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05/07/2019 12A Background Report; Impact Fees in Washington State to\'4\lyy tbxk ik 1 PP1-:4P PPP g. A P p P 1 PPi ittYlltYlt.\ta. BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEM ENT Item No. 12.A. For Meeting of: May 7, 2019 ITEM TITLE: Background report on the authority and scope of Impact Fees in Washington State SUBMITTED BY: Joan Davenport, Community Development Director SUMMARY EXPLANATION: At the March 12, 2019 Study Session on Affordable Housing, the City Council requested a background report on Impact Fees in Washington State. The City of Yakima has never implemented impact fees, which are authorized in a limited form in RCW 82.02. Much of the information in the attached report is from the Municipal Research Services Center. ITEM BUDGETED: STRATEGIC PRIORITY: APPROVED FOR SUBMITTAL: fir City Manager STAFF RECOMMENDATION: BOARD/COMMITTEE RECOMMENDATION: ATTACHMENTS: Description Upload Date Type MIS e rt on Impact s 4/ 5/ 019 backup Material 2 Impact F-es This page provides a general overview of impact fees for cities and counties in Washington State,including information on how they may be used and sample documents from selected jurisdictions. What Are Impact Fees? impact fees are one-time charges assessed by a local government against a new development project to help pay for new or expanded public facilities that will directly address the increased demand for services created by that development. What Can Impact Fees Be Used For? RCW 82.02.050-.110 and WAC 365-196-850 authorize counties,cities,and towns planning under the Growth Management Act(GMA)to impose impact fees for: • Public streets and roads • Publicly owned parks,open space,and recreation facilities • School facilities • Fire protection facilities These impact fees may only be imposed for"system improvements"-public capital facilities in a local government's capital facilities plan that are designed to provide service to the community at large(not private facilities),are reasonably related to the new development,and will benefit the new development(WAC 365-196-850). Impact fees cannot exceed a proportionate share of the cost of the system improvements,and municipalities must have additional funding sources and may not rely solely on impact fees to fund the improvements(RCW 82.02.050). Impact fees may not be used to correct existing deficiencies.For instance,a school district may use the impact fees from a development to pay for construction of new classrooms at specific schools to accommodate the increased enrollment anticipated from that specific development. But the district may notuse the impact fees to build new classrooms to reduce overcrowding caused by existing residents. An impact fee ordinance,however,"may provide for the imposition of an impact fee for system improvement costs previously incurred by a county,city,or town to the extent that new growth and development will be served by the previously constructed improvements provided such fee shall not be imposed to make up for any system improvement deficiencies"(R___111- EIZ02,060(8)). For example,if a public works maintenance facility was designed and constructed to address both existing deficiencies(say,60%)and future growth needs(say,40%), impact fees could be used to pay for up to 40%of the debt service on the bond issued for that facility. � � � Transportation Impact Fees Transportation impact fees must be used for"public streets and mads"that are addressed bya capital facilities�� eiernentofaconnpvehensive plan adopted under the GMA and RCW . (7)). plan It is unclear whether state law allows these impact fees to be used to fund mu(timodat improvements,but such use is probably acceptable as long as the improvement is within the street riQht-of-way-such as bus lanes,sidewaiks or bike lanes-and there isa strong transpo�ation-rebtedjustification. However,itis doubtful that innpactfees could pay for buses,vanpoo[vehicles,recreational traits,or other projects outside the right-of-way. Since impact fees