By Paul Post
Area builders applaud a recent federal court ruling that could save them large sums by prohibiting some types of development fees local municipalities charge them.
Towns, cities and counties quite often impose such fees for new construction projects and use the money for things such as road, infrastructure and recreation facility upgrades.
But the U.S. Supreme Court, on April 12, sided with a rural California resident whose local government required him to pay a $23,420 “traffic impact fee” in order to obtain a building permit for a small pre-fab home he wanted to put at the rear of his property for his grandson.
“How’s that going to impact traffic? It wasn’t going to impact anybody,” said attorney David Robinson, of the California law firm Holland & Knight, whose clients include numerous builders and developers.
“This decision will have a major impact because it will result in a lot of changes in the way government operates,” he said. “For so very long the fox has been running the henhouse. If a developer wants to build something on one side of town, they’ve been charged a massive fee to build a public amenity on other side of town that has nothing to do with project in question. The bottom line is, that’s going to be really hard for the government to do now.”
Moving forward, impact fees must be able to stand up to two basic considerations. One is a proximate test. The impact local government is seeking compensation for has to be in some way logically or proximately related to the development.
Second, is the fee in reasonable proportion to the impact? For example, government couldn’t require a $100,000 fee for a $10,000 impact.
“This is going to be a serious check on what governments can do,” Robinson said. “It’s not going to be business as usual any more. It’s new, it’s very powerful. It will save developers money. But it’s also going to create a lot of litigation. There’s no question about that. You’re going to see a whole lot of experts on both sides, arguing whether an impact is directly related or proximate and whether the fee charged is reasonable. There will be a lot of debate about how this new rule is applied in any given situation.”
John Munter, president of Greenfield-based Munter Enterprises Inc., said, “Municipalities in some cases make a ridiculous request like, we want you to put in a mile of sidewalk where there isn’t any. They can come up with very expensive mitigation that doesn’t fit into the economics of a project. If you have a $1.5 million project, but have to spend $300,000 to do it, obviously it doesn’t make any sense. In those cases a law like this would certainly help.”