STUDY JUSTIFIES ORANGE BEACH IMPACT FEES

Published By Mobile Press Register
Wednesday, August 02, 2006
By RYAN DEZEMBER
Staff Reporter

ORANGE BEACH -- City leaders learned this week that they can justify charging builders of single-family homes up to $5,514 per house and high-rise condo developers $4,236 per unit under an impact fee law approved earlier this year by state legislators.

The law was written to give Baldwin County and its 13 municipalities a way to force builders to pay directly for services -- police and fire protection, roads, parks and even library books -- needed to accommodate rapid growth. Signed into law by Gov. Bob Riley in April, the law went into effect July 1.

The maximum impact fee that local governments can charge builders and developers is 1 percent of a project's fair market value, according to the law. But before cities and the county can start collecting a flat 1 percent on every new home, shopping center or apartment building, each government must figure out how the money will be allocated to sustain and expand services.

In the case of Orange Beach, which is on track to become the first Baldwin city to implement an impact fee, a study was commissioned from the Maryland firm TischlerBise that breaks down the justifiable maximum fees according to the development's demands on services and the cost of maintaining current levels of service.

According to the study, Orange Beach won't be able to charge the maximum impact fee laid out in the state law on certain, typically expensive, developments.

Say, for example, that a new $1 million house is being built. The most the city could justify charging for an impact fee is $5,514, according to the study, even though state law would allow a fee of $10,000, or 1 percent.

But as the prices of fire trucks, bridge construction and park land go up, Orange Beach can "recalibrate" TischlerBise's study and formulate new maximum fees, Mayor Pete Blalock said.

"Over the next five years, the city would collect approximately $13 million in revenue that you don't have today," Carson Bise, vice president of the firm that did the study, told city officials Monday afternoon. "Obviously if you're updating the impact each year, that revenue amount would likely increase."

Unlike residential development, commercial projects, which lead to no impact on the city's library or parks, aren't assessed for such. But shopping centers, warehouses or office parks can be charged impact fees to support police and fire protection and roads. The maximum fees for commercial development vary between $675 and $12,216 per 1,000 square feet, according to TischlerBise's report.

"This is a very systematic approach to recoup costs for new growth," said Jim Lawson, Orange Beach's director of community development. "The theory is new growth should pay its own way; citizens who live inside the city shouldn't have to pay for new growth."

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The study predicts that Orange Beach -- with about 5,300 year-round residents and a peak-season population of around 20,000 -- will add an average of 477 housing units a year through 2020. Year-round population will exceed 9,000 while peak-season residency is expected to top 33,000 that year, the study says.

The toll that each type of development takes on city services was taken into account in the study, and impact fee revenue must be spent accordingly.

For example, an impact fee charged on a new single-family home should be spent in the following way, according to the study:

43.5 percent for parks and recreation.

33.1 percent to transportation.

14.7 percent for fire protection.

4.4 percent for the library.

4.3 percent for police protection.

According to the state law, however, the fees cannot fund all of the costs of particular services. In the police department, for example, impact fee revenue could be used to buy new cruisers or add on to the jail, but couldn't be spent on officer salaries.

"Basically, what this does for us is it reduces our need to find capital for buildings and stuff like that and it helps us free up money to run these projects," Blalock said.

Added Bise, "And it frees up money for retrofit and maintenance, which is the area that every community in the United States is letting fall by the wayside because they're spending so much time providing growth-related services."

In mid-May, the Orange Beach City Council agreed to pay $68,100 for the TischlerBise study -- an amount that is eligible for repayment through impact fee proceeds, Blalock said. Gulf Shores in late June also contracted with the firm -- which specializes in drafting impact fee laws and reports -- and awaits its still-under-way study.

Some Orange Beach officials expressed concern Monday after Bise explained the report that the impact fee, combined with rising building costs, skyrocketing insurance rates and other city taxes might be too much for individuals wishing to build a home in Orange Beach.

In addition, several said they didn't want to discourage so-called "work force" housing and other projects to accommodate low- to middle-income buyers by overtaxing their developers.

The state law allows for local governments to create credit systems for developers of affordable housing as well as those who propose donating land in lieu of paying the fee in cash. Also, City Attorney Wanda Cochran said that implementing an impact fee wouldn't prevent developers from donating land or building public facilities as part of planned unit developments.

City officials said they would work on developing a credit system as they tinker with their impact fee ordinance starting at the City Council's work session Monday and the Planning Commission's meeting Tuesday.