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Impact fees considered from different angles by builders, developers and lawmakers

Friend or foe to building and development projects?

Impact fees are a topic of interest in the world of real estate and development — and sometimes cause a stir and even lawsuits. The fees are often considered in high-growth areas and are now being considered as the Gulf Coast rebuilds from Hurricane Katrina. A bill to allow local governments the option to charge the fees was filed in the Legislature but is dead at this time.

However, Marty Milstead, vice president of the Home Builders Association of Mississippi, says the measure could be inserted in another bill, something his organization hopes doesn’t happen. “Our association is opposed to impact fees in all shape, form and fashion, across the board,” he said.

“They’re another name for taxes, taxes on housing. The problem with impact fees is that they make it more expensive to get into homes.”

Another take

But Buddy Edens, president and CEO of Associated Builders and Contractors, says his group does not have a problem with impact fees. “We need to let municipalities assess fees that are needed within their towns,” he said. “Some don’t have the money to improve water and sewer and many of their systems are outdated and not able to keep up with services due to growth.”

He feels the fees should apply statewide and that rapidly growing areas need them to keep up with that growth.
Gulf Coast Investment Developers (GCID) was developing a number of condominium projects on the Coast before the hurricane. They are continuing that development with 14 current projects. “Up and down the Coast several cities are proposing impact fees and are doing them,” said GCID’s president and CEO Mike Boudreaux. “Overall it’s not appreciated from the developer’s viewpoint, but we look at it as something we have to do to show good faith in the community. We’re going to do our part and step up to the plate.”

According to Boudreaux, Biloxi is providing every developer an agreement whereby the developer guarantees to provide money to the city to apply toward the installation of water, sewer and streets. The fee is $2,500 to $3,500 per unit.

“We’ve signed our first agreement. It’s for the Ocean Club which has 375 units,” he said. “We knew the city would not be able to handle it on their own. We look at it as doing our part of moving forward.”

Ground was broken for the Ocean Club, located on U.S. 90 in Biloxi, on the site of the former President Casino’s hotel tower that was once the Hilton Hotel. Of GCID’s 14 projects, 11 are in Biloxi, two are in Ocean Springs and one is in Long Beach.

Asked if impact fees impede growth, Boudreaux answered, “No. They stimulate growth. The whole purpose is to stimulate growth. If they’re used as intended, they will help move cities forward and keep the burden of development off local residents.”

His company sees condominiums as vertical subdivisions and looks at impact fees as the cost of doing business. “Every community has a different mind set of how they want it to look,” he added. “There’s more aggressive growth going on here. If the communities to the north would look at fees as the cost of doing business, it would stimulate growth.”

The Mississippi Association of Realtors (MAR) strongly opposes impact fees in any form, including in areas rebuilding from the hurricane. “Impact fees have a negative effect on development and would threaten recovery efforts so desperately needed in affected areas of our state,” said Angela Cain, the group’s executive director. “We encourage government at all levels to refuse to enact impact fees where they do not exist and to discontinue their use in areas where they are currently assessed.”

To pay for rebuilding in storm-ravaged areas, MAR supports incentives they feel spur restoration and redevelopment, focusing on economic incentives, tax credits and exemptions, innovative public-private partnerships and financial assistance.

Among the woes MAR says are caused by impact fees are a disproportionate increase in construction costs that will drive up costs of existing properties, deter developers from pursuing otherwise viable and needed projects and cause developers to reduce project quality and/or quantity.

Mixed reaction in DeSoto County

State Sen. Doug Davis (R-Hernando) sponsored an unsuccessful bill last year to legalize impact fees. He thinks counties and cities should be allowed that option.

“This is one option that needs to be looked at. I certainly don’t want to see it mandated but it would be for public utilities and infrastructure in impacted areas,” he said. “These fees would not go into the general fund and would not be used for recurring expenses.”

He’s had mixed reaction from people in DeSoto County, the rapidly growing area he represents. He’s had dialogue with some developers and builders who are against impact fees and respects their opinions.

“DeSoto County already has an impact fee. It’s called an economic development fee for countywide sewage and it has not slowed down growth. Every new house pays $1,000 for this line,” he said. “Proposing the option of impact fees was my attempt to keep taxes lower on the people already living in the area.”

He points out that since 1990, DeSoto County’s population has nearly doubled to more than 130,000 as the county has become a popular bedroom community for Memphis.

Without a state law giving counties and cities the option of assessing impact fees, the Home Builders Association considers the fees illegal. In 2003, the organization took the City of Ocean Springs to court over the city’s attempt to charge impact fees. A Jackson County court ruled in favor of the association in 2004 and the State Supreme Court will now rule on the issue.

“We feel confident the Supreme Court will uphold the Ocean Springs ruling that we won,” Milstead said. “We are against impact fees and will continue to fight them. We’re just enforcing the law. We’re asking cities to stop breaking the law.”

He says the Coast is getting federal funds to restore infrastructure. “It would be a horrible thing to ask someone who’s lost a home to pay an extra tax,” he said. “Builders would pass along these costs the way gasoline taxes are passed on to customers.”

He adds that cities and counties already have the ability to charge condo builders and his association is trying to prevent homebuyers from paying additional fees. “That would price people out of the home market. It would be very hard for a young couple to purchase a home,” he said.

Contact MBJ contributing Lynn Lofton at llofton656@aol.com.


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