Kalispell Senator’s Bill Seeks to Tighten Laws on Impact Fees

The Senate Local Government Committee recently held a hearing on Keith Regier’s Senate Bill 142, which would provide increased oversight of impact fees

By Mike Kordenbrock
Homes under development in southern Whitefish on June 17, 2020. Hunter D’Antuono | Flathead Beacon

A Kalispell senator has sponsored a bill that would increase government regulation and oversight of impact fees, something opponents during a recent committee hearing said would hurt counties and towns in efforts to keep up with the cost of growth. 

Republican Sen. Keith Regier (SD 3) is the sponsor of SB 142, which in its shortened title is labeled as a bill to “provide oversight of local impact fee laws.” 

Impact fees are charges imposed on developers by a government to fund the additional service capacity or infrastructure required for the development. 

The bill would empower the Department of Commerce to review complaints and reports related to impact fees, and to enforce payment of refunds. Regier’s bill also calls for governments to pay a portion of the amount collected on impact fees as an administrative fee to the Department of Commerce for administrative purposes. The increased regulation the bill calls for would come through additional requirements for governments seeking to collect impact fees, including by requiring governments to commission additional reports compiled by independent firms. The bill would also tighten restrictions on what kinds of projects impact fees can be used for, and would require an application for projects that are not acceptable under law. If impact fees were improperly used, or projects they were collected for fail, the bill would require governments to refund the fees.

Governments would also need to provide a service area report conducted by an independent firm when imposing impact fees, and that report would need to be updated at minimum every five years. Additionally, the bill calls for governments that collect more than $100,000 in impact fees in a fiscal year to submit to the Department of Commerce documentation and an audit related to those fees.

During a Jan. 16 hearing before the Senate Local Government Committee, Regier described the bill as one that would make impact fees “reasonable” and make housing “more affordable.” 

“Missing from this part of code is a means to enforce restrictions that are in law. Some municipalities have violated the code or implemented excessive fees, leaving individual citizens no recourse but to sue, which is expensive,” Regier said. 

Proponents of the bill, including some who helped draft it, included a trio of Whitefish residents. Paul Gillman, Bill Halama, and Bill Burg were critical of the city of Whitefish for overcharging for impact fees, which they referenced when speaking in favor of the bill. A class action lawsuit over the charges is ongoing, and the city has made efforts to refund those who were overbilled. 

In the case of Whitefish, the overcharged fees were passed by the city council in 2018 and became effective in 2019, but the city has been charging impact fees since 2007. 

Last February, Whitefish City Manager Dana Smith told the city that it would be issuing a total of $196,000 in refunds to property owners, and estimated the average refund would amount to between $700 and $850. 

Some of the opponents of the bill included the mayor, deputy mayor, and city manager of the Gallatin County town of Belgrade; Cascade County Commissioner Joe Briggs; representatives for the cities of Missoula, Billings and Bozeman; Whitefish City Manager Dana Smith; and a representative for the Montana Infrastructure Coalition.

“This bill really launches a missile to kill a mouse,” Montana League of Cities and Towns Executive Director Kelly Lynch said, adding that she believes the issues in question were specific to Whitefish and that the city fixed the issue and began the process of refunding. She also told the committee that there are already processes for auditing and oversight from the state.

Briggs, who was also there representing the Montana Association of Counties, said that rural counties don’t have the staffing to keep up with the additional requirements the bill would impose.

“You’re going to hamstring the ability of counties to respond fast enough when a development opportunity presents itself to a county,” he said. 

Mike Meis, the deputy mayor of Belgrade, said that impact fees were needed so that growth could pay for growth. “We don’t want to see the burden of growth shifted onto our longtime residents,” he said.  

The committee ultimately ended the first hearing for the bill with the promise that further action would be taken at a later date.

In a fiscal note appended to Regier’s bill by the governor’s Office of Budget and Program Planning, the bill is identified as having significant local government impact, with the fiscal impact coming from the bill’s call for the Department of Commerce to oversee the collection and administration of impact fees imposed on development by government entities. Part of those oversight powers included in the bill would allow the Department of Commerce to initiate proceedings against a government entity in court to recover amounts due and enforce compliance in the event that impact fees were improperly collected.

The bill could cost the state $200,989 in Fiscal Year 2024, $89,414 in Fiscal Year 2025, $94,055 in Fiscal Year 2026, and $98,766 in Fiscal Year 2027.  Analysis included in the fiscal note states that the Department of Commerce “cannot estimate the amount of revenue that will be collected” and that “The minimum amount that can be determined is less than projected administrative costs they are intended to offset.”