By Polly Keary, Editor
What is the best way to give a town the best possible schools?
Is it to charge developers the estimated cost to the school district associated with the new housing the developers bring to the city?
Or will that keep builders, and the tax base that comes with growth, away?
That is the issue that the Monroe City Council will take up in coming weeks, and the school district and the development community are digging in on both sides.
Impact mitigation fees
When a developer builds a new house in Monroe, that developer pays for more than land, permits, materials and labor. The developer also pays for the impact that new residents will have on existing services.
Those fees are called impact mitigation fees, and have been in use in some places since the 1980s.
Today, about 60 percent of towns with more than 25,000 people charge developers mitigation fees for improvements to parks, streets, schools and more.
The amount charged to developers is based on a complex algorithm meant to determine as close as possible the exact cost to a community of a new residence, based on the size and type of the residence, the needs of the community and more.
The money collected can only be spent on capital improvements related to the impact, such as traffic lights or park expansions, and has to be used within reasonable proximity of the development and within a certain amount of time. Money not used quickly enough has to be returned to the developer.
Builders and people in the real estate business tend to take a dim view of mitigation fees.
In testimony to the Monroe Planning Commission in October of last year, Jennifer Anderson, a representative from the South Snohomish County Master Builders Association, told the commissioners that reducing school impact fees is a way to keep Monroe competitive for prospective builders.
New residents, she said, would bring in millions of dollars to Monroe’s economy and create as many as 50 new jobs in the community.
“The best way to support schools,” she said, “is through growing the local economy.”
Charging developers fees only serves to keep the developers out, said one former builder. Emmet Lane, an Everett resident who described himself as “a recovering builder,” told the commission last year that one of the first things a potential builder looks at when pricing land in a community is mitigation fees.
He told planning commissioners that a difference of $1,000 or so for building one new dwelling might not be significant, but developers who want to put in a large number of homes could find the total mitigation costs for a large project a real deterrent.
In an effort to soften the blow to developers, Monroe decided years ago to offer a 50 percent discount on the school impact mitigation fees to developers, and that discount was later reduced to 25 percent, which it remains today.
By year’s end, the council plans to vote on whether to increase that discount to 50 percent again.
‘Why just the schools?’ school officials ask
Monroe collects impact mitigation fees for schools, parks and streets. Of all the impact fees it collects, it keeps the money from all but one.
That one is the school impact fee.
The city, when issuing permits and charging fees, charges developers for all impact fees including schools, and as a courtesy passes the school’s fees on to the school district.
But although they don’t keep the money, the city does get to decide how much to charge the developers for the schools.
Last year the city had considered reducing park and traffic impact fees as well, but has now decided to focus on the school fees.
That has some education workers upset.
“It’s disappointing to be back at square one again,” said school district spokesperson Rosemary O’Neil. “We expected that the conversation would look at roads and parks, too. As an example, the fee for parks is almost as big as the one for the schools, and none of them have a discount.”
What does Monroe charge?
In October of last year, Monroe’s fees were set at $2,158 for traffic, $4,579 for parks and $3,968 for schools. After the 25 percent discount, that meant developers paid about $9,800 in fees per single family home. An additional 25 percent discount would drop the fee total by about $1,000.
Snohomish County’s fees vary greatly depending on the area, but are considerably lower.
Sultan charges for traffic and parks, but not for schools.
Studies show impact fees do little to alter growth
Several studies conducted in the last 10 years tend to suggest that communities that charge impact fees don’t experience less growth than their non-fee-charging neighbors.
A 2012 study in Florida found no difference in building between counties that had reduced fees, versus those that charged full fees. Developers paid about $12,000 in mitigation fees per home in the full-priced counties, and as little as $6,000 in the counties that reduced fees.
For every $1,000 reduction in fees, there was an increase in building permits of less than one percent in most counties. (One county showed an increase of 2.6 percent for every $1,000 in reductions.)
The Brookings Institution, a public policy think tank in Washington, D.C., published a paper in 2003 that concluded that fees do drive the cost of housing up somewhat, but also tend to increase the amount of buildable land in a community by increasing the infrastructure.
Fees tend to drive the cost of land down, as a result of increasing supply, but that cost decrease is offset by the increase in the prices of the houses built on that land, the study found.
Typically, house costs go up by half again as much as the impact fee charged the developer, the study found.
But the overall impact on the economy seems to be at worst negligible and at best a boon, the study’s authors wrote.
“We find, at a minimum, that impact fees are not a drag on local economies,” the report stated. “At most impact fees are the grease that helps sustain job growth in the local economy.”
But increases in the cost of housing concern people who fear that those increases could keep low-income people and minorities out of the market.
Studies conducted in California in 1997 found that for every dollar charged to builders, the price of homes rose anywhere from $0.25 to $1.88, with the less expensive homes increasing the least.
Rental incomes were also shown to increase slightly in areas in which fees are charged; a 2002 study found that low-income rental units had about a 1 percent greater likelihood of moving out of the affordable range when mitigation fees were charged above a certain level.
What do fees pay for?
School impact fees can only be used for capital improvements, not operations.
About $1 million in fees collected from the developers of the Fryelands neighborhood went toward the $12.5 million cost of building Fryelands Elementary.
But mostly, impact fees go to pay for portable units, said Monroe School District Superintendent Ken Hoover.
Portables cost about $160,000, more for ones that have things such as science labs, which make them a lot cheaper than building new schools, but they are a temporary solution, said Hoover.
“If you look at what it costs to put in a portable, and compare it to mitigation fees, it’s pretty nearly able to cover that cost, but nowhere near the cost of permanent space,” he said.
Currently the district is using 36 portables, each of which seats about 25 kids, meaning that about 900 of the district’s seats are in portable buildings.
Although fees can’t go to pay for operations or for maintenance on existing buildings, when those fees aren’t there to pay for portables or for some of the cost of building new schools, that means money that could go to maintenance gets used instead, said O’Neil.
“If you don’t have the fees, the money you might have used on a roof or a heater goes to the short term impacts of additional students as growth occurs,” she said.
The bottom line
At the heart of the argument over school fees is the question of which policy gets the town to better schools faster, and which is most fair.
Developers argue that fees are, in fact, an up-front property tax, and unfairly make new residents subsidize existing residents.
But in comments to the planning commission Oct. 21, school board member Nancy Truitt Pierce argued that reducing the fees would unfairly shift responsibility for the cost of new growth to people who already live here.
“We anticipate .615 kids for every new single family house,” she said. “It is based on annual increases from past developments, so it’s pretty solid, even if some kids move from an apartment to a house.”
And, she said, the state pays 15 percent of the cost of building new schools and 78 percent of the cost of operating schools.
“Our local taxpayers must foot the rest of both bills,” she said.
The city will hear comments from citizens during a public hearing before the Monroe Planning Commission on the matter Monday, Nov. 18 at 7 p.m. at City Hall. The commission will then make a recommendation to the City Council, which will vote on the rate change by the end of the year.