IPFNA_Policy Analysis Memo_Jan_06

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A fundamental principle of impact fees is that n ew development cannot be charged for a higher level of service than is provided to existing developmen t. Section 46-142(b) states that an impact fee study Ñshall specify the service standards for each type of facility subject to an impact fee; provided that the standards shall apply equally to existing and new pu blic facilities.Ò If, for example, a County currently provides five acres of parkland per 1,000 residents, it cannot base park impact fees for new development on a standard of ten acres of park land per 1,000 residents, unless certain conditions are met. Fi another source of funding other than park impact f ees would have to be identified and committed to fund the capacity deficiency created by the higher level of service. Second, the park impact fees must generally be reduced to ensure that new developmen t does not pay twice for the same level of service, once through impact fees and again through genera l taxes that are used to remedy the capacity deficiency for existing development. Section 46-143 (d)(1) requires counties to consider the Ñmeans, other than impact fees, by which existing deficienci es will be eliminated within a reasonable period of time...Ò in formulating an impact fee. In order to avoid these kinds of complications, the general practice is to base the impact fees on the existing level of ser A corollary principle is that new development should not have to pay twice for the same level of service. As noted above, if impact fees are based on a higher-t han existing level of serv ice, the fees should be reduced by a credit that accounts for the cont ribution of new development toward remedying the existing deficiencies. A similar situation arises when the existing level of service has not been fully paid for. Outstanding debt on existing facilities that are co unted in the existing level of service will be retired, in part, by revenues gene rated from new development that will also pay impact fees to mai existing level of service. Consequently, impact fees should be payments that will retire outstanding debt on existing facilities. The HawaiÔi enabling act addresses this issue in Section 46-143(d)(6), which provides that one of the seven fa ctors that shall be considered in determining Ña proportionate share of public facility capital improvement costsÒ is the Ñextent to whi a developer required to pay impact fees over the next twenty yea contribute to the cost of existing public facility capital improvements through user fees, debt service payments, or other payments, and any credits that may accrue to a development because of future payments ...Ò The State act implies that credit may also be due fo r other types of revenues besides those used to pay debt service on existing capital facilities. Section 46-143(d)(2) states that another factor that shall be considered is the Ñavailability of other funding for public facility capital improvements, including but not limited to user charges, taxes, bonds, intergovernmental tra assessments ...Ò Also, Section 46-141 defines Ñpropor tionate shareÒ to mean Ñthe portion of total public facility capital improvement costs that is reasonably a ttributable to a development, less: (1) Any credits for past or future payments, adjusted to present va lue, for public facility capital improvement costs made or reasonably anticipated to be contributed by a developer in the form of user fees, debt service payments, taxes, or other payments...Ò Aside from debt service payments, however. credit against impact fees may not be required for other types of funding that have historically been used for growth-related, capacity-expanding improvements, or which may even be committed to be spent in th e future for such purposes. While new development may contribute toward such funding, so does existing development development benefit from the higher level of serv ice that the additional funding makes possible. To insist that historical capacity funding patterns must be continued after the adoption of impact fees, and that new development is entitled to a credit for its contributio argue that local governments cannot require Ñgrowth to pay for growthÒ unless they have always done H Ô C \I N A ÐP A M January 5, 2006 , Page 8 AWAI I OUNTY NFRASTRUCTURE EEDS SSESSMENT OLICY NALYSIS EMORANDUM