Impact fees are the one-time levy on new construction. They’re the equivalent of a sin tax on development. They’re used in many areas of the country to defray the impact of development on schools, roads, fire services and so on, when other revenue sources aren’t available. They can run from a few hundred to a few thousand dollars.
Impact fees are especially prevalent in states like Florida where the tax structure is Byzantine and lawmakers do everything they can to undermine local governments’ abilities to raise money. So impact fees are exclusively a tool of local governments and school boards. To levy them, the law says a local government must show “a reasonable connection” between the fee and the projected growth it’s paying for. It’s somewhat of a guessing game. But experience, logic and evidence-based analyses limit abuses. So does the market. You can set your impact fees too high, but if development doesn’t follow, you won’t get much revenue anyway. You can pander to developers and set them too low, but if development is brisk, you won’t have enough money to meet its demands.
That deficit is what the Flagler County School Board is trying to avoid. It last set its impact fees in 2005 at a paltry $3,600 for a new house. In inflation-adjusted dollars, that would have to be $5,300 today. In August the school board voted to increase it to $7,175. It looks like a bigger increase than it is. In inflation-adjusted dollars, it’s effectively a $1,875 increase. The board needs to build up revenue in anticipation of having to build a new high school and a new middle school in the next several years.
Why shouldn’t it set the fee at $5,300, in line with inflation? First, because even the $7,175 fee won’t be nearly enough to cover anticipated needs. Second, because it is a forward-looking fee that should not immediately be depleted by inflation in coming years, repeating the error of 2005 (when the district set its fee several thousand dollars below the recommended amount). Third, because in a county where the median sale price for a house is now $300,000, a $7,175 fee–which is part of that price–is minimal. Stretched over a 30-year mortgage it amounts to a few hundred dollars a year: peanuts to account for needed schools.
And fourth, because the district year after year has been cheated of construction revenue by state laws robbing Peter to pay Paul.
The district used to get state dollars to build schools, the so-called public education capital outlay dollars known as PECO. In 2008-9 alone, Flagler received $4.3 million (the equivalent of $5.6 million today). Flagler is receiving zilch in PECO dollars now. The state ended those appropriations when it shifted them to charter schools. The state used to allow districts to set a higher property tax rate to raise local revenue for construction. The state ended that, too, cutting back that levy 25 percent, an enormous loss for the district. That left impact fees as the principal building block of new schools.
But wait: the state just changed that too to add one more screw in districts’ revenue vise. Since we live in a state where home rule is now heresy, a new law forbids local governments from enacting impact fee increases of more than 50 percent in any four-year period unless they prove extraordinary circumstances. The school board thought it had done just that: 16 years without a fee increase, explosive development that, while still disproportionately driven by older empty-nesters, is starting to resume at least some of the rapid school-age growth of pre-housing bust days, and overcrowding in some schools. Flagler Palm Coast High School is its own subdivision the size of Bunnell (minus Grand Reserve). Matanzas High School is getting there.
Superintendent Cathy Mittelstadt spent a good deal of her career in the St. Johns County school district, which has been building a couple of schools a year for years. Mittelstadt may be inscrutable in some regards. In this one, she isn’t: she’s made it very clear that she’s a stickler for sound planning and minimal surprises. She wants to position the school district for its needs before getting buried in them.
The County Commission and Flagler’s home builders are standing in the way. They’d rather she risk chaos so their bottom line and political fortunes aren’t dented.
Everyone, of course, loves their school system and pledges undying allegiance to it. Or at least pretends to. Yet earlier this month, the county commission, moments before approving its own doubling of impact fees without a hitch–and without opposition from any other government–objected to the district’s fee increase. It did so after a parade of home builders and realtors berated the district’s projections of increasing enrollment as exaggerations and miscalculations and the proposed doubling of fees as excessive.
The school board had based its fee structure on an expert study. The home builders had nothing more than objections based on its presumably brilliant and entirely dispassionate guesses. The county commission, as always, pandered.
It’s not that the home builders’ case was bunk. They made fair points. They could even be right. But if anyone was the greater guesser, it was the home builders, who came armed with anecdotes, indignation and threats, not the district, which came armed with a study by some of the best in the business.
Then the curtain lifted. It was a weird scene. Builders, Realtors and county commissioners holding the school board’s impact fees hostage. They had the stage to themselves. Future residents who’ll need schools obviously couldn’t be there to advocate for their future conjuring. Existing residents don’t care. They think impact fees don’t affect them, which is wrong: if anything, impact fees benefit them by raising the price of homes–and values, and therefore capital gains for existing residents, though that’s the least of it. Residents (and businesses) should be the first champions of a strong, well-managed school system that doesn’t devolve into a shanty of portables, as it did in the last decade.
