Apologies to Mrs. Gump but stupid is what stupid does is the simplest explanation of impact fees ever uttered. Touting impact fees can help get a lot of charlatans on the various elected boards in town. Generally speaking they tend to be the type that can’t say no to spending or to the debt required to feed the government’s appetite for your money.
Back in the day when thousands of local construction workers enjoyed those now preciously sought living wage jobs the sleight of hand called impact fees were born. It made the Best Practices Consultants a fortune off local governmental units. Debt bond saleswomen made tons of money goading the charlatans into touting impact fees to help round up support for referendums.
What was most promoted was impact fees were the only way to get those greedy builders and developers to “pay their fair share.” Then when asked why the need to go into debt if they have impact fees the story changed to “it’s a way to control growth.” That’s how it turned into the political animal it is today. Both were false pretenses and the consultants knew it.
Those greedy developers pass those fees on to the builders who buy their lots. Those greedy builders pass the costs on to the home buyer. So as much as the big spenders want to paint the developers as the bogeyman it is the consumer and taxpayer that pays impact fees. Once as an item on their new construction bill and then for as long as they own that home since it is falsely added to the value and then taxed as part of the EAV.
Do impact fees control growth? No. Because new construction isn’t the only form of growth.
Here’s a local example. New homes are being built in Sycamore at a modest but steady pace for the past several years. Over the same time period you can almost count the number of new homes built in DeKalb on one hand. So explain how District 427’s (Sycamore) enrollment flatlined from 3,788 students in 2011 to 3,776 in 2015 yet enrollment in District 428 (DeKalb) increased from 5,998 to 6,306 with no new construction.
Well, the answer isn’t easy to swallow. The number of low income students in modestly growing in new residential construction Sycamore has risen from 25% to 27% of its enrollment, In 428 (DeKalb) the number of low income students has increased from 48% to 59% over the same time period.
Just a little common sense: Empty nesters are more likely to buy new construction homes because they can afford to. Households with children have less equity and income at their disposal. The poorer the household the more likely the low income students.
But as the economy and lending rules tightened impact fees did become a barrier for new construction. In the boom years bankers were falling all over themselves to loan money for building and developing. Now they won’t lend one penny for impact or connection fees. With an uncertain if you even have a buyer market such fees — and they are now substantial — are road blocks.
Property values are directly tied to new construction. In the peak of the residential construction years the median price of a home in DeKalb was just under $200,000 and just over $200,000 in Sycamore. No new residential DeKalb today? Median home value $130,000. Sycamore? $170,000.
But what about that $110 million worth of newly constructed schools? The Best Practice Consultants claimed that was all DeKalb needed to become like Naperville only smarter. Well it’s now an anchor hanging around the neck of the city’s future. The property tax rate has grown from around 8.04 to more than 13 and growing despite the decline in home values. The debt bond saleswoman and her partners on the ReNew Our Schools committee tied the debt repayment schedule to DeKalb seeing $60,000,000 in new construction each and every year until the bonds were paid off.
So as communities begin to relook at impact fees and wonder how to get new construction going again the local units might ask themselves which they need more of — impact fees or new construction EAV?
Bonus: State law requires those who collect impact fees to submit a public audit that shows which lot paid impact fees and where those dollars were spent. If you live in a new subdivision (built after 2000) ask for one. Just remember refunds on improper use of impact fees are paid to the current owner of the lot on record. What did you get for your money?
Impact fees are like an opiate. They numb the senses.