are restricted to capital facilities,they cannot be used to fund transportation studies or operating | and maintenance costs. Bellingham has compiled a LQmparison of impa` _ base,rates in Western�W_h_-~-_^. Note:This information on|vappU�stn�anspor��innimnpac�feesauthohzed6 �—� , by RCuvom.03��50-�0 and WAC Transportation365- 96_85(�forjuhsdictionspiannin8underGM&5ep/ rateiegisiation �heLocai — Act.chapter 39.92����vvhoseinitiaipassa8epne�ated�MAby�woyeam)authoriz K counties, _ _ authorizes cities,es. towns.and 'transportation dis(rict�across the state-including those not planning under GMA-to impose transportation impact fees,but MRSC is not aware of any jurisdictions that currently do so under that authority. Park Impact Fees Park impact fees must be used for"publicly owned parks,open space,and recreation facilities"that are addressed� acaoha fadU�eso�nebcnnentofacomnpnehensive plan adopted under the GMU\ 4)undRCVV -' 82.02.090(7)). ` Most cities and counties in Washington only charge park impact fees to residential construction or the residential portion ofa mixed use building or development,but a few also charge commercial or industrial deveiopnnentu since ennp�vees(and not just residents)can directly benefit frnrnnearby parks and recreational tacihties.(See Tuhw'b/s exannpiein the�arnp�xdo ct' j � School Impact Fees School impact fees must be used for"school facilities"that are addressed 6va capital facilities plan element ofa � comprehensive plan adopted under the GMA --� H«CvY 82.02.050(4)and '�CW'82,02---- 7)).TvpicaU�school innpact fees apply only to residential construction or the residential --�ionof �iedusebuiiding' or development. School districts are responsible for expending the impact fees but are not authorized to collect the fees.Asuesult school innpactfees require ooupemtionbetvveenschool districts and the dties.towns,orcounbesadnministerinQthe - impact fee program.This cooperation should take the form ofaninterioca(agreement(|LA)that specifically identis � eachpartnoie. ''^ 4 A '�exexemptionfor school impact fees that would otherwise be distributed to aschooi district must first be d 6v-, theschooidi�hct 3 ). approve Fire Impact Fees Fire impact fees must be used for"fire protection facilities"_ tha'tare addressed ~6v-a capital fac iht�spbmelement nf aconpehensivepLanadoptedunderthpGM"`RC, 82,0�050(4)and '� ^'090(7))�Because state bwprovides nnfu�hers�tutopyoradninistcadvcdeO itio»s'so »cj«'isdictio»sha«etakenbuponthenseivestode�ne'fi»epnutectionfaciht/es'intheirow»mu»ic/pa(codes. (8eeAub«rn'mcxanpleinthesamp�cocwnen¢ssect��/whichinc\udes8»eenQ/nesand equipment.) Determining Impact Fee Rates Local governments must establish a rate schedule for each type of development activity thatisau6iecttninn t fees,specifying the fee tobeinmposed for each type ofsyst i --'~~� -^ pac bebasedonaforrnuiaorotherca\�uiationthatincor incorporates, r»p/o«enne»t���VY/���' ' ).The schedule nnust po s.annonQotherthinQs: | ` The cost of public facilities necessitated by new development ^ The cost of existing public facilities improvements ^ Adjustments to the cost of the public facilities for past or future payments made orneasonabk/anticipatedto b mnadeby new deveiopnnent . e ^ The availability nf other public funding sources ^ The method 6v which public facilities improvements were financed ThesemtestudiesshouidbeupdatedperiodicaUytorefiectchanQesinthecostoffaciUt/es VVh8elocal Qovernnm ts are not required to hold a public heahn8before adopting or increasing innpactfees itnnay-" do e» espedaUyifthedecis/onnniQhtbecontrovemiaL ' so' Local governments may provide exemptions for low-income housing and other development activities ith''b d puoocpuqposes'( 60).Sornejuhsdicbonsneducenrwaivece�aintypesofirnpactfee for with "broad »fde«eiopnnenteither�nincenbvized ( s /ce certain facilities. eveopnnentorbecausethedeve\npmncnt places nosiQnificant�undenon exiutingfac/ Practice Tip:Some jurisdictions automatically adjust their impact fees bv indexing thernwhich protects futue