Impact fees were first implemented in Kitsap County 1992, according to County Administrator Malcolm Fleming, and have been part of the cost of new construction since. The theory behind such fees is that new development should pay for the infrastructure required to support it.

There is much controversy over the fees in general, but more recently, over the vote (2 to 1 by the Kitsap County Commissioners) to increase those fees, and the scramble to find a way to avoid having those increased fees collected.

Impact fees for residential construction are collected for roads, parks and schools. Impact fees on commercial projects are just for roads. The money must go toward specific capital facilities projects in those categories.

A single-family home is currently charged $1,974. Beginning July 2004, the fee will be approximately $2,700, and by 2007, it will be about $4,300, with variations according to the specific geographic area of the county, as school districts and road districts do not have equal construction needs.

Commercial building permits include a road impact fee that is specific to the type and size of the business. Fleming gives these examples: a 50,000 square-foot retail space pays a fee of 85-cents per square foot for a total of $42,500. In July 2004, the rate will be $1.24 per square foot, and $2.12 by 2007.

A larger retail mall, currently assessed at $1.26, would be $3.15 per square foot in 2007. A 10,000 square foot office space, currently at $1.23, will become $3.08, and a medical office will rise from $1.96 to $4.92 per square foot in 2007.

Fleming indicates the differences in road impacts are based on national studies of the number of trips generated by each business category and size of facility.

For the past decade, Kitsap County has collected some $1.85 million annually in impact fees. In mid-2004, when the sliding increase is set to begin, assuming it is not repealed, an additional million dollars is projected to be collected. By 2009, when the top level approved for the fees is reached, they could generate $5.7 million per year. These projections are based on the population growth anticipated by the Comprehensive Plan, consistent with the rate of growth the county has experienced over the past three years.

“If the level of development activity is lower,” Fleming says, “the revenue generated by impact fees will also be lower than we have projected, as will the impact of additional population on schools, roads and parks.”

Impact fees are currently collected at the time a building permit is issued. Beginning in 2004 that will be delayed until a certificate of occupancy is issued. For a builder, that means a shorter time between paying the money out and being reimbursed via sale or lease.

Fleming says the county’s current capital facilities plan is based on collecting the legally highest allowed fees, whereas the commissioners have approved increases phasing in over four years, capping in 2007 at 60 percent of the maximum allowed.

“State law requires counties to make written findings that public facilities such as roads, streets, parks, recreation, open spaces, schools, and school grounds are adequate before approving proposed subdivisions, dedications, short plats, and short subdivisions,” explains Fleming. “Consequently, it will be necessary for the commissioners to either cut some of the projects from [the] capital improvements plan and accept a lower level of service, or provide some other source of funding to pay for the planned capital investments.”

Art Castle, Executive Vice President of the Home Builders Association of Kitsap County has problems with the concept of impact fees.

For years the landowner’s taxes were collected without the impact of the people who would one day occupy it. Also, the out-of-state purchaser of an existing home places an added demand on services, yet pays no fee.

Castle says impact fees began when taxpayer revolts put limits on tax increases.
Of the county’s adopted dramatic rise in the rate and amount of commercial impact fees, Castle comments, “Those are big dollars for a relatively small investment company. Is that economic development?”

Adding the current real estate excise tax, sales tax (charged on both materials and labor) and property tax, he says local governments in Kitsap take in about $15 million a year on new construction now, apart from impact fees.

Castle cites a recent Kitsap-based study showing each new household generates some $13,000 into the coffers of local governments the first year, and about $4,400 per year thereafter. In other words, they are already generating a positive impact on the treasuries of local governments.

“If growth is not paying for itself,” Castle observes wryly, “it is because it is paying for everything else.”.