After another lengthy debate on the pros and cons of development impact fees, the Lincoln City Council froze the rates for the second year in a row rather than adjust them for inflation.
DEENA WINTER / Lincoln Journal Star | Posted: Sunday, November 16, 2008 6:00 pm
After another lengthy debate on the pros and cons of development impact fees, the Lincoln City Council froze the rates for the second year in a row rather than adjust them for inflation.
That means the fees developers pay to offset the city’s cost to provide their infrastructure will remain at 2007 rates rather than increase 5 percent in 2009. The council also froze the rates last year rather than hike them 2 percent in 2008.
The freeze prevents the fee for the average home from increasing $252 next year. Freezing the rates means the city gets an estimated $178,000 fewer dollars. But when you combine that with last year’s lost revenue, it translates into $1.5 million in lost bonding capacity for public projects.
The issue pitted home builders and business boosters against neighborhood advocates — and prompted the usual discussion of whether growth pays for itself, whether the fees have really caused a construction downturn, and whether a freeze would do much good.
During about two hours of debate, people like appraiser John Layman laid blame for Lincoln’s construction slump at the feet of impact fees.
Some cities have frozen or eliminated impact fees to try to spur construction. Layman said Lincoln’s impact fees have gone up at an alarming pace in the past four years. Lincoln’s fees — which are used to offset the cost of streets — have increased 67 percent, compared to 18 percent nationally. The fees for water pipes have increased 68 percent, compared to 37 percent nationally.
However, Councilman Dan Marvin said Lincoln’s rates are about half the national average. Others cited much higher impact fees charged in Colorado cities, ranging from $5,000 to $23,000.
Councilman John Spatz suggested those cities charge such high fees to discourage development.
Jerry Boyce, president of the Home Builders Association of Lincoln, said the city has not issued so few building permits since 1982, when interest rates were sky-high.
Over the past 33 years, the city has issued an average of 885 single-family home permits annually. Last year the city issued 569 and so far this year, just 373.
“This is not the time to be adding costs to residential and commercial construction,” he said.
But Marvin said apparently last year’s rate freeze didn’t help spur construction, since building permits continue to decline.
Marvin argued Republicans had no problem increasing water and sewer rates 4 percent this year (and likely 6 percent next year) but are inconsistent by not allowing a similar increase in impact fees for developers.
Councilman Jon Camp said the “impact tax” recently helped push a local Lincoln electric company to Waverly.
Coby Mach, executive director of the Lincoln Independent Business Association, noted multi-family home permits have dropped to less than 50.
But opponents said the whole nation is seeing a housing slump and suggested Lincoln is overbuilt.
Mach said the freeze would still be a “goodwill gesture” to an ailing segment. Developer attorney Mark Hunzeker said few places have seen building permits drop as precipitously as in Lincoln.
“People are leaving this community in numbers that I haven’t seen since… the early 1980s,” he said. “We’ve lost a lot of quality, skilled trades people.”
But Stuart Long, a member of the Lincoln Neighborhood Alliance, said he’s watched the city cut employees, stop mowing parks, cut the bus system and raise other fees in order to balance the city budget in recent years.
“You were trying to find revenue everywhere you could find it,” Long said. “I guess my question is, what makes the home builders so special?”
Councilman Ken Svoboda said the freeze doesn’t benefit builders; it benefits home buyers, since the fee is passed onto them.
Councilwoman Robin Eschliman said the difference is, when construction slows, roofers, plumbers and shinglers also suffer — whereas “if you freeze bus rates, it’s sort of a non-event.”
The final vote split along party lines, with the four Republicans, Svoboda, Eschliman, Camp and John Spatz, passing the measure over the objections of the two Democrats, Marvin and Doug Emery. Jonathan Cook was absent.
Reach Deena Winter at 473-2642 or dwinter@journalstar.com.