George's Information and Comments

Growth Impact Action Committee

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Public Works Districts and Putting it all Together

6/6/08 Update: I have just learned from the S.C. Ways and Means committee that the Residential Improvement District  Act has passed the S.C. General Assembly. As long as the governor goes along, this removes (in my mind) any excuse for county council not to insist that Carolina Station and subsequent large developments agree to put their development into such a special tax district agreeing that the development pay for the school facilities that it requires. (The subsequently added Getting Developments to Pay for their Public School Needs, accessible by clicking the item in the left-hand menu goes into greater detail.)  The Residential Improvement Act specifically calls out public school facilities as public facilities that it can be used to cover. Click the Residential Improvement District Bill item in the menu on the left for more information. The detailed information herein on the residential improvement district bill may not accurately reflect what has actually passed.

5/23/08 Update: Correction to 5/20/08 Horry County Council Presentation:

  New Developments Should Pay for the School Facilities They Require and an addition (in blue text) to the "Comparison of Impact Fees . . . " section below.

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Comparison of Impact Fees, Residential Improvement and Public Work District Approaches

The imposition of development impact fees is the approach currently under consideration to have new developments pay at least some of the increased costs to the county necessary to meet the new developments’ needs. Strictly as a matter of fairness, existing homeowners should not have to pay for needs not required except for new developments.

Other sections of this Web site discuss impact fees and other proportionate share ordinances in more detail. This section tries to cover their most important points.

Proportionate shares are one of the three constitutional requirements that are supposed to be met by any ordinance such as an impact fee ordinance. The other two are uniform application throughout a county (or other local government jurisdiction) and that fees or increased taxes are to be used strictly for the additional needs that a new development requires.

The words: “proportionate share,” in this context means that a development should pay for its newly required public facilities and, ideally, services, in proportion to the use that the new development requires compared to the use of the rest of the county. That is, a new development should pay the costs associated with the new development’s comparative usage of the new facilities it requires, ideally, the new development’s comparative use of the existing facilities it requires and, again ideally, the additional operating expenses the new development requires.

The following summarizes important features of proportionate share approaches covered by existing or currently anticipated S.C. statutes:

Impact fees, as restricted by the S.C. statute, only cover new public facility construction and equipage plus capital equipment, individually in excess of $100,000. The service areas for those public facilities can be interpreted as covering the entire county. Impact fees would not cover the cost of the construction and equipage of new schools.

The existing Public Works Improvement District statute covers new public facility construction and equipage within the improvement district or immediately adjacent to it as well as other agreed upon facilities traditionally provided by the developer. It is unclear whether or not schools can be included in the public facility category. The property owners within the district are obligated to pay special taxes that can cover operating expenses. This special taxation district, as any other special taxation district, requires a development agreement with the original property owner of at least 25 acres.

The Residential Improvement District bill underway currently covers new public facility construction and equipage at any place in the county agreed to by the property owner as well as other agreed upon facilities traditionally provided by the developer. School construction, and presumably equipage, is explicitly included. There are no provisions for operating expenses. This special taxation district, as any other special taxation district, requires a development agreement with the original property owner of at least 25 acres. The original and subsequent property owners within the district, rather than the county, take on the obligation for a bond to pay for the agreed upon facilities. As known at this writing, property buyers into the district are not protected from paying the special district taxes if a developer bails out before their homes are built.

None of these approaches directly address a new development’s proportional use of the existing facilities it requires. In a March 20 e-mail from Planning Director and attorney, Janet Carter, writing in response to my specifically asking for suggestions if the just preceding sentence was not true, wrote: "While it is true that use of existing facilities is not directly addressed, it is addressed indirectly. It is the demand by new residents that creates the need for additional capacity. When the new facility is built both new and existing residents will use it while both new and existing residents continue to use the existing older facilities.  New residents create the need for more capacity regardless of whether or not they actually end up using new or existing facilities."

I have no excuse for not adding her response to this discussion in March except that I got confused, for some inexplicable reason, in thinking that what she was saying was about what the county fiscal impact model addresses. In some instances, that model does not address all facets of a new development’s proportional use of the existing facilities it requires. For one thing, it does not address the fiscal impact caused by the additional load on roads external to the new development -- an extremely difficult thing to figure out how to include in an analytical model, but somehing very pertinent in Horry County.

Summary Comparison Table of “Proportionate Share” Ordinances

The following sections “put it all together” in some more detail.

Click here to view the most recent update on the Residential Improvement District approach.

Click here to view the Public Works Improvement Act statute text on the S.C. Web site.

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March 18 County Council Public Input On Proportionate Shares

(The text in italics expands on the talk actually given. That text was deleted so as to stay within the five minutes allowed for a public input talk.)

