Oppose Adoption of Development Impact Fees
Development impact fees have been discussed as a way to help finance municipal services and capital projects, from roads, sewers, police and fire services to school systems.
Under this revenue scheme, an amount is charged to new housing units - or to any type of development - to pay for the presumed "impact” the home has on the local budget. Sounds logical until one dives into the real adverse consequences of adopting these and similar revenue programs, such as water and sewer connection fees that have no basis in a utility's real costs.
We strongly oppose such a scheme for all of the following reasons:
- Impact fees are discriminatory. All residents, existing and new, require government services of all types and all pay property taxes, yet impact fees are charged to only residents of new homes. Moreover, since new homes are generally larger and valued higher they pay on average higher property taxes than existing homes. The production of new homes usually incurs double or triple payments of the conveyance tax (i.e., when land is sold to the developer, again when the developer sells to the builder and, again, when the builder sells to the buyer), yet existing home sales incur the conveyance tax once. And new home builders already contribute huge percentages of land for open space as well as build roads, utilities and amenities that service their new developments.
- School impact fees on new homes are an unfair, unbalanced and inefficient method to finance schools systems. The average number of public school children in all CT housing units is, in fact, only 0.5 children, and all homes (with children and without) pay property taxes. Many new homes are sold to empty nesters, retirees and other market segments that have no children, while in all municipalities many families with children move into existing homes, not new construction. Thus, people without children purchasing a new home pay the fee, but families with school children buying existing homes do not pay the fee. The Connecticut Association of Boards of Education voted 11-5-02 to NOT endorse school impact fees.
- Impact fees are not fiscally prudent or reasonable. Fiscal impact studies, when done properly, often show that new homes more than pay for themselves. Home construction produces income, sales and conveyance tax revenues, and pays many other fees to government agencies amounting to thousands of dollars per home. New homeowners funnel more money into local businesses, driving commercial development. And new homes are necessary for economic growth because homes are where jobs go at night. If you drive out homes, you will drive out economic development. See New Homes Do Pay.
- Impact fees are simply a no growth tool and raise the cost of housing. Since impact fees are not fiscally sound and are discriminatory, and since they will add substantially to the cost of new housing, they serve as a pernicious no growth tool, pushing new development to other nearby communities without impact fees or to other states. The Fairfield County Business Journal noted that the lack of affordable housing is a major concern among consumers. Impact fees would greatly exacerbate that problem. See OLR’s reports below highlighting studies that show housing costs increase and building activity decreases in areas that impose these fees.
The State legislature's Office of Legislative Research (OLR) has issued the following reports on impact fees: