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Developers, builders feeling impact of Supreme Court’s fee ruling

The recent Mississippi Supreme Court ruling stating that the City of Ocean Springs has no legal authority to assess impact fees has stirred up a hornet’s nest. Not only do cities like Clinton, Madison and Ridgeland stand to lose hundreds of thousands of dollars from impact fees, developers want the money back that has been previously collected.

The 6-1 Supreme Court ruling backed the May 2004 ruling by Jackson County Circuit Judge Dale Harkey, which stated that Ocean Springs could not assess fees to help finance infrastructure upgrades and alleviate the strain on utilities created by new developments. The 4,000-member Home Builders Association of Mississippi (HBAM) had filed a lawsuit against the coastal city in January 2003, stating the illegal tax assessed there amounted to nearly $5,000 per home.

“We’ve been fighting against impact fees for years, and knew that we would not be able to stop local government from taking these taxes illegally without the Supreme Court ruling,” said HBAM CEO Marty Milstead.

‘Long and expensive battle’

HBAM is calling on municipalities to return the impact fees plus interest to developers.

“We’re asking State Auditor Phil Bryant and Attorney General Jim Hood to expedite this request,” said Milstead. “The Home Builders Association of Mississippi feels good about this win. It’s been a long and expensive battle, and now the Supreme Court has spoken.”

Taking away a community’s building block may hurt impact fee opponents the most, said Mississippi Municipal League executive director George Lewis.

“Ultimately, the goal for a better quality of life and the growth of a community is the same on both sides,” he said. “Communities have to make plans for revenue to get the kind of community they want. Improvements in communities affect everyone from housing to recreation to safety, and revenue has to be derived, whether through impact fees or taxes, to finance a comprehensive plan the city has for its citizens.”

HBAM president Clay Easterling, a land developer, homebuilder and insulation contractor, pointed out many people don’t realize the developers already pay for infrastructure related to developments — sewer, water, streets, sidewalks, engineering fees, permit fees and more — and then gives it to the city or county upon completion. The new tax base is there for government to tax legally for years, he pointed out.

“Researchers from the University of Florida concluded in a recent study that growth pays for itself,” he said. “They also warned that charging new residents taxes and fees that substantially exceed their share of associated public costs will harm the local economy, unduly delay development and result in a general economic slowdown. This would not be good for any of the state, but especially for the Mississippi Gulf Coast.

“These developments are good for the community. It’s economic development. It creates jobs and raises the property value of the area with new construction.”

Feeling the bite?

Several states allow impact fees, but mostly limit them to roadwork. Courts in Florida, Kansas, Ohio and Wyoming have held that municipalities have the authority to adopt impact fees, even though no specific statute allows it.

“In extremely dense population markets, which are particularly high income, such as San Diego or Palm Beach, impact fees are probably more commonly accepted,” said Mark Bounds, president of Mark S. Bounds Realty Partners in Madison. “But in areas where there’s not as much wealth to go around, you feel the bite with that extra layer of taxation.”

Lewis said there’s room for compromise — and collaboration — between municipalities and developers.

“We don’t want to shoot ourselves in the foot by saying we’re just not going to do anything to provide the revenue to grow and to enhance our community,” he said. “I just think there’s a lot of work that we’re going to have to do to look at the future of our cities and towns. How we’ll go from this decision on … that’s not a simple thing to do.”

The court also pointed out that citizens must approve impact fees or state lawmakers must pass legislation allowing them. Milstead doesn’t believe either method will prevail. “I just don’t think there’s an appetite in the Mississippi Legislature for additional taxes on property owners,” he said.

Contact MBJ contributing writer Lynne W. Jeter at Lynne.Jeter@gmail.com.

About Lynne W. Jeter

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