The Flagler Beach City Commission Thursday will vote on what could be the single-largest tax increase on development in the city’s history. The city is considering adopting higher impact fees on water and sewer connection, and imposing new impact fees for police, fire, parks and recreation services, which it has not had until now.
Commissioners did not indicate which way they’d vote when a consultant presented them the proposal, which is still being reviewed by the Flagler County Builders Association. (See the proposed ordinance with a breakdown of the fee structure here.)
“I was talking with the city manager and there was a recommendation made that no action is taken this evening on this,” Commission Chairman Eric Cooley said in late July, when Bise presented the results of the study, “that this gets held for the new city manager to formulate some suggestions that will then get brought back forward for that as to make some decisions.” The proposal is now before the city commission with its new manager, Dale Martin, in place.
Impact fees are the one-time levy builders pay on new residential and commercial construction to defray the “impact” of development and new residents on infrastructure. The fee is passed down to the property owner. Proponents of fees–or consultants hired to study and justify them–typically claim that fees are not taxes. To those paying then, impact fees are indistinguishable from taxes.
Impact fees are particular to states with byzantine or lacking tax structures, compensating, for example, for the absence of state income taxes or for low property taxes, especially in jurisdictions that seek to limit property taxes even when they have room to raise them. Fee structures can be just as byzantine, as Flagler Beach’s proposed fees would be: For police, fire, library and parks fees, there would be no fewer than 11 different increments, depending on whether the property is commercial or residential, and depending on the property’s size.
Flagler Beach last raised its water and sewer impact fees in 2012. The city has now determined that raising water and sewer fees and possibly imposing new impact fees for the other services is necessary to keep up with growth.
“We’re projecting a resident population increase of about almost 1,600 people, a seasonal population increase of about 5,600,” L. Carson Bise, president of TischlerBise, the Bethesda-based consultancy, told the city commission in late July. “We’re also projecting an additional approximately 750 housing units, employment increases of about 535 jobs, and then non residential square footage increase of about 213,000 square feet over the next 10 years.”
The new fees in Flagler Beach would add anywhere from $2,480 to $7,488 per house (increments top off at 3,500 square feet, even though Flagler Beach is getting a few houses twice or three times that size), in addition to higher water and sewer fees. Non-residential construction–commercial, industrial, institutional, office–would pay from $850 per 1,000 square feet to $4,200 per 1,000 square feet.
If all the new fees are approved, a typical house of between 2,001 and 2,500 square feet would pay a total one-time levy of $5,718 in new fees–a police fee of $1,054, a fire fee of $1,247, a library fee of $284, and a parks fee of $3,133. Water and sewer impact fees would be on top of that.
Single-family homes currently pay an impact fee of $5,592 for water and sewer. That would increase by $3,136 if the fee were to increase by 25 percent.
TischlerBise is among the nation’s leaders in impact fee studies. It is the Flagler County School Board’s consultant on school impact fees, though builders and developers, along with the County Commission, were sharply critical of the district’s–and the consultants’–initial proposal to double school impact fees two years ago. The dispute centered on school enrollment figures, which the consultants projected to be higher than builders and the county thought justified by data. For now, builders and the county have been closer to the evidence than the district’s still-lagging enrollment.
But enrollment figures are different from population figures. Numerous factors are playing into lagging public school enrollment, such as accelerating diversion to home-schooling and private school as parents take advantage of up to $8,000 per student in public money usable, as vouchers, on private school tuition. (See TischlerBise’s impact fee study for Flagler Beach here.)
If builders and developers have had a strong case against growing public school enrollment, they cannot make the same case about net population increases. Flagler County’s population has grown by 33 percent since 2016. But that growth has happened mostly in Palm Coast, in the county and in Bunnell. Comparatively, Flagler Beach has been the laggard.
If there were to be an impact fee for the library, the city would have to commit to building an expansion to that building (not a replacement), though the fee includes a component for new books, too.
Bise in July wanted to make a point to commissioners: “It’s not a tax,” he claimed. “I can’t tell you how many meetings I’ve been to around the country where somebody refers to an impact fee as a tax on new development. And it’s important to understand the difference between a fee and a tax. A tax is primarily revenue-raising in nature. A fee is typically designed to cover the cost of something.”
In fact, both a fee and a tax are primarily revenue-raising, and both a fee and a tax’s revenue is intended to “cover the cost of something.” The end result is the same: both means of raising revenue are levies applied with a measure of uniformity or progressivism, making the distinction between a “fee” and a “tax” irrelevant, at least to those paying either.
Just like taxes, though more rigorously and systematically so, impact fees must be justified before they are imposed. To impose or raise fees, the government must meet certain criteria: there has to be a need for new revenue, development is occurring, and if service levels are to be maintained, the infrastructure must be expanded to meet those needs. But fees must also be proportional. For example, a commercial development that generates more traffic must pay a higher transportation impact fee than one that generates less. The revenue may only be spent on the specific reason for which the fee is imposed.
Florida passed a law two years ago that limits how steeply and frequently fees are raised. Absent emergencies, fees may not be increased more than once every four years–unless a local government has no impact fees in place. In those cases, the fees may be set at whatever level a study shows the need for, and a government is willing to approve.