oevenuesandcanpotentiaKyeUnninatethe'needfo/theheQ/s(ativcbody'toQothnou8ha'formal rate setting process again.For instance,see:Federal Way,MvnkcipatCode Sec 19-91 '- -Transportation impact fees indexed 0oa three-year moving average nf the yySDOT7ianspnm un(coscitydeterrnineatht i ,�xunConstructmn Cost Index. Rate study rnuotbe updated every three yeao ' a cocumnstanceshavenotchangedtowarentanupdate.Park impact fees indexed annually to Portland Consumer Price Index for first half of the year,but may only increase automatically for three consecutive years. If fees are set to automatically increase for a fourth consecutive year,city council must hold a public hearing and establish new impact fee rates.Note that the Portland-Salem CPI index has been eliminated effective January 1,2018. 5 Park impact fees indexed annually to Seattle Metropolitan Area Consumer Price Index and rounded to the nearest five dollar increment.(Similar provision for transportation.) Please note:There have been several geographic changes to the CPI indexes bennnin8]anuary1.2O18�Fornnore infornma�nn.seeourpaQe Collecting Impact Fees Impact fees generally must be paid before construction begins. �i �� speco*lmteest-beahngaccnunts.vithasepan�eaccount ~ retained » �ch»ob'fire,etc1 Each agency that/rnposesinnpactfees �ve«e'ytypeoftacKityforwh�chthefeesa»ecoUected must provide a»annual report o»each of the accounts showing the so«oeandannuuntof»evenue».asweUasth ���_� c/nmprnvernentsfinanced with the reve A9[VV � 70). For infornnationon accounting oequinernentsfor innpactfees see »«e `�~^� (no equivalent secbon/n the Cash Basis BARS Manuai). ' e Effective September 1,2016,ESZ-5-923(codified at KAY_Q2,Q_ZM) required cities,towns,and counties to adopt an impact fee payment deferral system for small single-family residential developments,allowLing developers to pay the fees after construction instead of beforehand. For details and examples,see InIpACLEM Deadline for Expending Impact Fees '/nmpact fees must be expended oru encumbered within 10 years c�'receipt,' »a'ya» unless d co'npe|om�reason"� f held� ���to�eh� � — `- - � _ documm�nt�d/nvxr/t/ng6vthe governing body(R[VV requires each jurisdiction to refund the impact fees,plus earned interest,to the developer if: ` The impact fee is not expended or encumbered within 10 years of collection; ~ The jurisdiction ends its impact fee program and the funds have not yet been expended orencunnbencdor ^ The developer does not proceed with the proposed deve(oprnentactivity and requests arefund. ' ' Examples of Impact Fee Provisions Below are of impact fee ordinances,codes,and rate studies from cities and counties in � 6 Rate Studies and Calculations • (2015) -Transportation • i I (2017) -Examines 2017-2018 transportation impact fee base rates in Western Washington,with jurisdictions near Bellingham highlighted. • (2015) -Schools(see appendices) • Rntn (2011) -Transportation,parks,fire • euirr frip tcP (2013) -Transportation • Thurston Cou (2012)- Parks Impact Fees for Multiple Capital Facilities - Cities • -Highlighted in a for using leading practices in fire and transportation impact fees,including calculating,charging,and maintaining transportation impact fees and taking into account fire impacts by land use type. • 1iPQk -Transportation,schools,parks-Good,consolidated format of the Impact Fee provisions,and includes a Chapter on Transportation Concurrency. Transportation Impact Fees - Cities • 19 4 (E) -Received the for incentivizing fewer auto trips through reduced impact fees for certain types of development. For details,see Bellingham's webpage on • 1klsbt.1rgjitvr -Any development activity in central commercial district is considered to be redevelopment(not new development),so exempt from paying transportation impact fees;5%administrative fee; public works director makes determination about whether a particular development activity falls within a transportation impact fee exemption. • pQkanefrjjiiintc7 -Lots of detail included within the code,including a"four service areas"map and impact fee project