart of what promises to be the most contentious issue the council could take up over the next year or possibly several years.
    Next month, councilors will consider a proposed planned growth strategy ordinance intended to guide future development of the city.
    Impact fees a set schedule of costs to be borne by developers are a key ingredient. The bill calls for the council to adopt fees, based on the work of a task force.
    Even if the planned growth bill fails, impact fees will probably be brought up separately.
    "One of the things impact fees will do is just level the field so that everybody knows right up front what their cost will be and they can make a decision on whether they want to develop or not," said Victor Chavez, director of the city planning department.
Subsidizing growth
    There has been a long-simmering debate about whether developers are paying the full cost of providing services to new developments, specifically on the West Side, or if fringe development is subsidized by people in older parts of the community.
    "I believe that we are not collecting the real cost, that the taxpayers you, I and everybody else who pays taxes we are subsidizing new growth," said City Councilor Eric Griego, a sponsor of the proposed ordinance.
    People in the development community are not opposed to impact fees, and many are quick to point out that the business sector helped engineer the state statute that allows the fees.
    The question is: How much is fair?
    Even as the system is set up now, developers are creating a mass of development-related infrastructure, and the city greatly benefits from it, said Jim Folkman, executive vice president of the Home Builders Association of Central New Mexico.
    "Developers not only pay for all the streets, curbs and gutter, water, sewer lines and drainage within the subdivision, they pay for all that and give it to the city, which becomes a revenue-generating asset," Folkman said. "It's on the basis of that the city can charge property taxes. It's on the basis of that they can charge for water and sewer services.
    "In addition to that, very frequently, the developers also pay for off-site improvements curb, gutter and the streets to get to the subdivision."
Alternative fees
    Currently, the city has several ways to cover the public works costs associated with new development.
    One is through utility expansion charges. The one-time charges are paid by new water customers when they link to the city sewer and water system. The fee for a typical home with a 3/4-inch water line is $2,619.
    For fiscal 2001, the city collected approximately $11 million in utility expansion fees.
    Developers are also required to dedicate land for neighborhood parks and pay a fee for parks $78 for a single-family home.
    In lieu of land dedication, the developer can pay cash, which is based on land cost in the area and the subdivision's proportionate share of the cost to buy land for a park.
    Another way is through "exactions" requiring that developers build roads, intersections, drainage works and other facilities off-site to support their subdivisions. The improvements eventually become city property.
    Folkman described the exactions process as "arbitrary," "inconsistent" and "unpredictable." Many agree.
    "The exactions process is inherently unfair," said Orlando Lucero, a land-use attorney and representative of New Mexicans for Smart Growth, a coalition of developers, home builders and real estate representatives. "It is dependent on who the developer is, the kind of clout the developer has. You could have two developers doing the same project, in effect, and they may end up paying for very different things just because of the way the negotiation process worked with the city."
    City Councilor Michael Cadigan, another sponsor of the planned growth ordinance, also sees inequities.
    "Some developers, specifically big developers, get stuck with a big chunk of money that they have to spend, and that gets driven into the price of a home," Cadigan said. "But people who are doing small subdivisions, they usually come in under the radar. ... They pay the water and sewer hookups and the park fees, but don't get hit with exactions."
    An analysis in the 750-page planned growth strategy report points to problems with utility expansion charges. Among them, the fee structure is calculated to generate only a percentage of the full installation cost and makes no distinction between infill development and building in areas with less infrastructure. The difference in costs is significant.
    "If you're building a house on the West Side, you pay the same amount for your utility extensions as you do if you're building in the Downtown core area or the neighborhoods that we build in," said Louis Kolker, executive director of the Greater Albuquerque Housing Partnership, which has been working on affordable housing projects in the Santa Barbara-Martineztown and Trumbull-La Mesa areas. "But, in fact, the extension costs where we build are very minimal, because all the infrastructure is there."
    It's debatable whether the utility expansion charges now cover the full cost of sewer and water. In theory, they should pay for things such as wells, reservoirs, pump stations and big transmission lines that get water from the source to the edge of a subdivision.
    "Does it cover the cost of the water main to get to the subdivision? Absolutely," Cadigan said. "(But) there are a lot of system-wide amenities that they are getting benefit of that are not included in the cost."
    The state Development Fees Act, passed almost a decade ago, sets specific guidelines for cities and counties to use in creating impact fees.
    Fees can cover a variety of projects: facilities for water supply, treatment and distribution, drainage, parks, roadway facilities such as streets and bridges, or buildings for fire, police and rescue, among them.
    The proposed ordinance states that the city would seek statutory authority to expand the list to include schools, transit and water rights.
    That could open a can of worms at the Roundhouse, one planner said.
    "I think there will be heated discussion at the Legislature if that law gets reopened and we start adding other things or other methodologies," said Karen Marcotte, with Consensus Planning, a land-use planning firm. "It was a hard-fought battle to begin with to get something that was felt to be fair and predictable."
Paying the price
    The proposed ordinance says impact fees "shall be initially calculated based upon the full marginal cost of growth." In general, that would make fees higher in areas where it costs more to provide the services and infrastructure to support growth and vice versa.
    "The idea of the planned growth strategy is, initially, you set impact fees at 100 percent, and then give discounts," Cadigan said.
    Waived or decreased fees would be used as incentives to direct or encourage certain development, according to the proposed ordinance.
    Fees could be reduced for projects that result in jobs closer to residential areas, mixed-use projects, neighborhood commercial centers, activity centers, higher density housing and affordable housing.
    They could also be waived for development consistent with metropolitan redevelopment plans, neighborhood and sector plans, centers and corridors plans and for affordable housing.
    Although many developers say they are in favor of impact fees, determining the fees won't be easy.
    "The same developers who were telling us they want impact fees were the ones singing the praises of reducing impact fees," Griego said, referring to Bernalillo County's recent decision to reduce its impact fees.
    Some worry about a plan that would set impact fees higher on the city skirt.
    "Where it's currently the cheapest to build is on the West Side and that's where they want to raise the fees," Marcotte said. "They're saying they'll compensate for that by waiving the impact fees in the center city, but that doesn't compensate for more expensive infrastructure and the more expensive land. So, there's no way for that price to come down."
    Lupton, with Sivage Thomas Homes, said it doesn't take much of an increase to begin pricing people out of the housing market.
    "We're no rich economy here," Lupton said. "If all of a sudden my cheapest house is $5,000 more than it was a month ago, there are a significant number of people who now can't buy a house. So what they're going to do is what they do everywhere else in the world it's the old 'drive till you qualify.' People are going to go where they can buy a house."