Impact fees in Florida are set to change under the newly passed state bill HB 337 which Gov. Ron DeSantis is expected to sign into law.
Here are things you should know about impact fees and why they should matter to all Florida residents, not just developers, builders and homebuyers.
What are impact fees, anyway?
Impact fees are a one-time fee assessed to either developers or builders for new homes, including townhouses, apartments and condominiums, as well as new commercial developments.
The purpose is to help pay for increased infrastructure demands created by the new growth. If roads and other infrastructure improvements fail to keep up with growth, it can affect the quality of life for all residents by creating increased traffic congestion and greater wear and tear on existing infrastructure facilities as well as other resources such as water, schools, police and fire services and area parks.
Will this affect your driving?:Florida bill limits impact fees. Will that make construction of needed new roads slow to a crawl?
What they can be used for
impact fees can be used for new roads and bridges, as well as new water, sewer and utility lines, schools, parks and recreational facilities as well as first-responder services.
The latter can include new fire or police department vehicles and school buses.
What they can’t be used for
Impact fees are only supposed to be used to offset the growth created by the new development in question. That means they cannot be used to pay for maintenance or repair of existing roads or other facilities. They also cannot be used to address issues that existed prior to the new development. Impact fee revenues also cannot be used to pay off existing debts or for previously approved projects.
Who can issue an impact fee and who pays them?
Impact fees are assessed by counties, cities and special districts. Often those fees are simply passed on by the developer or builder to the end-user, such as the purchaser of the new home.
But just because a local government charges impact fees for new homes and commercial development projects, it doesn’t mean that money is immediately available all at once to spend on new roads or other infrastructure improvements.
“The other issue that impacts the numbers is the timing that a builder pays the impact fee,” said Clay Ervin, director of growth and resource management for Volusia County. “By state law, a government cannot require payment of impact fees until the issuance of a certificate of occupancy, so permits may have been issued, but we would not receive the impact fees until the C.O. was issued.”
How did impact fees come about in Florida?
The first attempt to issue an impact fee in Florida occurred in the 1960s when the City of Gulf Breeze in Santa Rosa County sought one to help pay for parks, according to a 2005 report produced by James Nicholas, a professor at the University of Florida, on behalf of the Florida City & County Management Association.
That impact fee was challenged and found to be an unauthorized tax in a 1966 court case. But in 1976, two separate attempts were upheld by the Florida Supreme Court: one by the City of Dunedin, the other by Dade County.
“Impact fees evolved in Florida through the courts” in the decades that followed “ultimately being recognized as being within city and county home rule authority,” according to the UF study.
How does the new state law affect impact fees?
Assuming Gov. Ron DeSantis signs it into law, HB 337 places a cap on how much local governments can increase impact fees: No more than 12.5% in a given year and no more than 50% over a four-year period. The law would be retroactive to Jan. 1, 2021.
Any increase in impact fees of more than 12.5% must be phased in in equal amounts over two years, if the total increase is 25% or less, or over four years, if the increase is more than 25%.
Local governments can only issue an impact fee once every four years.
In order to increase an impact fee, the local government must provide a calculation of how it arrived at the need for that amount based on the “most recent and localized data.”
The local government issuing the impact fee must also provide an accounting of how it used the revenues collected via the fee.
Builders and developers must be provided advance notice of the change at least 90 days before the new impact fees take effect. Conversely, a local government can make any reduction, suspension or elimination of an impact fee effectively immediately.
Any contribution by a developer or builder for public facilities or infrastructure must be credited towards reducing the impact fee on a dollar-for-dollar basis at fair market value.
“If a developer provides land for right-of-way for road-widening or construction of improvements to add capacity to a thoroughfare road … then we are obligated to provide a dollar-for-dollar credit to the developer equal to the value of the land or the actual construction costs,” said Ervin. “These are credits that are assigned by a proportionate fair share agreement.”
Can there be an exception to the cap?
Yes. HB 337 allows local governments to increase impact fees by more than 12.5% annually and/or by more than 50% over four years. but only if it can demonstrate “extraordinary circumstances.”
In addition, the local government must first hold at least two public workshops and demonstrate to the public how it came to determine a need to raise impact fees greater than the allowed cap.
The impact fee increase must also be approved by at least a two-thirds vote of the governing body.
In any action challenging an impact fee or the government’s failure to provide dollar-for-dollar credits for the payment of impact fees, the burden of proof falls to the local government.
Impact fee credits are assignable and can be transferred at any time after establishment from one development or land parcel to another within the same impact fee zone or impact fee district that also stands to benefit from the infrastructure improvements.