That’s what Mittelstadt is trying to avoid. That’s what the county commission seems oblivious to. The very same commission that just a few weeks ago fell all over itself to grant the sheriff more new deputies than he’d ever had in any single year, based on the same projected population increases the commission was now ridiculing. Consistency and thoughtfulness has never been this commission’s best assets. But the school board has every right to be infuriated by the commission’s presumption. (A notable exception: County Commissioner Andy Dance, a former school board member who actually studies his meeting materials and more.)
It is a quirk of Florida law that county commissions get to “approve” a school board’s impact fees, to the extent that a county agency–the tax collector–collects the money and redistributes it to the board. So the county must amend its relevant ordinance every time a school board changes its fee structure. It should be a formality.
Some counties, ours among them, have taken the law to mean–I think incorrectly–that they have the authority to deny a school board’s request, even though the school board has carried out its own public hearings and voted on the increase with the required supermajority vote. Since when does another government get to decide what school boards may and may not do? The county commission certainly isn’t asking permission from the school board or Palm Coast to pass its own big impact fee increase. But there’s your Byzantine tax system for you.
That’s not going to change. But the absurd dynamics of the matter shouldn’t undermine a school board’s 10-year growth plan. Politically, the commission is overstepping its bounds, pure and simple. It is cajoling a few special interests already making a killing. KB Homes, to take one example of a builder with a local imprint, saw its net profits skyrocket 116 percent in the six months ending on May 31. Realtors haven’t been doing badly either, judging from the Flagler County Realtors Association’s latest report: a 47 percent year-over-year increase in sales as of the second quarter of 2021.
Yet they’re complaining about school impact fees at the expense of the single most important local government entity and its construction planning. (They may claim to be advocating for home buyers. But let’s not add amateur comedy to the mix.)
If, as these special interests claim, the school board is overshooting its target, nothing prevents it–and everything compels it–to return to the table in a few years and scale back its fees. That revenue is restricted. It can only be spent on new construction, expansions, or debt service of previous construction. It’s not as if the school board is hoarding a slush fund. Mittelstadt’s point is that undershooting is not an option, unless the commission is willing to see schools in chaos and students warehoused in temporary concrete blocks. Between one risk and another, it should be a no-brainer.
There is a crowning irony to this charade orchestrated by the county commission and its disingenuous doubt about the school board’s study rationalizing the higher fees.
During the workshop before the commission, Darin Dahl, president of the Flagler County Homebuilders Association, threatened to sue the school board if the impact fees were approved as presented. He cited a Santa Rosa precedent, prematurely. No such precedent has been set. The courts have merely granted an injunction, stopping school impact fees from being collected pending the resolution of the case, which is ongoing. Dahl may be right: the Santa Rosa school board could lose.
But the more relevant part of that court decision upholding the injunction, and that Dahl pointed to, was the court’s rationale. Santa Rosa had relied on a university professor’s calculations to impose its fees–not exactly the most reliable way to go. The court gave the greatest weight of evidence to Carson Bise, singling out the expert the home builders in Santa Rosa brought in to show that the school district’s methodology was flawed. The company that bears Bise’s name, TischlerBise, is an ace in the field of impact fee studies.
And here’s the kicker: the Flagler school board retained Carson Bise and his company to conduct its own impact fee study. Bise himself was standing right there, a few feet from Dahl, as Dahl made his threats of legal action. Bise must have been inwardly smiling, since Dahl seemed to have no clue that his own home builder colleagues in Santa Rosa were relying on Bise to make their case.
Just as the Flagler County School Board is now relying on Bise to make its case.
If commissioners aren’t interested in Bise or judges, they should at least listen to Al Hadeed, their own attorney, who outlined their responsibilities in a memo. He said the commission was “not obligated to grant the School Board’s request either in whole or in part.” But he also noted that, if commissioners were worried about a lawsuit, the board could indemnify the county because “the School Board is in a superior position to defend the impact fees and their underlying analysis with their own experts.”
There. Asses covered. Now nothing short of arrogance and rank hypocrisy would have commissioners stand in the way of the school board’s impact fees. That, and the currency that glitters most in commissioners’ eyes when their donors stand within spitting distance: political cowardice.