It was a tale of two fees.
When the County Commission discussed the more-than doubling of its impact fees on new construction over the next four years at a workshop on Tuesday, commissioners were relaxed, unquestioning, basking in plaudits from local interest groups. They were all in.
The schedule would create impact fees for fire, EMS, law enforcement and libraries, and increase fees for transportation and parks, resulting in an increase from a combined $1,706 currently to $3,873, even though in some categories, the county doesn’t yet have a spending plan.
“I’m in favor of this number,” Commissioner Greg Hansen said. “I think we’ve got–staff’s done a good job putting this together. And I think it’s pretty self explanatory. I’m good with these numbers.”
When the commission discussed the school district’s request to double its impact fees, it was almost all hostility, questioning, disbelief–and a threat of litigation from the head of the local home builders association.
The contrast was striking and unexpected: the school district is required to submit its plan to the county, which collects impact fees through the Tax Collector and redistributes them to the agencies levying them. The district expected it to be a formality, since it is its own government. Instead, county commissioners turned the district into a subservient actor to county wishes as three commissioners–Joe Mullins, Donald O’Brien and Dave Sullivan–cast doubt on the size of the district’s request, its timing, and its claim as qualifying for “extraordinary circumstances” that justify the steep increase.
The commission chamber was stocked with builders, Realtors and their associates. The district had not expected such a show of force against it. At its own hearing, only two people, including the executive director of the local builders’ association, had spoken. Neither were thrilled with the plan, but neither spoke with the sort of belligerence the plan drew on Tuesday.
The workshop before the commission, required by law, was little short of a shock to the district, whose officials will now meet one-on-one with commissioners in hopes of countering the builders’ influence and pushing for their plan. But they have a difficult road ahead.
“The gradual increase is more realistic than a massive 100 percent increase in my opinion,” Mullins told Superintendent Cathy Mittelstadt. “Wouldn’t you agree that’s what we should have been doing the whole time, is gradually increasing instead of massively coming in one day saying, hey, there’s a big–that’s not planning for growth, it’s reacting to growth.” But Mullins was not grasping the impact fee increase process, even though he kept pointing at that flat student population over the years: the district did not have the numbers to justify a fee increase over the past 15 years. It now says it does, in a sharp turn-around from previous trends.
“We see the growth in front of us,” Mittelstadt said.
That left School Board Chairman Trevor Tucker literally pleading with the commission as he explained the district’s situation in terms he hoped the commissioners would understand. “If we have to build three schools or part of a school and two schools, it’s $178 million,” Tucker said. “We do not set our millage rate. We have a 1.5 mill capital. It used to be 2.0 capital.” (That’s the tax rate appropriated for school construction.) “We do not have the ability to raise our own revenue for this. Impact fees are a way to mitigate some of this. I don’t think even if we got this full impact fee, are we going to have enough for $178 million? We’re going to have to be bonding out a lot. We’re going to be doing whatever we can to pay the rest. But we have to provide seats for these students. We don’t want our students in a whole bunch of portables. So I implore you, please, approve this new millage rate for us.” (He meant impact fee.)
Impact fees are a one-time charge levied on the cost of a new home or a new commercial structure. (See the primer here.) As the name implies, fees are designed to defray the impact of new development on such things as schools, parks, fire services, roads and utilities. There are individual impact fees for each of those services in most local governments. City and county governments generally have all those impact fees except school impact fees: that’s the responsibility of the school board.
Whether it’s a city or county government or the school board, impact fees under Florida law may not be arbitrarily levied or increased. While entirely legal–and integral to Florida’s system of raising public revenue in a state without income taxes–each local government must justify its new fee structure every time it raises those fees. It does so by conducting an independent study that outlines the rationale for the new fees, based on evidence that they are needed.
The school district did that in 2004, the last time it appeared before the county commission. But the school board at the time adopted impact fees significantly lower than those recommended by the fee study. The study had recommended an impact fee of $5,764 for a single family home. Instead, the school board, heavily influenced by home builders, Realtors and a booming market–it was still on the windward side of the housing bubble–opted for an impact fee of $3,600 instead.
That’s the impact fee in effect today. In inflation-adjusted dollars, that fee’s purchasing power is actually $2,584 of what it was in 2005. Put another way: if the fee had kept up with inflation–if, like Palm Coast utility bills, it had been adjusted for inflation every year–it would have had to be $5,164 today, according to the Bureau of Labor Statistics’ Inflation Calculator.
If the district had adopted the recommended impact fee of $5,764 in 2005, in inflation-adjusted dollars, the fee–just keeping up with the cost of living–would have had to be $8,269 today.
The adopted mobile home impact fee in 2005 was $1,066 (instead of the recommended $1,698), and the adopted fee for each unit of an apartment was $931 (instead of $1,481).