Pinch me. Am I dreaming? I have been championing impact fees before and since the inception of the Growth Impact Action Committee Web site in early 2002, as some of you have also. Now a majority of you have wisely agreed to do what is necessary to enact impact fees in South Carolina.

Earlier councils rejected the S.C. statute as unworkable, but the situation has changed dramatically with the S.C. Supreme Court’s favorable decision on Summerville’s impact fee ordinance.

Horry county passing impact fees under the S.C. statute is a giant step in the right direction. But, among other things, public schools  and operational expenses are not covered by the S.C. impact fee statute. Yet our taxes due to schools have been half again those required by the county. And at least in the case of the proposed Heartwood development, the fiscal Horry County software impact model that does not include schools computes its net operational expenses at four times its net capital expenses. I don’t believe any  S.C. statute considers the increased costs associated with future construction needs due to the added load on older infrastructure such as roads.

(The fledgling Residential Improvement District bill would explicitly cover schools and other public facilities not necessarily within or immediately adjoining a proposed development and is unique in that it would remove the bonding costs for newly required public infrastructure from the county, county taxes and existing taxpayers.

The existing Public Works Improvement District statute unlike either Impact Fees or a Residential Improvement District covers operating expenses and can be read to include schools as well as other public infrastructure, although schools are not explicitly named as they are in the Residential Improvement District, and it requires the covered public facilities to be within or immediately adjacent to a covered development.

The Public Works Improvement District like Impact Fees would require the county to float any bonds that might be used.

Both the Residential Improvement District and the Public Works Improvement District approaches would require development agreements as any special tax district requires the agreement of the developers. Residential Improvement District and Public Works Improvement District agreements pass with the land so that sub-developers, buyers or users must comply with any special taxes agreed to.)

Let’s look at two PowerPoint slides to show what proportionate share ordinances should ideally cover

First as to public facilities that would not have been required if it were not for the new development, the new development should have to pay its proportionate share of the:

Construction and equipage costs of the public facilities that the new development requires in proportion to the development’s required usage,

•         Including the facilities’ bonds and debt service

•         Minus applicable revenue streams other than real property taxes (e.g. federal & state contributions)

But if new home buyers had been here earlier they would have had to pay their proportionate share of the existing public facilities that the new buyers need to use.

So if things were done truly fairly, a new developments would also have to pay its  proportionate share of the

Depreciated and equipage appraised value of the existing facilities that the new development requires in proportion to the development’s required usage,

•         Minus outstanding bonds and debt service (paying in taxes)

•         Minus revenue streams other than real property taxes (e.g. federal & state contributions)

Finally, the new development should, ideally, pay its share of the

•         Additional operating expense costs that the that the new development requires

–        Minus the taxes paid by the new development for associated county operating expenses

(Impact fees are not punitive measures against developers nor do developers pay. Any additional costs in new home construction due to the additional public facilities and services a development requires are passed on to the buyers in the developments that require them. Those additional costs, typically paid over 30 years, are not going to dissuade home buyers. If they do, the county’s other taxpayers would be better off fiscally if those that are disuaded do not buy.

The state of South Carolina sets the percentages by which the general taxes by local governments may be collected. Let’s face it only higher priced new homes pay for the public facilities and, if lesser priced homes are constructed, the only way that the rest of us are not taxed more and more is to have those buyers pay their own way by proportionate share ordinances of some kind,)

Unfortunately, I don’t know of any S.C. statute that addresses new developments paying their proportionate share of the depreciated value of existing pubic facilities that new developments need to use. I believe the existing Public Works Improvement District statute is the only statute that does allow the inclusion of operating expenses.

I don’t have the time to detail that statutes plus and minuses tonight or those of this or another tool that could transfer the taxes on some of the costs of the public facilities required by a new development from the rest of us to the development -- the fledgling Residential Improvement district bill that explicitly includes schools.

I salute this county concil majority for its wisdom in moving towards imposing impact fees even though they will not help in next years budget. They will help in future budgets. And we would be in much bettter fiscal shape today if previous councils had shown such wisdom.

Realistically, the best that it appears the County Council can, and should do, when it approves impact fees is to include a provision specifically allowing impact fees to be supplemented or replaced by development agreements for special tax districts or other proportionate share ordinances that might be allowed by statute, perhaps combining the good features of the existing Impact Fee, Public Works Improvement District and anticipated Residential Improvement District and addressing the costs of future construction needs due to the added load on existing infrastructure.

Please put up the third slide.

You can visit the Growth Impact Action Committee, GIAC2002.org, Web site to view staff’s three enlightening PowerPoint presentations at the March 3 county council impact fee workshop.

  Click here to return to "Growth Management Tools"

  Click here to view the most recent update on the Residential Improvement District approach.

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 Detailed Comparison Table of "Facilities" Provided