For the record, I have been involved in reviewing development impacts and the discussion of Development Impact Fees for nearly a quarter century. I have testified before both the Massachusetts and New Hampshire legislatures on this subject. I have also made a presentation before a Congressional Sub-Committee Hearing years ago held in New York on the issue of private sector involvement in infrastructure improvements.
Development Impact Fees are long over due. However, the proposal made in this section is as noteworthy in what it takes away from communities as to what it grants them. As an old fable once said, “beware the wolf in sheep’s clothing.” I think communities need to be aware that this proposal is “the wolf in sheep’s clothing.”
11) Development impact fees
The following new Section 9D is inserted into chapter 40A:[1]
40A:9D. Development Impact Fee
(a) Authority
(1) In addition to its home rule authority to impose a development impact fee, a city or town may adopt a local ordinance or by-law under this section that requires the payment of a development impact fee as a condition of any permit or approval otherwise required for any proposed development within the scope of this section, and having development impacts as defined in the ordinance or by-law. The development impact fee may be imposed only on construction, enlargement, expansion, substantial rehabilitation, or change of use of a development. The development impact fee shall be used solely for the purposes of defraying the costs of capital infrastructure facilities to be provided or paid for by the city or town and which are caused by and necessary to support or compensate for the proposed development. Such capital infrastructure facilities may include the costs related to the provision of equipment, facilities, or studies associated with the following: water supply; sewers; storm water management and treatment; pollution abatement; solid waste processing and disposal; traffic mitigation; roadways, transit, bicycle and pedestrian facilities, and other public transportation facilities; and affordable housing; costs related to facilities such as schools, public safety facilities, and municipal offices shall be excluded.
As I mentioned in an earlier post, if you can implement an action under home rule authority, and legislative action should be viewed as limiting a town’s home rule authority. The statements in this section related to home rule authority is the first red flag. However, the courts in the Franklin decision seem to have placed extreme limits on home rule authority when it comes to impact fees. It would seem appropriate, to start, to simply remove all reference to home rule authority. Otherwise, outside of the exclusion for schools, I really have no other concerns with the authorization section.
Too bad, the legislation did not simply stop with the authorization of these fees. There is plenty of legal analysis, including at the U.S. Supreme Court level to describe the limits on impact fees. The remainder of this section really is superfluous and should have been left out.
(2) Nothing in this section shall prohibit a city or town from imposing other fees or requirements for mitigation of development impacts which it may otherwise impose under state or local law and that are consistent with the constitution and laws of the Commonwealth; except that the imposition of a development impact fee as provided in this Section 9D shall be the exclusive means by which a municipality may require the payment or performance of off-site mitigation for development impacts of the proposed use of land or structures permitted or allowed as of right under its zoning ordinance.
Here is the “wolf”. This section, and several more detailed areas below, essentially prohibit communities from using any other mechanism to address the impacts of a project on a community. By limiting communities in this fashion, the proposal does not allow a community to require a turn lane to be added to an adjacent street to serve the access needs of the application. Such a turn lane would serve only the needs of the project in question, not the general public, except to mitigate a site specific congestion problem. Yet, this section will prohibit the town from making such an imposition. This is totally unacceptable. It essentially places every community on the same footing, regardless of their planning capabilities or the development pressures they may be experiencing. There will be situations where a project comes into a community creating an immediate infrastructure improvement need. The community may not have adequate development pressures to warrant an impact fee, as the fees collected over a five year time period may amount to no more than what the project proposed will contribute. However, the limitation on such off-site mitigation would leave a community with significant infrastructure problems. Clearly, this section should be deleted from consideration.
(b) Limitations
(1) No development impact fee under this section shall be imposed upon any dwelling unit, regardless of how created or permitted, which is subject to a restriction on sale price or rent under the provisions of G.L. c. 184 as amended ensuring that the unit will remain affordable for a period of at least 30 years to households at or below the area median income as most recently defined by the United States Department of Housing and Urban Development or successor agency, or any other dwelling unit permitted under G.L. c. 40B.
