At Monday (2/6/2012) night’s regularly-scheduled meeting of the City of Rogersville City Council, council members will consider making a bold move to draw the attention of the home building community – a move that would send a clear signal that the city wants more home building business, and is willing to do its part to encourage it.
City leaders will consider a proposal to cut the city’s impact fees by as much as 75% on building permits pulled in the next six months. Details of the proposal still are being discussed, but action to cut fees could take place as soon as Monday’s meeting. The concept has been under consideration by city leaders – who have worked closely behind the scenes with HBA of Greater Springfield leadership – for nearly a year.
“As home building emerges from unprecedented economic hardship, cities will have to compete fiercely for thousands of jobs and economic benefits that will come from future home building,” HBA of Greater Springfield CEO Matt Morrow said. “To win that competition, cities must demonstrate they are committed to minimizing costs to build, and to treating builders fairly. A move by Rogersville to substantially reduce impact fees would send precisely the right message to the building industry: ‘Rogersville is open for business!'”
Water and sewer impact fees in Rogersville range from $1,500 to $2,600 per house, depending on location. Cuts being discussed among city leaders would reduce the cost of a new house in Rogersville by 1,125 to $2,225 – enabling hundreds of area families to afford homes in Rogersville they otherwise could not.
The HBA of Greater Springfield sent a letter of support to Rogersville Mayor Jack Cole late last week (click here to see the letter). In the letter, Morrow made clear that a substantial reduction in impact fees can only help stimulate the local economy:
“It is the position of the Home Builders Association of Greater Springfield that most impact fees, on balance, inhibit a local economy’s ability to grow. Not everyone agrees with us on this point, and we understand that. On the broader point, however, most can agree: The bigger impact fees get, the more harmful they become to a local economy.
Impact fees don’t just raise the price of a house. They raise the price without adding value to the house. These non-market costs add to the already considerable cost associated with buying a new home. The buyer of a new home in Rogersville receives nothing “extra” for the $1,500 to $2,600 in impact fee expense that is included in the cost of their home. They receive the same water and sewer service that everyone else in Rogersville receives, and at the same monthly rates. The only difference is that they also pay the additional upfront charges in the inflated price of the house. The larger the impact fee is, the greater the disincentive is to build or buy a new home in a community.”
Rogersville is the second area city to evaluate its impact fee policy in recent months. Last week, after considering increasing impact fees by as much as $2,500, the city of Republic was persuaded by HBA arguments to reconsider its impact fee & connection fee schedule associated with building a new home. The newly adopted schedule would result in a net decrease of $190 per new home.
The HBA of Greater Springfield generally opposes impact fees for off-site infrastructure as bad public policy that:
- Is based on the false premise that residential construction represents a net cost to a city’s economy;
- Artificially inflates the price of new homes, and, ultimately, all housing;
- Represents a fundamentally flawed financing scheme that, by raising the price of new homes, reduces the very activity (home building) the community depends upon for impact fee revenues; and
- Cripples housing affordability, pushing the American Dream of Homeownership further out of reach – especially among the poorest members of a community.
Read the HBA of Greater Springfield’s full Issue Position Brief on Impact Fees by clicking here.
The most fundamental assumption made in calling for impact fees is that residential construction must “pay its own way” through these special exactions for infrastructure improvements. In fact, residential construction in the Greater Springfield area (including in Republic) more than pays its own way already– delivering a positive net economic impact of millions of dollars.