list;severability clause. Park Impact Fees - Cities • n" - Broad focus on parks and recreation facility needs;includes a detailed fee schedule. • I kwita.Mt.irijj c -Charges park impact fees to new office,retail,and industrial development. • n` * -Includes a detailed fee schedule;impact fees are assessed for two types of service areas:regional/citywide and local. School Impact Fees - Cities • .9 - Highlighted in a 2008 State Auditor's Office report for leading practices in school impact fees,particularly the rate schedule and calculations. • -Requires city council to adopt by reference the school district's capital facilities plan into the citys comprehensive plan;district's capital facilities plan must be readopted by City at least 7 once every two years and must meetdty's requirements;impact fee calculation formulation included as Attachment A. ^ -Cred/tforin-Wndconthbutions Fire Impact Fees - Cities Auburn Muni" efinition of"fire protection facilitie�'includes fire trucks and apparatus,fire ^ - MenbonsfinecapitaifaciUtiespianandsix-yearcapacity includes ifa a�/oWn��t6�ood� � actua e County Impact Fees The examples listed below contain most of the provisions included in the other examples cited above b t f«anouscounties/nVVashinQton. _ . u ane nnmn ^&Kil��m County n%y Cod 10- Roads,parks,schools. ^ -Transportation,schools,parks. Thurston County and ` RGchester School District,~A for=�hnmoeImpact Fees(2O13) - Identifies roles d nesponsibiUtiesfor coUectin8.d/mtribudnQ.and expending school imnpactfees. an " fiaD016-2018) -Adoptingirnpactfeedcfernaisystennandauthohz/n8 interlocal autho --u'^`'.'^..`=for county rocouect/rnpact fees on behalf nf fire pnotecdond�trictsand regional fire es Frequently Asked Questions For answers to selected questions MRSC has received about impact fees,see the Court Decisions For selected court decisions affecting impact fees,see our page nn _ Recommended Resources Includes -[ornpoehenuivewebs/te provided by national inmpactfee consukantsDuncan Assndatey 2014. snaws'stateandioca(Unks.survcys.pubUcations.andcase�w-butnonewinfnrnnationpostedsi-cc Last Modified. February 0S.2O19 mznmmnsc"f Washington,All rights rese"~ 8 MRSC Waivers of Fees or Standards A number of communities have adopted exemptions, fee waivers, or fee reductions of charges normally assessed to residential development. Examples include impact fee exemptions (as authorized by RCW 82.02.060(2), discounted building or planning fees, or reduced sewer and water connections fees. Other communities offer exemptions or reductions from certain development requirements, such as required parking spaces, or allow modification of dimensional requirements, such as setbacks and building height. Such modifications may make additional units possible or may provide flexibility that reduces construction costs. Examples of Codes Allowing Fees to Be Waived • Ephrata Municipal Code Sec. 13.04.1 12(g) —Allows for water connection fee waiver while Sec. 13.08.050(.1) allows for sewer connection fee waiver • Everett Municipal Code Sec. 16,72.070—Offers waiver of planning fees • King County Code Sec. 21 A.43.080 —Provides impact fee exemption/reduction for low- or moderate-income housing. • Kirkland Zoning Code Sec. 112.20(4) — Includes dimensional standards modification as well as reduced fees for road and/or park impact, and reduced fees for eligible planning, building, plumbing. mechanical, and electrical permits • Lakewood Municipal Code Sec. 18A.50.760—Reduces fees for land use and building permits • Port Townsend Municipal Code Sec. 13.03.110 —Offers system-development charge deferrals • Puyallup Municipal Code Sec. 17.04.080(2) —Offers waiver of building permit fees y [AlUt,Gmvmrnr.- Impact "- �=^ Payment Deferral Programs This P _ �provides_an overview_ ~.