A House of Delegates committee has spiked a bill that would overhaul Virginia’s patchwork system of proffers and impact fees, but not because lawmakers are enamored with the current system. They hope to come back next year with legislation that reflects more input from local governments, reports Sandhya Somashekhar with the Washington Post.
Remarkably, the Republican-dominated House was in agreement with Gov. Timothy M. Kaine, a Democrat, on the issue. Stated Kaine yesterday: “I can see some significant problems with the proffer system.” The governor said he would be open to a more “uniform, rational” system that helps lower housing costs.
The problem with the legislation, sponsored by Sen. John Watkins, R-Powhatan, and backed by the home building lobby, is that it set the impact fees at a ludicrously low level: $12,500 in Northern Virginia and $7,500 in the Rest of Virginia. Local governments estimate the fiscal impact associated with the construction of a new home — providing schools, roads, public safety buildings — at $40,000 or more in fast-growth jurisdictions like Loudoun and Prince William.
However, the bill offered one very powerful insight that makes it worth revisiting next year: It would have imposed impact fees on “by right” development, as opposed to collecting proffers only from developers who rezone their land. Currently, local governments get no recompense for by-right development. The downfall of the bill is that the fees it specified are so low, it is feared, that even expanding the tax base would not make up the difference.
The problem of by-right development is much bigger than most people realize. Because it gets a free ride fiscally speaking, by-right development enjoys a tremendous competitive advantage in the marketplace. That’s unfortunate because by-right development consists largely of small-scale, pod-style development — not the larger, planned communities with mixed uses and walkability that many home buyers prefer. Thus, the current proffer/fee system subsidizes the scattered, low-density human settlement patterns that consume so much energy, generate so much pollution and make public services so more expensive to provide.
In an ideal world, local governments would dispense with negotiated proffers and apply impact fees on all development, thus broadening the tax base and creating a level playing field between rezoned and by-right projects. But the impact fees would be set high enough to recompense local governments for the expense of widening roads, extending water and sewer, building new schools, erecting public safety buildings, buying new fire trucks, etc.
The challenge is to devise an agreed-upon methodology for calculating thoses costs and setting a reasonable fee to cover them. Different municipalities make their own calculations. Which costs do they include? Which costs should they include?
That raises another critical issue: Should impact fees be uniform? I would argue that not all human settlement patterns are created equal. Some projects are configured in such a way as to pose less financial burden on the community — fewer Vehicle Miles Driven per resident, few lane-miles of road to maintain, fewer miles of water and sewer pipeline to run, shorter distances for school buses to drive, shorter response times for police, fire and rescue crews. Would it not make sense to create a fee schedule that varied depending upon the impact of the development project in question?
Embedded in the empirical question of what expenses the fees cover is the philosophical question of what they should cover. Should new development bear the full fiscal cost of providing public infrastructure, or should existing residents bear a share of the burden as well? Does loading up the full fiscal burden onto new development make housing unaffordable, creating a whole new set of issues and problems?
However one answers these questions, it is clear that the Watkins bill does not address them. The task of devising a fair and reasonable methodology for calculating and setting impact fees, I would submit, should be the top issue on the agenda for whomever studies the issue later this year.