Last Thursday evening, May 23, the Pagosa Springs Town Council approved the first reading of Ordinance 911.
AN ORDINANCE OF THE TOWN OF PAGOSA SPRINGS AMENDING THE LAND USE AND DEVELOPMENT CODE TO REPEAL DEVELOPMENT IMPACT FEES AND FEES IN LIEU OF PUBLIC LAND DEDICATION
The Town government has been collecting ‘impact fees’ since 2006 — a ‘fee’ charged to the builders of new homes and new commercial buildings to offset the supposed expansion of necessary government services caused by those new developments. The fees had been based on a 2006 study by Denver-based Economic and Planning Systems (EPS), which suggested that each new single-family home would, by its mere appearance in the urban landscape, create the need for perhaps $5,000 in additional government services, while a new commercial building would have — generally — an even larger impact on government services.
The Walmart store in Aspen Village, for example, paid about $400,000 in Town impact fees when its building permit was approved in 2014.
How has the Town using these impact fees? Good question. I’m glad you asked.
The Town had $449,638 in its “roads impact” savings account in 2015, and was just itching to spend it. According to the Town’s regulations in its Land Use and Development Code, these “road impact fees” must be used to mitigate the impacts to streets caused by new development.
As stated in the Land Use and Development Code, the Town Council must:
Ensure that the impact fees established by this Article are not used to offset existing deficiencies in capital facilities necessary to serve pre-existing development;
Please note that condition. Impact fees must not be used to offset existing deficiencies. That’s Colorado law as well.
If you look in its approved budget, however, the Town did two major road projects in 2015, to repair failing pavement. One project rebuilt a portion of Piedra Street; the other project repaved a portion of Trujillo Road. Both of those streets have been around for 100 years, so I suppose the failing pavement could easily be classified as “existing deficiencies.”
The Town spent a total of $215,705 on these two projects from its Capital Improvement Fund:
But a much larger share of the cost — almost twice that amount, a total of $400,000 — was extracted from the funds in the Town’s Impact Fees account:
The Town Council allowed “growth” — the very few homes and commercial buildings constructed within the Town boundaries since 2006 — to finance 65% of these routine ‘deferred maintenance’ projects. “Pre-existing development” paid only 35% of the cost.
This appears to me a blatant violation of Colorado law, and a violation of Article 10 in the Town’s own LUDC. But based on my past experiences, I suspect the Town’s attorney, Bob Cole, was completely comfortable with the way the Town utilized its impact fees — and would have advised the Council they’d done nothing unethical or illegal.
Another problem with the the original impact fee plan, back in 2006, was the assumption that both the Archuleta County government and the Town government would establish identical impact fee programs. But the Board of County Commissioners (BOCC) has consistently refused to implement impact fees — meaning that, for the past 13 years, developers have been paying a premium whenever they built within the Town limits.
The Town Council has, in recent months, heard complaints from developers and potential developers about the discouraging effects of the Town impact fees, and the Town Council responded to those complaints by spending thousands of dollars on a new update to the required impact fee analysis — the analysis that supposedly justifies impact fees, by estimating the presumed fiscal impacts of each type of development. The new study, by EPS, offered a fresh look at the fees, and suggested a greatly reduced fee schedule for commercial developments.
By the time the analysis was completed, however, several members of the Council had begun questioning the overall wisdom of collecting these fees, especially considering the continued reluctance of the BOCC to join in the fun. The unanimous vote by the Council on Thursday to eliminate impact fees contrasts with a unanimous vote, back in 2006, to implement the fees.
The second reading Ordinance 911 is scheduled for June 4.
During Thursday’s Council discussion, a couple of audience members asked how the Town would cover the loss of revenue, if the fees were repealed. Town Manager Andrea Phillips had estimated that about $50,000 was being generated annually in impact fees, dependent upon the number of building permits in a given year.
The Council did not respond to those particular audience questions. But I might be able to offer some comforting financial numbers, for any folks worried about the loss of impact fee revenues.
In 2005, just prior to the implementation of Town impact fees, the Town government collected total revenues of about $4.5 million.
In 2012, the Town spent about $76,000 drawn from impact fees. The total Town budget that year was about $6.2 million, meaning that impact fees contributed about 1 percent of the Town’s revenues that year. We will note that, although the population of Pagosa Springs remained essentially flat between 2005 and 2012, the Town’s government spending had increased by nearly 40 percent.
In 2018, the Town government spent about $10.2 million — more than twice its 2005 revenues. Once again, impact fees contributed about 1 percent of the budget in 2018.
According to the US Census Bureau, the Town of Pagosa Springs population has increased by about 23 percent since the establishment of Town impact fees. (The county population has increased by an even lower rate — only about 14 percent.)
Will the Town really miss impact fees of $50,000 per year, considering its overall budget has more than doubled — has increased by $5.7 million — since 2005?
Probably not.
For this editor, however, the discussion about impact fees has a deeper meaning, related to the overall ‘growth of government’ in a small rural community. Central to the Town Council impact fee discussions I heard, over the past year or two, was the issue of economic growth. Were these impact fees inhibiting growth? Because, if they were… well, that was a negative effect, and possibly a very good reason to repeal the fees.
We understand that governments can generally grow their bank accounts and their staff salaries, only if their tax revenues increase. Tax revenues generally increase when the population increases, and when homes values increase, and when businesses are collecting more sales tax and lodgers tax.
Very few governments would ever conclude that, in fact, our community would benefit from a reduction in population, or from a decline in property values, or from any other actions that might reduce government revenues.
For that, we must rely upon the natural occurrence of economic recessions.