Title
Approval of an Ordinance Regarding the Timing of Impact Fee Payment
Recommended Action
Finance Committee Recommendation:
On August 11, 2014, the Council's Finance Committee reviewed and recommended approval of the proposal described below.
City Manager Recommendation:
Move to approve on second reading an ordinance amending Olympia Municipal Code 15.04.040(H) to revive the impact fee deferral option.
Report
Issue:
From July 2009 until August of 2011, the City of Olympia offered an option to defer the payment of impact fees - normally due when building permits are issued - until final inspection of the building. Should the City amend the development code to again offer this option to building permit applicants?
Staff Contact:
Keith Stahley, Director, Community Planning and Development Department, 360.753.8227
Presenter:
None - Consent Calendar Item
Background and Analysis:
The background and analysis have not changed from first reading to second reading.
In the early 1990s the State Growth Management Act authorized cities to collect "impact fees" as one means of financing infrastructure improvements needed to accommodate population growth. Impact fee programs are limited by statute to funding only transportation, school, fire protection, and parks and recreation facilities. Olympia was an 'early adopter' of impact fees. (Note: The City also collects comparable fees for utility capacity improvements - these are termed "facility charges" and are not included in this deferral proposal.)
Olympia's impact fee program provides that impact fees are ordinarily due and payable when a related building permit is issued. These fees are relatively substantial. For example, in 2014 the impact fees for a new single-family home totaled over $14,000. (See Attachment 2 for a summary of the impact fee program.) Impact fees are also a relatively large source of the City's and Olympia School District capital budget revenue. Depending on the state of the economy, annual impact fee collections have varied from about one million to several million dollars.
Over the years the City has offered deferral of impact fee payments as incentive for various types of development, such as for downtown housing. In 2009 the City responded to the economic recession by offering all building permit applicants the option of deferring the payment of impact fees. By exercising that option, a development applicant could defer this cost of development until final inspection of the new building or addition (usually about 6 to 24 months. This slightly reduced the size of any construction loan.
During that two-year period, 28 applicants took advantage of the deferral option. A $50 administrative fee was collected by the City for each of these projects. No unexpected administrative problems were experienced during the period the program was in effect. Pursuant to the adopting ordinance of 2009, all of the City's impact fee deferral options expired on August 1, 2011, "unless otherwise re-authorized by the City Council."
Early this year the Finance Committee discussed what actions the City might take to spur the slow economic recovery. The attached ordinance would revive this development incentive by reinstating this 'all-city' version of the impact fee deferral program and remove the expiration provision. In other words, the revived deferral program would remain in effect until revised by a future Council action.
Neighborhood/Community Interests (if known):
No general community interest known. Building permittee representatives, such as Olympia Master Builders (OMB), and parties interested in City financing, such as Carnegie Group, may have an interest. OMB is aware of the proposal.
Options:
1. Approve attached ordinance reinstating impact fee deferral option as described.
2. Refer issue to Finance Committee for additional review and recommendation.
3. Do not approve attached ordinance.
Financial Impact:
Specific financial impact not known; will result in small reduction in interest earned in impact fee accounts due to delayed collection of fees; added administrative cost should be off-set by deferral fee.