February 4, 2008

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Urge Senate Finance to carry over impact fee bill

SB 768 will deal serious blow to ability of local governments to pay for development

Proposed legislation designed to overhaul cash proffers and create an impact fee system to help cover the cost of local development is no longer acceptable to local governments.

SB 768 (Watkins) was intended to:

enact an impact fee system to help pay for schools, roads and public safety facilities;

do away with the cash part of proffers; and

limit non-cash proffers.

The original bill included a grantor's tax in areas of the state not subject to the transportation district part of last year's HB 3202 (Hampton Roads and Northern Virginia). The Senate Local Government Committee, however, stripped the grantor's tax out of the bill, but retained very low caps on the impact fees. The Senate Finance Committee is scheduled to take up the bill on Wednesday morning, Feb. 6.

The bill:

SB 768 is a serious blow to local governments' efforts to pay for growth and will be a major loss of revenue compared to the cash proffer system. The result will be to shift the burden of paying for growth to the real estate tax. Existing taxpayers will be hit with an even greater share of the cost of growth with the bill in its current form.

SB 768 caps the impact fees for houses at $8,000 per unit in Northern Virginia, $5,000 per house elsewhere and caps commercial impact fees. The caps are too low to equal the revenues the cash proffer system provides, despite being applied to by-right and rezoned lots, especially with the grantor's tax stripped out. A study was done by the bill's proponents that justified the legislation based on capped impact fees AND a grantor's tax. That justification is now lost. In addition, the study itself is seriously flawed and employs questionable methodology.

SB 768 will have a chilling effect on rezonings. Local officials will not have the ability to encourage rezonings and will not have the ability to pay for new development costs. The result will be the denial of many residential rezoning requests.

Cities and towns would benefit from a healthy impact fee system, since the adjoining counties could rezone for higher density residential and commercial near the city or town. With SB 768 in its current form, that benefit is lost.

Please urge your senator to have this bill studied for a year. This major revamping of this important land use regulation must be done correctly to protect local governments, taxpayers and the development industry.

Senate Finance Committee membership / contact information.

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