This section is good to an extent. To an extent, it goes too far as well. Deed restricted affordable housing units clearly need some relief from impact fees. However, as Chapter 40B projects include significant numbers of market rate housing units, the exemption of Chapter 40B projects from impact fees, and also due to the prohibition on off-site mitigation, any other consideration of reducing the impacts of a project on the community is a bit much. Chapter 40B projects come with significant financial rewards to development projects, density bonuses, financing from state agencies, low or no interest loans, etc. The communities are left footing the bill in terms of infrastructure improvements unless mitigation can be negotiated or imposed. Clearly the “financially unfeasible” determination included within Chapter 40B would seem to be already limiting on communities. To further restrict community review of Chapter 40B projects under Chapter 40A would seem inappropriate.
(2) The fee shall not be expended for personnel costs, normal operation and maintenance costs, or to remedy deficiencies in existing facilities, except where such deficiencies are exacerbated by the new development, in which case the fee may be assessed only in proportion to the deficiency so exacerbated.
This section simply restates what an impact fee is, versus what taxes are for. The courts have clearly weighed in on the use of impact fees. This section is consistent with the court determinations. Given, the proposal does not seek to authorize an area that has been restricted by the courts, the section would seem unnecessary.
(c) Requirements
(1) Prior to the imposition of development impact fees under this section, a city or town shall complete a study that: (i) analyzes existing capital improvement plans, or the facilities element of a plan adopted under section 81D of chapter 41, or the infrastructure improvements element of a community land use plan adopted under Section [4] of Chapter 41; (ii) estimates future development based on the then current zoning ordinance or by-law; (iii) assesses the impacts related to such development; (iv) determines the need for capital infrastructure facilities required to address the impacts of the estimated development including excess facility capacity, if any, currently planned to accommodate future development; (v) develops cost projections for the needed capital infrastructure facilities and documents costs of existing facilities with planned excess capacity; and (vi) establishes the amount of any development impact fee authorized under this section in accordance with a methodology determined pursuant to the study. The study shall be updated periodically to reflect actual development activity, actual costs of infrastructure improvements completed or underway, plan changes, or amendments to the zoning ordinance or by-law.
The requirements of this section may prohibit many communities from seeking to use them. When coupled with the outright prohibition on any other means of off-site mitigation, this act becomes a developers blessing to place all of its impacts on the back of taxpayers. In considering allowing for impact fees, the drafters of this legislation should consider that the end is to have a mechanism that can make the state more development friendly. This proposal could clearly have the opposite impact. Part of the issue is that the requirements in this section are unclear. Given the nature of the existing litigation on impact fees, and the available literature covering the subject, one has to ask, “is this looking for a local comprehensive plan to itemize every contemplated infrastructure improvement and to assign costs associated with these?” Or, “is a more generic analysis under consideration as in the reports I wrote while with the Metropolitan Area Planning Council?”
The first section is straight-forward enough. Any adequate plan should include a facilities element. The facilities element will obviously be improved by any existing capital improvement plans, especially any facility specific plans such as a corridor improvement plan for a particular roadway. Secondly, build-out analysis, again fairly straight-forward. The state even has some generic build-out figures on its website. However, the build-out analysis for a town-wide planning analysis will not be as accurate as that used in a specific corridor or neighborhood planning effort.
From here the level of technical expertise becomes a little more unclear. When you are on a town-wide plan, you have a general build-out, which creates some general ideas of your needs. Can impact fees, as contemplated be assessed on these generic studies and cost estimates?
Impact fee analyses have been based on general figures. You can see the reports and computer program I wrote when I worked with the Metropolitan Area Planning Council for examples of the typical Impact Fee Analysis. These more facility wide approaches are the same whether you are looking at the works of Jim Duncan or Arthur Nelson and James Nicholas. I hope that this is what this section is looking for, however, too much is left to interpretation and should be clarified. Otherwise the early impact fee communities will find themselves as the new legal case studies.
