IPFNA_Policy Analysis Memo_Jan_06

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EXECUTIVE SUMMARY The purpose of this memorandum is to assist HawaiÔi County in de replace its existing system of fair share assessments with an impact fee program. An impact fee is a one-time charge on development, designed to cover the cost of gr Background Since the early 1990s, the County of HawaiÔi (Ñthe CountyÒ) has imposed Ñfair share assessmentsÒ on applicants for new residential (including agricultural zoning allowing lots one acre or less in size) and hotel zoning. The fees, which are imposed as a c ondition of zoning approval, are collected prior to securing final subdivision approval for new residential lots or prior to obtaining final plan approval for multi-family or hotel development. The fees, which are adjusted annually for inflation, currently total $9,761 per single-family unit for roads, pa rks, fire, police and solid waste facilities. While the fair share assessment am ounts are substantial, they have not generated much revenue. An analysis done in 2004 determined that over $74 m illion had been assessed on new zoning in the ten years of the program, but only $3.6 million had been co llected in cash and another $15.2 million had been provided by developers in the form of in-kind contributions in return for credits. This is because most of the land that has been subject to fair share assessm ents at zoning has not yet been subdivided. If the fair share assessment amounts had been in the form of impact fees collected at time of building permit, they would have generated $103 million in cash and credits since January 2000, and if they had been assessed on nonresidential as well as residential de velopment, they would have generated $170 million. General Approach The County should consider replacing its fair shar e assessments with a true impact fee system that follows the requirements for the State of HawaiÔiÔs impact fee e assessments, impact fees would be assessed on all new developmen development and residential development in areas wi th existing zoning. An impact fee collected from all new development would be more legally defensib le, more equitable and generate significantly more revenue than the current Ñfair shareÒ system. Th is additional revenue would translate into capital improvements that would benefit all fee payers. Lots in Older Subdivisions One of the reasons for the failure of a previous impa ct fee initiative in 1990 was a lack of support for assessing individual property owners. The Island of HawaiÔi has many buildable lots in older subdivisions that have not been fully developed. Ma ny of these subdivisions were created in the 1950's and 1960's prior to the comprehensive subdivision co de that was adopted in 1967. The perception is that many of these lots are owned by local re sidents who have owned them for years with the expectation that one day they would build a house on them. The fear is that imposition of impact fe may hurt this opportunity. Development in these older subdivisions could be a major source of the islandÔs affordable housing. The current fair share system only rezoning, at the cost of generating very little revenue for need There are two reasonable approaches to dealing with this issue in the context of an impact fee system. One approach is to allow one dwelling unit to be built on any existing lot of reco rd at the time of impact H Ô C \I N A ÐP A M January 5, 2006 , Page 1 AWAI I OUNTY NFRASTRUCTURE EEDS SSESSMENT OLICY NALYSIS EMORANDUM