Village of Taos Ski Valley Impact Fees

VTSV - John-Anthony Miller III – Planner II / 11-30-12

What are Impact Fees?

Impact Fees are one time levies assessed on property developers during the permitting process

Impact fees work to bridge the gap between the cost of new municipal infrastructure and the revenue steams that will help pay for them

What is the Average Impact Fee?

“Impact fees vary greatly by region and facility. Fees are generally highest in Western states (California, Oregon, Washington, Arizona) and lowest in South Central states (Texas, Oklahoma, Arkansas, and Louisiana). Fees are usually highest for school facilities (often over $10,000 per dwelling) and lowest for police facilities (often under $500 per dwelling.”

www.impactfees.com/Faq/general.php#

How do Impact Fees affect the Village Economically?

Throughout this presentation, we will present the most current ideas on impact fee theory and how it relates to economics in three different ways

How do Impact fees affect prices of new and existing homes,

How do impact fees affect prices of undeveloped land,

And, How impact fees affect housing production?

Impact Fees Vs Home Prices

According to a study by Gregory Burge, “Impact Fees in Relation to Housing Prices and Affordable Housing Supply”, “Impact fees do lead to higher average new housing prices, with

most studies indicating a $1.50 - $1.70 increase in housing value for every $1.00 increase in impact fees.”

Cost of existing housing also arguably increases as well due to the fact that housing consumers find new and existing housing of equal quality to be close substitutes therefore demand for existing housing increases. Burge’s study found a link of $1.00 - $1.68 increase for every

$1.00 in impact fees. Burge, Gregory S. 2008. “Impact Fees in Relation to Housing Prices and Affordable Housing Supply. Availible: http://faculty-staff.ou.edu/B/Gregory.S.Burge-1/Publications and Working Papers/Impact Fees in Relation to Housing Prices and Affordable Housing Supply.pdf

Yinger, 1998

According to J. Yinger’s study, “The Incidence of Development Fees and Special Assesments, 1998”, Impact fees work to do two things in an economic market.

Impact fees reflect the cost of providing valued facilities needed to serve new development, and

May offset property taxes that would otherwise need to be assesed for added growth and infrastructure.

According to Yinger, both of these affects work to shift home values higher.**

**Assumes there is a higher mobility for consumers than developers

Yinger, J. 1998. “The Incidence of Development Fees and Special Assessment”. National Tax Journal. 51, 23-41.

What is causing the increase in values?

Impact fees rely heavily on the idea of supply and demand. Higher property values and cost come from the idea that impact fees

increase reservation prices that consumers are willing to pay. increased infrastructure and facility access as well as reduced property

taxes in the future actually incentivize an increase in new and existing housing demand.

“A rising tide lifts all boats”

Case Study

Stingell and Lillydalh (1990) Loveland Colorado Study (1983-1985), examined a $1,182 increase in

impact fees Results

Found increases in new home price just over 3x the size of impact fee Increase in existing home price by $7,000 or 6x the original impact fee.

“If homeowners feel that the benefits from the new facilities are valued highly enough, housing prices will increase by an amount higher than the impact fee”

Stingell, Larry D. and Jane H. Lillydahl. 1990. “An Empirical Examination of the Effect of Impact Fees on the Housing Market.” Land Economics 66 (1), 82-92.

Impact Fees Vs. Undeveloped Land

According to Nelson et al. (1992), there are two positive affects of land price in relation to impact fees.

Impact fees establish a contract for development rights. Developers may prefer impact fees versus situations with no fee but less certain development rights.

Impact fees may delay development until housing prices and land prices increase enough to offset the fee

Nelson, Arthur C., Jane H. Lillydahl, James E. Frank, and James C. Nicholas. 1992. “Price Effects of Road and other Impact Fees on Urban Land.” Transportation Research Record 1305, 36-41

Impact Fees and Taxes

In a study by Ihlanfeldt and Shaughnessy, (2004), they argued that “Impact fees work to reduce the property tax burden felt by the community residents, lowering future tax debts.”

They estimate that for every $1.00 of fees, you see a saving of $1.20 in tax savings.

Ilhanfeldt, Keith R. and Timoth M. Shaughnessy. 2004. “An Empirical Investigation of the Effects of Impact Fees on Housing and Land Markets”. Regional Science and Urban Economics. 34(6), 639-661

Do Impact Fees = New Taxes?

