Some area builders balked this week when consultants reported the city of Waco has the option to add as much as $7,600 in impact fees to the cost of new homes in an effort to offset the tax burden for roads and utilities.
While advisory committee members appeared averse to the idea of charging the maximum allowed, impact fees are an increasingly common way for Texas cities to shift the public burdens created by new development from existing taxpayers to the people directly involved in the new development. The city of Waco started the lengthy process to implement impact fees last year, and a consultant recently pegged the maximum impact fees the city legally could charge at $5,380 to $7,609, depending on the area of town. With that ceiling in place, an advisory committee will recommend what the city should charge, before public hearings on the proposal.
Cooper Custom Homes President Ken Cooper said the maximum allowed fees — determined by Freese and Nichols, a planning firm the city hired last July as part of the process laid out in state statute — would be too high and could stifle the city’s growth. Cooper serves on the advisory committee as a representative of the Heart of Texas Builders Association.
“There’s a give and take on all of these,” Cooper said. “What you have to do as a developer is understand going in what those costs will be and how that’s going to impact the buyer’s decisions on what they’re available to spend.”
In addition to having new development contribute more to the infrastructure needed to support new development, impact fees also can provide a financial incentive for developers to build where roads and water and wastewater facilities have existing capacity. The central city, North Waco and East Waco, for example, are in a zone where the maximum possible fees would total $5,380, and areas on the outskirts of town see maximum possible fees up to $7,609.
Those totals include three separate fees, for water, wastewater and roads, each maximum calculated based on growth projections and infrastructure capacities and costs, with varying nuances for each category. Once fees are set, they are reviewed every five years.
“Waco is going to grow by 17 or 18 thousand people over the next 10 years. It’s going to create a demand on roads, water and wastewater systems,” said Eddie Haas, transportation planning manager for Freese and Nichols. “We’ve looked at those growth needs. We’ve developed a capital improvements plan. Ultimately it boils down to this infrastructure is going to cost some money, and the question is ‘Who is going to pay for it?’”
Haas, who presented the firm’s calculations on maximum fees to the advisory board this week, told the board there are a broad range of options for deciding how much to charge.
“Do we want a uniform fee across the board? Do we want to have variation?,” Haas said. “Do we want to collect water and wastewater at 50%, or roads at 10%? Do we want to break out a residential versus nonresidential rate? Some communities have done that.”
During the meeting, Kim Kazanas, executive director of the Waco Business League, said she had concerns about the fees driving development into neighboring cities.
“We’ve got potentially three municipalities butted up against these areas — Hewitt, Woodway, potentially McGregor,” Kazanas said. “Do impact fees draw development potentially away from the city of Waco but place it in Woodway, where our infrastructure is equally stressed but there’s no impact fees collected?”
Waco Planning Director Clint Peters said the maximum fees presented at the meeting are intended as a point of comparison, not as a proposal for the committee to go with.
“We don’t want to be a leader in the cost of impact fees,” Peters said. “We just wanted to show you those calculated fees and how they stacked up.”
While the maximums are given on the basis of a single-family home, impact fees also apply to other types of development, and can be set to vary depending on the type of development. Square footage, type of land use and the size of water meters can all factor into how a fee is calculated for a given project.
Once the committee makes its recommendations and public hearings are held, the Waco City Council could take action as early as the end of September.
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