�impact"=q payment deferral programs required for cities_tmwns �sin V�� _�n�couot Washington State, and forms. � � � � Statutory Requirements In 2015,the state legislature enacted ES8 5923,which required counties,cities,and towns to adopt a deferral system for the collection of impact fees for new single-family detached and attached residential construction,effective September 1,2016.Most of the legislative bills revisions focused on RCW 82.02.050. i ^ � Upon developer request,these jurisdictions must delay payment of impact fees until the time of: � lFina � inspection; . 3. Issuance of the certificate of occupancy or equivalent certification;and/or � 3. The closing of������of�� —_= property. Other provisions of the new law include: ~ The term of deferral is18 months from issuance of the building permit. ^ The amount of impact fees that may be deferred is determined 6v the fees im effect a1 the�rnethe appUcant U ap� esfo,adeferna(. ' ^ Deferral of impact fees can be limited bz the first 20aingle-fanmik/resid�ntiai�uiidin8�errnits �nnua�k/per applicant. ' ' `' • An applicant seeking a deferral must grant and record a lien against the property in favor of the municipality in the amount of the deferred impact fee. — ^ Municipalities may collect reasonable administrative fees from applicants seeking a deferral. ^ To limit the'spim-offLL[^issue,'appUcant'iu defined to include"an entity that controls the appUcantiscontroi( d by the appUoant.or/o under cornmnoncontrol vviththe appUcant�' ' � ^ Limited gnandfatherin8is authorized for an existing deferral system (in effect onor before April 1 �O1�) even ifit match not fully a�ch the new/state requirements,as long asaU impact fees are deferred. ' ' ^ Municipalities and school districts are authorized to institute foreclosure proceedings if impact fees are not paid. ^ The Department of Commerce must develop an annual report,beginning December 1 3018 on the payment and collection of/nnpact fees fmomnschool districts,coundes.and cities for ain8|e-farni|vresidential construction. lO Sample Ordinances . Buckley Ordinance (2016) - Mercer Island City (schools),Sec 19.18,060(parks), _ |nopactfee ordinances in2[D5-3016.• -- --^---r-~~~', ~«y""�aa Municipal Code Sec.Y�04,040(M)-Pre-dates dhe2O1Sobutdhecityhasreviewedthe ordinance and concluded that�connpUeo with the new�w legislation, . (2015) ^ Shoreline Ordinance No.718(2015) Sample Forms Below are examples of impact fee deferral forms. If you or your jurisdiction have additional examples you would like 0m share with us that differ from the ones below,please contact Steve Butter. . ~ EOUMCtAWJD2PACLEO-CDR-feniatAPPkc—attm(2O17)-Includes description of the deferral process,as well aslien agreement and release u/ lien ^ (2O1t)-Includes description of the deferral process,aywell (2016)as lien agreement and release of lien `- applicants to selectwhen they will pay impact fees.Includes a matrix ^ explaining the three options for"platted"and nnnplazmed' development:deferral,payment upon application,or payment upon issuance. ^ eAmpart Fee Deferral.Application 2O16)-Includes descriptionof the deferral process,as well aslien agreement _ Last Modified:May 3O.2O18 �2018mnscof Washi ngton, Privacy&Terms- ll Search��� �*esults Can't find what>mu're looking for?See MRSC's search tips! Results for"Impact Fees"within Inquiries Displaying 1-20 of about 30 results. A community wou | beapubUc / iUtyfor .i�� i-- —^''^~^~"�"'"uu//u/ necr�armn�c/Ut�s^inRCVy83.02.O90(7)and would thus center / ��� .�" wmuo ������u�����dan�a��/m��t��a��i���nn�� pnnentthattaheap�cef�ik�m�n�dh�adopb- ' 'new Inquiries Transportation impact fee money cannot be used for a tudy u date. RC 82.0 2.050(4 states that impact fe may be"spent only for the publi a'. t es a de ined nsR 8P2 2 OWwh hare add ess If '17 plan element...."The definition b Inquiries oriz imp ctf �ou�esofPubUcF�c�|vFund�n�Authoh'�---- ~~ .