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George's Information and Comments Growth Impact Action Committee ________________________________________________________________________________________________________________________________________________________ |
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Impact Fee Allegory and Analysis The only 10/4 change is the 10/4 note, currently at the bottom of this page. The story was updated, in blue text also, on 8/15 to use the Horry County average of one school child for four housing units rather than a simply postulated number and includes an introductory and concluding paragraph to more clearly denote its context. The other two sections are new; they use the actual Prince Creek development as an example and extend the reasoning and calculations to an Horry County wide context -- that will be further expanded yet upon the receipt of requested official numbers. Click the below to select particular sections of this page.
The current impact fee statute needs to be changed if not thrown out and redrawn. Among other things, it should include provisions for new school construction. Otherwise, population growth in Horry County will force drastic increases in the taxes, for all of us, to pay for public facilities we would not otherwise need. The following story outlines how a mythical locale -- similar, in many respects, to Horry County -- enacted (if in S.C., with the help of its state legislature) impact fees fair to existing homeowners and, really, fair to all: The little area grew to 2400 homes. With one child for every four homes (coincidentally, the Horry County average), they decided they should build up-to-date schools for their 600 children: an elementary, a middle, and a high school. Costs would include the buildings themselves, their parking lots and infrastructure, their furniture, equipment, school buses, computers and start-up expenses involving such things as hiring teachers and staff. This was some time ago so this all came to only $12 million dollars. (New Horry County elementary, middle and high schools cost $14 million, $22 million and $35 million). At first it seemed fair to divide the costs by the number of children – 600 – or $20,000 per child, but some households had 4 children and some none. They decided that educating the children was to everyone’s advantage so they divided the costs equally for each household -- or $5,000 for each. But then they decided that the cost should be divided as to ability to pay; so, they redistributed the costs based on the value of the individual new homes – in the same manner they allocated taxes to pay for ongoing expenses (including, hopefully, an adequate reserve for maintenance and eventual replacement costs). Then 2400 new homes were to be built. These would require at least $12 million more for new schools. The original 2400 citizen-homeowners faced with additional average $2,500 per household taxes to share the costs of the newly required schools, instead decided to require the new households to pay their own way with an average $5,000 per household impact fee. Everyone agreed this was fair. The impact fees were included in the new home mortgages so the costs could be spread over a number of years as the earlier residents had spread their costs over a number of years with bonds. Then a single new home was built. Unless the new home buyer intending to live in the home was not already an area resident, he or she was required to pay an average $5,000 impact fee as his or her fair share. Someone observed that if these people vacated their original homes, those homes might accommodate newcomers who would require new schools so such newcomers should have the average new schools cost of $5,000 passed on to them from the proceeds of their purchase price. (Extrapolating from actual Horry County data given by Joe Burch, Coordinator of Planning, Horry County Schools, a newcomer household adds, on a county-wide average, approximately $6,000 per home in new school construction costs alone.) -- The original citizens in our story decided they needed a fire department facility including building, lot, infrastructure, furniture, equipment, fire trucks and start-up expenses. They decided the costs for this should be prorated across homes and businesses in the same ratio as other taxes (as they had been for new school construction). In this case they determined from the number of building square feet, housing units or other measures what a new fire department facility would cover and apportioned the cost of a particular structure accordingly, both for the original residents and for impact fees for new construction. --- New police facilities, police cars, sewer, water and other infrastructure were handled similarly. The citizens did insist that law require local government to hold the impact fees in individual public facility accounts until spent for the construction of such type of public facility -- wherever needed in the jurisdiction. The principle used was to establish measures of the upfront costs of newly required public facilities due to new construction and to impose impact fees on the newly constructed building owners in the same proportion that property taxes are apportioned among all the tax payers. Hopefully, this story brings home the need for and how to impose fair impact fees and the need for the S.C legislature to change the impact fee statute to make this possible --especially including provisions to allow impact fees for new school construction. Click here if you want to return to the top of this page. -- George Edwards
The Tischler Associates report, presented to the
impact fee task force, provided little, if any, rationale for the various
negotiating positions it suggested for use in attempting to change the
existing South Carolina impact fee statute. I expected some knowledgeable
comparison with statutes from other states on the points at issue. This
could, at least, give some bases for claiming precedents for proposed changes.
