The biggest complaint regarding the impacts of new developments is increased traffic congestion. Why does it take so long for the impact fees to become road improvements? There are several answers to that question including existing deficiencies, the legal limits of impact fees and the cost of the improvements.
Impact fees are based on the philosophy that development should pay for the cost of providing the facilities necessary for growth. Those costs are financed based on some measurement of a development's impact on future needs.
“Impact fees are not intended to be used for operational expenses or to pay for capital improvements to correct an existing deficiency or shortfall” (my emphasis).1
California regulates the way that impact fees are imposed. An agency must (1) Identify the purpose of the fee; (2) identify the use to which the fee is to be put; (3) show a reasonable relationship (nexus) between the fee's use and the type of development; (4) show the reasonable relationship between the facility to be constructed and the type of development; and (5) account for and spend the fees only for the purposes and projects specifically used in calculating the fee.1
The upshot is that the city or county cannot merely foist all their previous deficiencies or future needs off on new residents. New residents are only responsible for the portion of impacts they cause and a nexus (connection) study has to establish that relationship.
Transportation infrastructure costs, and especially administrative costs, are extraordinarily high in California.
For example, the total cost of Highway 25 4-lane Widening Phases 1 & 2 is estimated at $248 million; the impact fee portion of that (to year 2035) is $88 million. Therefore, $160 million is not attributable to new development. Those funds would have to come from other entities such as the city, county and/or state, if they had them.
Based on the latest nexus study, the City of Hollister single family residential traffic impact fee maximum is increasing from $14,305 to $18,690. To put that into perspective, it would take 53 homes to generate $1 million in gross traffic impact fees or more than 13,000 homes to fund just the impact fee portion of the 14 current road projects.
If we wait 18 years and build 13,000 homes we may be able to get all the road projects done, provided others entities have their share. That is obviously not acceptable; therefore, we need a better solution.
There is a good alternative – development agreements. In my opinion, the City of Hollister has failed to effectively use this powerful tool to improve the traffic situation. More on that in a future segment.
1. 1991, ASCE Successful Land Management II: Managing and Paying for Growth Conference, “Impact Fees: Practical Guide For Calculation And Implementation” by Dennis H. Ross, Fellow, ASCE, and Scott Ian Thorpe, RCS Principal.