^a~-' ""'"�c��/ mcu/n���(��� |YPesmf|mmpact��sandC}ther ����[�yV�b ` ���oyv«asn/n8tonStatutes] F�/n��ne�nfonnationondhistopics�e �a�eon/mm�mctf��m, ' Inquiries A"things _ ~ w. °."" c �c�c�maconnunity without impact fees inpn�enenoetm on e . nyeo_ . - n--_- � tsi � mmc naha a� ��� - Hwemehenearebanotht ine location decision. For insCance.smnecid cities Uehums � ot � cesna nnenpoye_ Inquiries The in ha e d fe red 7,1 �o���ec��lO4�7O�J� '-----~ ^'~'°�"'"`"u/»m*mc/rn�actf�esvithinthe�s fewyearcAmbunn � - /�nnpona�/euennphonsfnorn��ns�mr�d�ninn���tf��m�n r�j d n�ton-CJnd�nanc�No�y7����. certain downtown 12 No.Impact fees cannot be used to cover the full cost of new facilities.The statute authorizing impact fees under GMA is RCW 82.02.050,which provides as follows: Counties,cities and towns that are required or choose to plan under RCW 36.70A.040 are authorized to im... Inquiries SC The Growth Management Act state that impact fees can a s W -0 -0 0( ) C 090 M e used for public facilities,including public streets and r id (rRC 82 2 5 4 and R 82.02. Q R has statepd thlat it is I be nte preted to include wide shoulders,bicyc.. C has stated that it is likely that"streets and roads"could Inquiries he impact fees to mixed use developments:Redmond xed se devel en Red ipal Code Sec.4-1-190 (G)(4) Puyallup Municipal Code Plea e ee the Mu s s following-Codes that address app cabi o Park impact ees to I 7P - (i G (4u a Mun ipa deo Inquiries � ' . Based on RCW 82.02-050(4),it is � � � � -clear that public facilities must be/nc�d�din ^ p�t�����������G�� a���U�p���nt�a comprehensiveActstateothatimm����f��acanbeusejƒorp_ /``�na�ennentAc�imnpactfeeo.TheGrowth Management Inquiries Some jurisdictions ha v einc capita(/ac/(U0esin their p impact re enginesand m 'naooes -|ft,,—~^~~"' "'o/ cap/oalPbansan6dafnetheas de�ne fire eng/nes and other appana�us_ � h�city�nactsan facilitiesthem inmp��tf�eupdinaoceandm/i^hesto Inquiries Although impact fees do not alter total`"°^s /eydo affect the d�Uib �Eachconn»»u»d«wiU need ton�abeapuUcy- uds�onaboutwhethe theu onof�ost�or««hopaYsfo/thefac(b��� tothenew/useoorspoead.vt*highert_ -- r ��stofnew/nfrastructune/schaq��dd/»ectk/ ` Inquiries Yes.First of alif,a city may not require new development t o pay for correction - g-'—�~�«�r��^«wwwm�r�r�th�pom�on o��c��esthataren - _existing��v��«���*coyrnayonly 13 Inquiries Impact fees may only be imposed for public capital facilities government's capital tacii�esplan that are desi designed to ~'"='"x"p«�«ernent�) �ent�ed�nak»cai ����anew —�' u�e�mo ��ecommunbv��mp uu«cmpnmen�and w/8��_ ' —�-,a»en�asonab|v Inquiries ' Impact fees are strictly optional.The Growth ' "" auc 'enr*crneq«/�sthatc�icspta»forfutu»cgnowthand provide the fad(�eonecessary for accommodating Fo thatgrowth.1mnpactfeeuPr»videanotherwayforcbiesa d coun�eato pay for these faciUbes� rrnoneinfo— » Inquiries =y in a n on nde For xamp s u -cip C 0 ( prov r impact fees by using a construction cost index.For es: Park impact fee rates shall be updated annually using f,,,e s aquah M n a ode Sec 3 72-07 B) ides. Park impact fee rates shall be updated annually usil Inquiries he ci does not have authori require 7ty ' '~~ " `^/ocr»per ut n � it vt cs /ybo y v- ity Unitybut «ithintheurbanQrowtha»ea' asiteheneeya .`oba m oern a( d/ �»»�Th� ho« e«e�doescnntempbatethatwithin urban ceo GMA'tha»eosxc/s_ /nqv/ncs ftatAmi Impact fees ^are charges assessed against newly-developing pnoperty—thatattenpttonecoverthecostincurred by a local government in providing the public facilities required to serve the new development.Impact fees areon|vusedto'~nd'"" ueu such as roads,schools,a... � Inquiries The count . . '.==po/uo ---u^.~e /en"ast"uut»hc*et*hreuaqrtnuaohn�nynz/ne edn�tt—o�o-nf—p-o~scr~a=n act fees.°aan�u ���he met.The c o nd thecou»tY's impact fee regulations are � Inquiries � ' The city is not required to make up for,with public funds ,an adjustment from the standard impact fee for which the city must allow in order to ensure fairness in the imposition of such fees. Unlike RCW 82.02-060(2),in which the city provides an exemption for low-income ho... � � ' 14 inquiries r r r An applicant does not vest to traffic or transportation impact fees,as the applicant would with respect to the land use regulations in effect at the time of submittal of a complete land use application. As summarized well in Paylina v. City of Vancouver,122 Wn,App.52... inquiries « 1 2 .- ©2018 MRSC of Washington.Ali rights reserved. '11