“Those fees have stood in place and done well with mitigating costs for the school district over the past 17 years,” Mittelstadt told the county commissioners. “But we recognize now with some growth that has been influencing into our schools, the time to move forward and get our fees adjusted to local levels is critically important.”
Carson Bise, president of Bethesda-based TischlerBise, the consulting firm the district retained to conduct the study, presented the district’s fee study, its rationales, its methodology and its bottom lines. The methodology included cost of land, buses ($116,000 per bus), construction materials and so on. All those are added into a gross total that nets a per-student “station” cost in future construction.
Consultants almost always rely on the University of Florida’s Bureau of Economic and Business Research’s population projections. Those projections are of course only estimates, and they are not always on target, at times changing from quarter to quarter. They have been less on target than more so in the last two decades, namely because of the housing bubble and the subsequent Great Recession. But the bureau’s figures remain the main standard of consultants’ analyses when population figures are needed.
Those figures project an overall 23 percent population growth over the next 10 years–26,600 new residents and 12,000 new homes. That translates to an increase of 19 percent in new school enrollment in that time span, or 2,328 students.
Significantly, when a study commissioned by the Flagler County Sheriff relied on the same bureau’s population projections to conclude that the law enforcement agency needed a huge increase in its corps of deputies, the county commission did not question the numbers, nor the demographics. Those demographics point to a continuing trend toward older residents in the county (over 30 percent are 65 and over). Older residents commit far fewer crimes. But both Palm Coast and county government this month granted the sheriff the largest year-over-year increase in deputies they ever had.
It was a different story for the school district as district officials and Bise were grilled over their numbers–including demographics.
Commissioners are right: It is unquestioned that for more than the past decade, Flagler schools’ population has been flat, hovering at the 12,500 to 13,000 mark, despite a significant increase in the county’s population. This year, the number has increased slightly.
“Just because we haven’t seen a lot of student growth historically doesn’t mean that that trend is going to continue,” Bise said. “I think what we will see is a continuation over time of the decline in the student generation rate per housing unit. But I do think, and I think there’s some compelling evidence… that the school district is going to have an increase in enrollment like you haven’t seen in a number of years.”
Patty Bott, Coordinator for planning and intergovernmental relations for the school district, submitted data showing the rapid increase in recent and projected development across the county, and with it the projected student population. She was repeatedly asked about the age of those coming residents. She parried the questions by pointing to her data.
The district is not using population projections alone, she said. It’s basing its student projection not on current age of homeowners, but current averages, which the district considers to be a more accurate portrait. So while there are 43,034 single family homes in the county in 2020, and 3,549 elementary age students, that resulted in a “generation rate” of 0.082 student per house. Taking that figure and applying it to the projected number of future housing units yields the longer-term estimate of how many students there’ll be, using the same formula for middle and high school. (Charter school students are not included in the figures, even though many of them “flow through” the district at one point or another, Bott said.)
“It’s not always people buying the new homes,” Bott noted. “It’s sometimes somebody rebuying that same home.” (Impact fees are levied only once on new construction. They do not figure in the price of a resold home except as residuals from the original cost, and in today’s market would be dwarfed by valuation increases.)
A new law that went in effect this year limits the increase of impact fees to 50 percent of their current value unless the local government can point to “extraordinary circumstances.” The school board approved its impact fee increase based on those extraordinary circumstances on Aug. 17, in a unanimous vote. The new law appears to have precipitated the district into action.
Another factor the district must contend with in projecting future construction: five of the eight funding sources for construction in existence in 2004 have been eliminated, including revenue from a 2004 bond issue, sales tax dollars and so-called PECO money (public education capital outlay projects), the state funding source that now flows more to charter schools, colleges and universities. The local property tax that the state allowed for capital dollars was cut 25 percent. “Overall 40 percent of the funding that was available to us in 2004 is no longer available to us,” Bott said.
Yet the cost of a “student station” (the equivalent capital cost of a school pro-rated for each student) has skyrocketed–from $20,387 to $34,202 for high school students. The costs are lower for middle and elementary students. The proportionate increase is just as steep.
“We need to be in a financial position to construct new schools,” Bott said. “Portables are not the answer. We’re currently overcapacity in elementary and high schools,” Bott said, and will be overcapacity in middle schools next year.
None of those arguments made much of an impact on the majority of commissioners, nor on anyone who spoke from the floor.
Mullins, the commissioner who was most inquisitorial during the 95-minute segment of the workshop, asked why the impact fees hadn’t been increased in 15 years, comparing it to being “asleep at the wheel.” Bott said it was because of slow growth: the justification would not have been there. He repeatedly pointed to a flat growth rate in student population, as did other commissioners.