According to the Mayor of Las Cruces, “It is a misrepresentation for opponents of impact fees to call them new taxes. In fact, impact fees will help keep taxes lower for current residents, since new development will be required to pay for the facilities that are required to directly serve it, as opposed to raising property and sales taxes on all residents.

Miyagishima, Ken. "Impact Fees Are the Best Choice for City Residents | NMPolitics.net." Impact Fees Are the Best Choice for City Residents | NMPolitics.net. N.p., n.d. Web. 02 Dec. 2012. <http://www.nmpolitics.net/index/2011/08/impact-fees-are-the-best-choice-for-city-residents/>.

Housing Production Affects

Do Impact Fees Slow Growth? Impact fees provide valuable facilities and

infrastructure.

Impact fees reduce the time span of review for new developments and zoning.

Incentivize rezoning to residential in undeveloped lands due to the ability to control growth and new infrastructure.

Impact Fees and Developers

Impact fees are not “anti-gowth” fees, While initial cost for the developers increase, this

cost is later passed on to the consumer.

Because there is a willingness to pay by the consumer, the demand for property with infrastructure and reduced future tax liability is higher than land without those guarantees.

Anti-Growth (cont.)

This increased demand can be seen not only in new and existing homes but also in undeveloped property.

Increase in willingness to pay is proportional to the value of the home. Bigger Home, more desire to have infrastructure and reduction in tax

liability.

Impact fees facilitate growth by expediting development approvals, increasing the amount of developable lands, and reducing citizen opposition to new growth

Santa Fe’s Current Impact Fee Schedule

Regional Impact Fee Analysis

*As seen in previous slide; Santa Fe passed the potential impact fee schedule

Impact Fee Percentage

Misconceptions

Impact Fees are a one size fits all equation - It becomes very problematic to compare impact fees from city to city due to the different fee schedules and structuring.

Impact Fees are a new or increased tax – actually Impact fees work to keep taxes lower by limiting future tax liability and infrastructure costs.

Impact Fees are anti-development – Impact fee actually work to create a more favorable environment for developers by standardizing the process of development and leveling to playing field for competition. Impact fees also work to incentivize development of unused land due to

the ability to feel more confident about infrastructure improvement guarantees.

Just for fun. VTSV vs. Albuquerque

Comparison for a 3000sf Single Family Home

Albuquerque VTSV

www.cabq.gov/planning/developers/fees/impact-fees/

Works Cited

Yinger, J. 1998. “The Incidence of Development Fees and Special Assessment”. National Tax Journal. 51, 23-41.

Moody, Mitch and Arthur C. Nelson. 2003. “Paying for Prosperity: Impact Fees and Job Growth.” Brooking Institution Center on Urban and Metropolitian Policy Paper, 2003.

Stingell, Larry D. and Jane H. Lillydahl. 1990. “An Empirical Examination of the Effect of Impact Fees on the Housing Market.” Land Economics 66 (1), 82-92.

Nelson, Arthur C., Jane H. Lillydahl, James E. Frank, and James C. Nicholas. 1992. “Price Effects of Road and other Impact Fees on Urban Land.” Transportation Research Record 1305, 36-41

Works Cited

Skaburskis, Andrejas and Mohammad Qadeer. 1992. “An Empirical Estimation of the Price Effects of Development Impact Fees.” Urban Studies 5, 653-667.

Evans-Crowley, Jennifer S., Fred A. Forgey, and Ronald C. Rutherford. 2005. “The Effect of Development Impact Fees on Land Values.” Growth and Change, 36, 100-112

Ilhanfeldt, Keith R. and Timoth M. Shaughnessy. 2004. “An Empirical Investigation of the Effects of Impact Fees on Housing and Land Markets”. Regional Science and Urban Economics. 34(6), 639-661

Works Cited

Burge, Gregory S. and Keith R. Ihlanfeldt. 2006a. “Impact Fees and Single-Family Home Construction” Journal of Urban Economics, 60, 284-306

Burge, Gregory S. and Keith R. Ihlanfeldt. 2006b. “The Effects of Impact Fees on Multi-Family Housing Construction” Journal of Regional Science, 45, 5-23

Burge, Gregory S. 2008. “Impact Fees in Relation to Housing Prices and Affordable Housing Supply. Availible: http://faculty-staff.ou.edu/B/Gregory.S.Burge-1/Publications and Working Papers/Impact Fees in Relation to Housing Prices and Affordable Housing Supply.pdf