Debate Over Impact Fees Heats Up

By Beacon Staff

As a growing number of residential and commercial developments sprout up inside city limits, Kalispell is wrestling a thorny topic that has emerged several times over the past decade.

Impact fees are back in the spotlight following the recent release of a preliminary report on the city’s water and wastewater systems and the associated costs of financing these fundamental operations.

Morrison Maierle, Inc., a consulting firm hired to update the city’s 2006 study, is recommending Kalispell raise the one-time water fees for new developments that hook up to city infrastructure. Under the proposed rate adjustments, a new residential unit would pay a minimum $2,567 compared to the current amount of $2,213. Larger developments that require increased meter capacities would be weighted and charged accordingly. For example, a development needing a one-inch meter size would cost $5,533 compared to the current amount of $6,418.

The proposed rate for the minimal wastewater, or sewer, impact fee would raise from $2,499 to $4,257. The report cites the need to raise rates in order to meet costs of the city’s upgraded wastewater treatment plant and future growth in the sewage system.

Kalispell’s Impact Fee Advisory Committee formally discussed the report with city officials in a contentious meeting inside City Hall on March 27.

“The money has to come from somewhere,” City Councilor Jeff Zauner said. “Throwing it all on the backs of the developer I don’t feel is fare. I also don’t think its fare throwing it all on the backs of our rate payers or our customer, the taxpayer.”

Board members Chad Graham and Jason Mueller, who are both local developers, leveled harsh criticism at the recommended rate increases and warned that the fees impede growth. They echoed statements made previously that the system is flawed and unfairly burdens developers.

Howard Mann, the owner and developer of Silverbrook Estates, described the fees as deterrents to growth.

“I think you’re fees are very high right now,” Mann said. “If you raise them even further, you’re going to further stifle growth.”

However, Public Works Director Susie Turner emphasized the motivation behind Morrison Maierle’s recommended change.

“As development occurs, infrastructure is needed to support that development,” she said. “By eliminating or reducing (the revenues from impact fees), the city is not going to be able to participate to help expand those services. That’s just the fact of the matter.”

The ongoing disagreement over impact fees centers on the question, “Who should pay for growth?”

Municipalities across the country have implemented the one-time impact fees as a way to pay for rising demands on fundamental services, like police, fire, sewers and transportation.

Kalispell currently charges five separate fees that total a base cost of $6,357 for a new household. The bill increases depending on the size of the new development and can amount to hundreds of thousands of dollars. The city may charge any amount up to the established impact fee, but not over that amount.

The Kalispell City Council voted to repeal its transportation impact fee last year, but the topic has resurfaced after Mayor Tammi Fisher expressed interest in finding an alternative replacement.

The city of Whitefish debated repealing some of its impact fees recently. Whitefish charges developers $6,443 for a new single family residence: $2,314 for water; $1,864 for wastewater; $210 for stormwater; $813 for the Emergency Service Center; $771 for City Hall; and $29 for the park maintenance building.

The city’s Impact Fee Advisory Committee recommended repealing the fees for City Hall, the Emergency Service Center and parks building, but the proposal fell short in February after Mayor John Muhlfeld cast the deciding vote to maintain all fees.

Muhlfeld and others who voted in favor of keeping the fees impact questioned the validity of opponents’ claims that impact fees hinder growth. Other proponents of the fees have said taxpayers already paid for the current infrastructure, and any growth should pay for itself.

Judging by building permits, there appear to be signs of resurgent development in Kalispell. The city has issued triple the amount of residential building permits so far compared to the same time last year. Kalispell’s building department has approved 21 permits with an additional eight under review. Through mid-March of 2012, the city had issued eight permits.

But with new growth comes new customers wanting city services, like water and sewer.

Kalispell currently provides water services to roughly 21,000 customers.

The Morrison Maierle report states that the current pumping capacity of the system is sufficient to meet peak daily demands, but between 2012 and 2015, the city should consider developing additional supply capacity in the system. The firm accounted for those costs in the updated impact fee report as well as other projected needs, including the increased demand of existing transmission and distribution facilities and the costs related to extending the current system.

Based on current growth projections, the water impact fee would collect sufficient funds to cover the debt service related to growth, according to Morrison Maierle.

The Kalispell City Council is expected to review the latest impact fee report in the following months.

To view the updated report, visit the city’s website at www.kalispell.gov.

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