County Commissioner Dave Sullivan said “extraordinary circumstances” are subjective terms. He said the district has some money in the bank ($23 million in acumulated fees over the years), so the district could split its request in half, increasing impact fees by less than the 50 percent threshold–therefore not triggering the “extraordinary circumstance” procedures and public hearings–and return in five years or so and increase impact fees again.
Mittlestadt said a high school expansion will wipe out that $23 million soon. “We continue to want to make sure we are managing the growth and what is essentially in front of us at this time,” Mittelstadt said. The $23 million is also being used to pay off debts, at $2 million a year, until 2030, to finish paying for Rymfire, Bunnell, and the Buddy Taylor-Wadsworth Middle School addition, plus Matanzas High School.
Andy Dance, a school board member for a dozen years before he was elected to the county commission in November, alone on the commission defended the school district’s approach and noted that as the district went through its lengthy public process, just one member of the public addressed the board. Dance also sought to counter Mullins’s assumption that since the district did not grow in the past many years, it won’t grow in the years ahead. “The hardest thing to wrap your head around is the stagnant growth for a while during the teens. And then,” Dance said, now projections that show more students coming. But it’s not unlike I think what happened early in the 2000s,” when growth was explosive.
Mittlestadt, a long-time Palm Coast resident who previously was an assistant superintendent in St. Johns, tried again.
“I’ve lived here for 20 years. I’ve seen that growth go like this and then like this,” she said, her right hand drawing a rollercoaster shape. “I’ve built two brand new homes. I’ve been fortunate in that manner. I also have previously worked in St. Johns County, one of the fastest-growing, built two schools a year for 10 years. So I have an inkling of what we’re facing and the pressures in front of us. We’re just trying to be so mindful and cognizant of creating that great school district that is prepared for the growth. None of us want to see our students stood up in relocatables or double sessions or some other mitigating factors that you can put into play when you’re looking at exceeding your capacity within your school district. So we’re trying to make sure we continue to keep our buildings in a safe environment, those innovative classrooms, and all of that is in line with trying to bring this forward as an impact fee resolution.”
But then came the onslaught from the floor.
Darin Dahl, president of the Flagler County Homebuilders Association, claimed “we have been invited to no stakeholder meetings. We’ve had no input into this whatsoever. We have requested it and we’ve been denied.” The statement was in direct contradiction of Annamaria Long, the Home Builders Association’s own executive director, who told the school board on Aug. 17: “We’ve also been gratefully involved with the workshops, with the impact fee and the study and all of that.” She went on to say on Aug. 17 that “there needs to be an impact fee increase, it’s too low. We simply are having a hard time with the data to prove that it needs to be double.” She also spoke on Tuesday, arguing that there are no extraordinary circumstances present–and called for an audit. “We do oppose taking action without evidence,” she said.
Dahl said the projections aren’t born out by the sort of people moving into the county–and threatened a lawsuit: “If we do implement this in full, we are breaking the law.” he said. “And we will open ourselves up to litigious action. Santa Rosa county has a precedent set already. And if we approve this, we will be on the wrong side of that precedent.”
Dahl was somewhat jumping ahead by calling an ongoing court case a “precedent.” No precedent has yet been set, nor have the courts ruled on the merits of the case, but merely upheld an injunction as the case is heard, albeit with “a substantial likelihood of success on the merits,” an appeals court found. (See the appeals court ruling here.)
The Home Builders Association in Santa Rosa County and a builder sued the school board over its new impact fee of $5,000 for new single-family homes, calling the levy unconstitutional. A trial court judge found that the impact fee study backing the levy was “sloppy,” and suspended the collection of the fees. The study was conducted by Claude E. Boles Jr., a consultant and faculty member at the University of Florida. No one has claimed that the TischlerBise study was sloppy or questioned its methodology so much as its deductive conclusions, though one speaker, builder Tony Amaral, described it as a “knee-jerk reaction.”
Still, the First District Court of Appeal in July upheld the injunction and leaves the door wide open for what could be a surprising ruling on impact fees.
Others who spoke were builders, work for builders, are members of the builders’ association or represent them in court, plus a Realtor, and spoke in favor of rejecting the district’s request as it stands. Their consensus proposal was a more scaled back approach.
And the Realtor, Michelle Davis, made a startling statement: “I do between 35 and 50 transactions a year,” she said. “To date, I’ve sold 29 properties, and not one of those homeowners have been–or even the folks that are buying the listings that I have–have been folks with children. And I’m just one of how many county Realtors here right now?”
Perhaps more convincingly than much of the rhetoric that day, Davis’s statement, paired with the district’s own student-population flatline of the last dozen years, may prove to be the district’s steepest hurdle in the commission’s eyes as the commission remains poised to do what the district thought was unthinkable: override the district’s own study, its own projections and its own request, and in a snub to the separation of powers, become the district’s ruling authority on school impact fees.