Impact Fees. We’ve heard about them from nearly every city, every county, and every citizen. In fact, in Fountain Inn, it was raised by our citizens during our Comprehensive Plan input sessions and surveys so much that it was one of the top ten recommendations for the City. It’s a recommendation that we’re already putting into action - just last month, we signed a contract with a firm to conduct an Impact Fee Study, which is one of the first steps required by state law when considering impact fees.

Most of the time impact fees are thrown around as the way to “make developers pay for improvements”. It’s an easy line to put out there, but the truth is - impact fees are not the saving grace many folks make them out to be. That said, I still believe they are worthwhile to consider personally - the devil’s in the details though.

So what are impact fees, and what exactly can they do? This month’s column aims to give you a basic overview. Please note - I am not a legal expert and there is a lot more to Impact Fees than this column. 

The Development Impact Fee Act, Section 6-1-910 of the SC Code, allows for cities and counties to impose an “Impact Fee” on any and all new construction. To even consider impact fees, the city/county must have a Comprehensive Plan in place. Once that bar is cleared, then there are two preliminary requirements before a fee can be approved:

1) A Capital Improvement Plan must be in place - a list of large capital projects the city is planning in order to accommodate any future growth (e.g. a new facility, fire truck, or other large need).

2) Complete an Impact Fee Study. You cannot just pick a number out of thin air and charge it to new growth. The state requires that a study be conducted to identify exactly what capital projects are eligible and can be supported by an Impact Fee, and what level of fee can be charged.

Now here’s where the details really matter. Impact Fees are governed by state law - they cannot just fund anything you want. Here are some broad stroke guidelines to keep in mind when thinking about Impact Fees:

1) Must be paid in advance by a builder. This is good for cities so that money can be put to work quickly - but this fee is just going to get passed down to the home buyer so realistically, it’s a tax on new buildings (not new residents, not just new homes - see #3 and #4)

2) Must be spent within three years of being received and kept in a separate account - otherwise it must be refunded to the entity that paid the fee to the City. 

3) Applies to all new construction, equally. If you live in the city limits and decide to build a new house 600 feet away, you’re paying the same proportionate impact fee. Or, if you remodel and add a new apartment or full dwelling - you’re paying the fee. You cannot differentiate between current residents and new residents, new full neighborhoods and new single homes. 

4) You can charge different impact fees between Residential, Commercial, and Industrial (and tie those different fees to different capital projects) - but inside those buckets, the fee must be at the same rate. All businesses would pay an impact fee if they built a new facility or expanded to a certain level that triggered the fee.

5) They must be tied directly, and proportionally, to the impact that specific home or building will have on the capital needs of the city.

This last one is important, because it is packed with more caveats. Impact Fees cannot fund:

● X Paving of Roads. They can fund the construction of new roads to service the new development, but they cannot pay to repave the road leading to the new neighborhood.

● X Operational costs. You cannot fund new police officers or city staff (recurring costs). Impact Fees must be attached to capital costs (one-time equipment, facilities, etc). 

● X Projects not impacted by the property paying the Fee. You cannot use Impact Fee funds to pay for something that is not impacted by the home paying the fee - you can’t replace a sewer line in an existing neighborhood using funds collected through an impact fee for a sewer project in a new neighborhood.

However, here’s what an Impact Fee can do:

● Pay for a portion of additional recreation space due to the increase in youth expected to live in a community.

● Pay for a proportional amount of additional equipment and facilities needed for city departments due to the increase of service from the fee-paying properties.

● Pay for a proportional amount of system upgrades needed to service new growth.

● Help make major capital improvements a reality sooner rather than later to meet the demands of new growth.

Impact Fees are going to be top of mind for many elected bodies in the coming months, including in Fountain Inn. They are much more complex than a headline may make you feel - and they may not do everything you’ve heard. But, they are worth considering in my book.●