But precedents may represent nothing more than a
record of the results of previous "negotiations" among those with one-sided
interests. If other state statutes were a product of interests such as the
Home Builder's Association (whose representative at the first Impact Fee Task
Force meeting bragged at how that organization, with others, had succeeded in
passing an impact fee statute specifically designed to discourage any
jurisdiction imposing impact fees) their true worth in rational
argument is questionable.
The fair purpose of impact fees is simply
to transfer the costs of new public facilities needed because of new
private construction to those who require them. The just preceding "story"
allegory tries to illustrate how this might be fairly and rationally done with
a completely new statute.
I introduced my story with considerations for new
schools although I understand that school taxes are not within the
jurisdiction of the county council. Nevertheless, school taxes represent
roughly twice other county taxes. And county and state officials, who claim
to represent me and other taxpayers, should include provisions for imposing
impact fees for new or expanded school faculties in a South Carolina impact
fee statute.
Other than definitions, and wording to allow
impact fees for new or expanded required school facilities, the approach in
the story would be a good basis for negotiations towards producing a new
South Carolina statute totally replacing the current one. There are
assumptions in the current statute which have little bases in reason.
For instance, the current statute says that
impact fees should be spent in the particular service area that they are
collected from and that they only be spent on pre-planned public
facilities. Logically this would mean that new construction should not be
allowed until facilities are specifically planned to handle the specific
needs of the new construction. In principle that might be fine, but I can
hear Horry County's builders screaming over any such delay in development
approval. And planners are not psychic as to where or when new facilities
might be needed to accommodate new growth.
The story details possible measures of the
costs of the new public facilities that such structures will require.
It proposes that new construction pay a proportionate impact fee based on
those measures, and that those fees be put in separate special funds that
may only be spent on facilities of that kind, e.g., school houses --
regardless of when and where they are needed in the county.
Click here if you want to return to the top of this page. Fair Average Apportionment of New School Construction Cost The average number of children per home tends to decrease as the price of the home goes up. Also, the average is higher in the western parts of the county, and, in general, west of the waterway – due to the lower home costs there and fewer retirees. In the county overall, there are approximately 0.256 children per household. Based on information supplied by the developer, an estimate of 0.2 children per household has been made for Prince Creek West. Applying this rate to the 2344 homes proposed for the area yields 469 new children. The current cost estimates for the various types of public schools (including building, parking, equipment, desks and infrastructure) are: n Elementary $14 Million (accommodates 650 children – pre-kindergarten through fifth grade) n Middle school $22 Million (accommodates 950 children – 6th, 7th, and 8th grades) n High school $35 Million (accommodates 1300 children), This is based on an estimate as to the inflated increase in construction prices using St. James High School’s construction cost a few years ago of $30 million. Apportioning the above according to the number of grades in each of these schools: n Approximately 234 of the 468 children would require an elementary school n 100 would require a middle school n 134 would require a high school Apportioning the costs, these 2344 homes’ fair share towards a special fund set aside for new school construction would be 234/650 X $14 million = slightly more than $5 million towards an elementary school, 100/950 X $22 million = approximately $2.32 million towards a middle school and 134/1300 X $35 million = slightly more than $3.6 million for a high school. This leads to a grand total of $10.92 million; dividing this by 2344 homes yields a fair share of approximately $4,658 per home. Almost all of this would be otherwise borne by other Horry County taxpayers. (The last bond issue of $150 million was supplemented by an additional $25 million dollars from the state infrastructure bank – but this was a happenstance.) The above discussion refers to a particular case, but because it is based on the current estimated cost standard for new schools and the standard number of grades associated with each type of school (as obtained from the Horry County school district), it can be generalized to an average cost per home for new school construction by multiplying the $4,658 figure for 0.2 children per home by 0.256/0.2 to yield approximately $5,962. (The average number of children per household in Horry County is 0.256.) Click here if you want to return to the top of this page. Spreadsheet Exhibit of Detailed Calculations:
Actually the percentage of children in elementary schools is only 48% which would put more in higher cost schools and make an estimated average fair share per home of $6,000 even more reasonable.
Note: It may not be obvious from the above analysis but the approximate $24,000 per student/ approximately $6,000 per home average costs apply to any number of new homes if the 0.256 students per home average is accurate.
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