Developers Attack Traffic Fee Plans

By Beacon Staff

For the builders of the commercial developments in north Kalispell, the best thing that could happen would be for people to come from as far away as Spokane and Calgary to spend money here; for the Flathead to become a regional shopping destination. Between the Glacier Town Center, the completion of Hutton Ranch Plaza and the Spring Prairie Center, there will be several million square feet of new stores added on to the shopping and restaurants already there.

And out of the hundreds of thousands of shoppers anticipated, nearly all will drive here, putting even greater stress on the valley’s roads, the maintenance of which is already one of the most heated issues in the Flathead. Which is why the Kalispell City Council is nearing the end of a two-year process to impose transportation impact fees on new development – residential and commercial – in order to maintain the roads in the face of the increased traffic that those developments will spur.

Since the state Legislature passed the law allowing such impact fees in 2005, the issue has been contentious in every city that has instituted them, and Kalispell, thus far, is proving no different. Several recent city meetings have drawn developers, their attorneys and other members of the business community to question whether the transportation impact fees, as currently proposed, are unfair to retail development, overly vague and possibly conflict with state law.

These protests are clearly irritating some city officials and community members who have helped determine the impact fees, and who question whether the developers are sincere about paying their fair share. The council, meanwhile, listens to both sides as it prepares to vote on the transportation impact fees sometime this spring.

While transportation impact fees may be new, other impact fees are not. What are now called impact fees were previously called “connection fees” and the city has been charging them for decades, as a one-time fee to new homes and businesses to pay for the cost of hooking up to city water and sewer. In recent years, the city has also established impact fees for police and fire protection, and storm water drainage.

But determining the amount of traffic a certain kind of business will generate is not as easy to assess as the amount of water a business uses. And traffic is what dictates how much the developer must pay. By that logic, a supermarket pays more than a house, because it generates much more traffic.

At last week’s work session, developers said the city’s methodology for assessing road impact fees, arrived at through the work of the Impact Fee Advisory Committee and the Portland-based traffic engineer hired by the city, passes too much of the costs off on commercial developers.

Ken Kalvig, an attorney for Wolford Development Montana, which is building Glacier Town Center, estimated that road impact fees for the development could cost as much as $6 million – a sizable chunk of the $17 million the city hopes to raise with impact fees for road construction costs through 2030. The maximum impact fee for a house, on the other hand, is under $1,000. He added that the categories, which determine who pays what, don’t fit many existing businesses.

“What Wolford wants to do is work with the city and come up with a program that’s legal, fair and understandable,” Kalvig said. “We’re not in a race with you guys; we’re not trying to delay anything so that we can avoid paying impact fees.”

Mark Goldberg, the Denver-based developer of Spring Prairie Center agreed that the current road impact fee plan dumped too much of the costs on retail commercial development, and not enough on tourists’ road use. “I don’t think that what’s being studied here and what is being presented to you is equitable,” Goldberg told the council. “I also don’t think growth is a bad thing.”

Phil Harris, the developer of Hutton Ranch Plaza, agreed, arguing that the road impact fees may be unfairly skewed toward retail development.

Wolford has also hired Michael Kakuk, a Helena lobbyist for the realty and building industry during the 2005 session, when the impact fee law was hammered out. Kakuk emphasized that the city could not use funds raised from road impact fees to solve existing problems; the funds can only be used for traffic the new development generates. “No city, no county that I have seen, has gotten it right,” Kakuk said. “My client, Wolford Development, is putting out his checkbook to help you get this right.”

Jim Cossitt, an attorney who served on the impact fee committee, bristled at the notion that road impact fees would stifle economic development or that an unfair allocation of the costs would hit commercial retail developers. There has been ample time over the last year and a half, he added, for developers to weigh in on how the road impact fees were structured.

“Issues of equity and methodology have not changed,” Cossitt said. “I think your transportation impact fee is rapidly becoming a scapegoat for deteriorating economic conditions that may impact the feasibility of these projects.”

Jim Hansz, director of public works for Kalispell, is also skeptical of developers’ assertions that the proposed impact fees are vague, overly complicated or unfair. Out of the funds the city anticipates raising from the fees, based on current growth estimates, Hansz said residential construction will pay 56 percent of the fees, while commercial developers will pay 44 percent.

“There’s a lot of crocodile tears out there,” Hansz said. “This is not a stacked deck here that’s pushing all these costs off on commercial.”

Hansz credits Wolford’s team with being straightforward and easy to work with, but he’s not sure how they arrived at the $6 million estimate for what it would owe in road impact fees. He estimated it’s far more likely the Glacier Town Center would owe somewhere around $1.2 million. Nor are the business categories complicated for most businesses, Hansz said, but in the case of a development like Wolford’s, with stores, office space and homes, data from the shopping center’s traffic estimates is necessary to figure out the fee. And for commercial developers, he added, the fees will be passed along to the shoppers – including tourists.

“It’s going to be a fee that is entirely repaid by the customers who do business there,” Hansz said. “I can’t imagine anything more fair, and easier to fund, and more equitable.”

The council planned to vote on its broader transportation plan at its April 21 meeting, and plans to schedule another work session on road impact fees. Council members balked last year at proposed road impact fees based on the city’s 1993 transportation plan. Those numbers have only increased as the city has grown. Hansz said the council may discuss ways the developers can pay road impact fees in installments, to make the charges an easier pill to swallow. But as for when a vote on this matter is likely, that will depend on the whether council members believe the fees are reasonable, and how adamant the development community remains that the fee structure must be changed.

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