Palm Coast Approves Sharply Increasing Development Impact Fees on Builders, Citing ‘Extraordinary Circumstances’

With some pushback from the Flagler Home Builders Association but notable unanimity from the dais and no complaints from the public, the City Council today approved sharply increasing fire, parks and transportation impact fees in hopes of further shifting the burden of development toward new residents. Last year the council did likewise with water and sewer impact fees. 

The fire and parks impact fee ordinance was approved on second reading, enacting it. The transportation impact fee, after a few more wrangles, was approved on first reading, but is expected to be approved in two weeks on second reading. The new fees kick in on Oct. 1. 

Impact fees are the one-time fee builders or developers pay once they complete a house or a commercial, institutional or industrial structure. Impact fees are intended to defray the “impact” of new development and new residents or businesses on infrastructure, including schools, parks, fire and library services. They are levied only on new construction on the principle that new residents will occupy those houses, and to some extent new businesses. The costs are typically passed down to the buyers of the new property and built into the overall cost. (See the briefing here.)

The fire impact fee is rising 117 percent to $942 for a single-family house, and to $1,495 per 1,000 square feet for non-residential buildings, a 114 percent increase. Revenue will help build new fire stations and buy new (but not replacement) fire trucks. 

The parks fee will increase to $3,164 for single-family houses, a 73 percent increase. It is not levied on businesses or institutional buildings on the assumption that families with children living in houses use parks. Xerox machines in offices do not. Revenue is to pay for a new recreation center, a cultural arts facility expansion in Town Center, near the future YMCA, and a clubhouse and event center at the Palm Harbor Golf Club. 

The transportation impact fee went through a few changes that lowered its cost. For example, U.S. 1 improvements were removed from the list of future projects and to apply a different fee based on the size of houses, rather than a flat fee. That brought the overall cost of the play from $124 million to $101 million, lowering the fee. 

Under that calculation, houses would be charged in increments of 1,000 square feet. A 1,000 square foot single-family residential house or apartment would pay $3,770. A 2,000 square foot unit, the more typical size of houses in Palm Coast, would pay $7,540–a 115 percent increase over the current fee (down from 137 percent in the original proposal). The increase on a 1,600-square-foot unit would be 72 percent. 

The higher costs for bigger houses and lower costs for smaller houses “is one way a number of communities are looking at to at least help address the affordability issue,”  Jonathan Paul, a principal with New Urban Concepts, the city’s consultant on the issue, said. “Doesn’t solve it, doesn’t meet all the needs that are out there, but it’s at least one step in that direction.” The larger the house, the larger the impact on roads and streets. “Does that apply to every single home built in the city? No, but on average, that is what the data shows us,” Paul said. 

Transportation impact fees will rise a built more for institutional construction such as churches, assisted living facilities, hotels, health and fitness clubs and the like, as well as for industrial construction. (The increases are in the 130 to 145 percent range.) 

Council members were surprised that ITT-platted lots in Palm Coast’s older sections have been paying somewhat lower transportation impact fees than new subdivisions. That will not continue: The council ended the exception.

Transportation impact fee revenue may be used anywhere in the city to add to travel lanes, to add turning lanes, to add to traffic signs, to build new bridges or new sidewalks–but not to repair existing roads or sidewalks, or to repave existing roads. 

Florida in 2021 enacted HB337, a law that corrals impact fee increases. Increases of 25 percent or less must be spread out over two years. Increases of 25 to 50 percent must be spread out over four. Increases of more than 50 percent are prohibited–with an exception, in case of extraordinary circumstances. 

A local government has always been required to prove the calculated need for impact fees through a study. It must also prove that extraordinary circumstances exist–that the population is increasing faster than the state average, and that it’ll continue to grow faster. The city must also show substantial increases in construction costs. The council had no issue determining that in every impact fee proposal, it was facing extraordinary circumstances. 

Annamaria Long, the executive officer of the Home Builders Association, challenged the findings. “Our forecast from 2020 was higher than our forecasting for 2025, which indicates that we now have a weakened nexus, and that is inconsistent with the proportionality requirements that the extraordinary circumstances require,” Long said. Construction costs alone are not sufficient to justify extraordinary circumstances. The law requires that “the extraordinary circumstance be severe, unforeseen and local,” which no longer applies, she said. 

Council member Theresa Pontieri, describing herself as “staunchly” behind the fee increases, countered Long’s analysis, citing Palm Coast as still one of the more affordable cities for working families in housing costs.  

“When we’re looking at all of these statistics and we’re trying to make sure we’re finding that sweet spot where we’re paying for growth, making sure infrastructure is taken care of, but also making sure that we remain an affordable place for working families and all of our essential workers to live,” Pontieri said, “I really do feel this is that sweet spot. So again, just hoping that this is the vote that takes place and that we get it done, not only this reading, but also the next reading.”

The vote was unanimous, as were the votes for the fire fee and the parks fee. 

The impact fee increases appear to have missed the bulge of the boomlet of 2018-2024 development that caused a backlash among residents and played a significant role in causing a majority of the council’s members to lose elected office. But new construction continues at a solid, if slightly diminished, pace.