(2) A development impact fee shall have a rational nexus to, and shall be roughly proportionate to, the impacts created by the development as determined by the study described in (c)(1) above evaluating said impacts, and it shall be applied to affected development projects in a consistent manner.
Rational Nexus is what has been litigated. Rational nexus provides for opportunities to follow the works of Duncan or Nelson and Nicholas or my own report for MAPC. Is that what is intended, or is (c)(1) intended to require a higher level of effort?
(3) The purposes for which the fee is expended shall reasonably benefit the proposed development.
This pretty well is covered by existing case law.
(4) The fee may not be assessed more than once for the same impact, nor may the fee be assessed for impacts, or portions thereof, offset by other dedicated means, including state or federal grants or contributions or other mitigation commitments made by the applicant undertaking the development.
Straight-forward, except for the “other mitigation commitments made by the applicant.” Normally this is straight forward as well, but given this section prohibits such requirements, why would this be here? It should be here, and the prohibitions on off-site requirements removed from elsewhere in the proposed legislation.
(d) Administration
(1) The ordinance or by-law may provide for a waiver or reduction of the development impact fee for any development that furthers an overriding public purpose as set forth in a plan adopted by the city or town under section 81D of chapter 41.
(2) If the proposed development is located in more than one municipality, the impact fee shall be apportioned among the municipalities in accordance with the land area or other equitable measure of the impacts of the proposed development in each city or town.
(3) Any development impact fee assessed under this section shall be deposited to a separate, interest bearing account in the city or town in which the proposed development is located. Unless subject to section (d)(4) below, no development impact fee shall be paid to the general treasury or used as general revenues of the city or town subject to the provisions of section 53 of chapter 44 of the General Laws.
(4) Any funds not expended or encumbered by the end of the calendar quarter immediately following 5 years from the date the development impact fee was paid shall, upon request of the applicant or its assigns, be returned with interest provided that an application for a refund prescribed in the ordinance or by-law has been submitted within one 180 calendar days prior to the expiration of the 5 year period. If no application for refund is received by the city or town within said period, any funds not expended or encumbered by the end of the calendar quarter shall then revert to and become part of the general fund under section 53 of chapter 44. In the event of any disagreement relative to who shall receive the refund, the city or town may retain said development impact fee pending instructions given in writing by the parties involved or by a court of competent jurisdiction.
The administration is fairly straight-forward. The requirement that the fees be used within a particular time frame may be limited. For instance, a project that may require state or federal funding (Transportation Improvement Program listing for instance) could take longer than 5 years to progress to construction. Changes in the economic climate could also be quite limiting. No one foresaw the current economic downturn, even a few short months before it occurred. Given the length of economic cycles, the time period for the expenditure of impact fees should be longer. A ten year time frame would be more favorable to ensuring that infrastructure improvements actually occur. If the fees lapse in too short a time period, it simply means that a greater state, federal or community contribution will be necessary, or the town drops the impact fee program altogether and takes a more anti-development posture.
Conclusions About This Section
I am a big advocate for the use of impact fees. They provide a basis for shared costs for infrastructure improvement. They are clearly more fair than the current situation. Unfortunately, as proposed, they are too restrictive, and the proposal removes other development mitigation from the equation. This limitation on tools available will restrict some communities from implementing impact fees, and will promote an anti-development posture in many. This anti-development posture is clearly not the intent of this section. However, the restriction on immediate mitigation of certain impacts will have this result.
As I noted in one of my other comments, the loss of the ability to look at off-site mitigation, will lead to more projects on Cape Cod being referred as discretionary reviews to the Cape Cod Commission. As a planner, I have to look out for the best interests of the community I serve. If I cannot require a project to add sidewalks, a turn lane, or an island to block turns, then I will have to consider what agency continues to have that power. The reviews may be limited, they may have a pre-ordained outcome, but the end result will be a more expensive review process due to the restrictions on the local requirements imposed by this proposed statute.
[1] Adapted from CPA2.
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