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Subjects › Planning › Impact Fee Payment Deferral Programs
Published 02/2012

Impact Fee Payment Deferral Programs

Contents

Introduction

Local jurisdictions have taken different approaches regarding when to collect impact fees. Most jurisdictions in Washington do not issue building permits, or in other cases, subdivision or development permits, until impact fees have been paid. A developer then has a major incentive to pay up, since the developer may not proceed with the project until fees are paid. Once permits are issued, some fear that it may become more difficult to collect the fees. Also, collection at earlier stages provides more lead time for planning and construction of facilities before the new demand is realized. However, impact fees collected at these earlier stages represent a significant upfront expense which a developer must pay before the project is generating any revenues. As a result, developers have pushed for state legislation to require jurisdictions with impact fee programs to allow deferred payment. Most recently, proposed EHB 1702 (2011) would have required jurisdictions to adopt one of several alternative impact fee deferral processes, but neither bill was passed.

In testimony related SB 5914 (a 1991 bill which would require have required local governments to delay impact fee collection until the point of occupancy) several jurisdictions that had experimented with delayed fee collection testified about difficulties that they had experienced with fee collection. Pierce County, in fact, rescinded its delayed fee collection option after finding over a 20% failure rate in collection. Olympia has a delayed payment option, but staff testified in 1991 that the delayed payment until occupancy did not result in a substantial savings to the developer or homeowner. The average time from permit issuance to occupancy was 3 months and the average fee was $5,000. At a 10% interest rate, the delayed payment would only result in a $125 savings for the homeowner, and could result in added costs in the effort to collect the fees.

Since the time of Olympia's testimony, the economy and housing market have changed dramatically. Interest rates remain low, but the time housing remains on the market after construction is likely to be much longer. More recently, in large part to assist a building construction industry in recessionary times, a number of jurisdictions have adopted new ordinances allowing deferment of impact fee payment. Both Pierce County and Olympia have fashioned new deferred payment programs despite concerns with earlier programs.

Deferred Impact Fee Payment Code or Ordinance Examples

  • Kitsap County Code Ch. 4.110 - See especially Sec. 4.110.020(E) and (F) - Impact fees must be paid before issuance of certificate of occupancy
  • Olympia Municipal Code Sec. 15.04.040(H) - To defer impact fee payment, a developer is required to execute an impact fee deferral agreement, which is recorded and creates a lien on the property. Note, however, that some lenders have required that the impact fee deferral agreement lien be subordinated to their financing before approving loans. Ordinance includes sunset clause.
  • Pierce County Code Sec. 4A.10.080(D - H) and Pierce County Ordinance No. 2010-65s - This ordinance allows owners of residential properties being constructed or improved for resale to request a voluntary lien to defer paying traffic and park impact fees until a property is sold, but no later than 2 years from the date of building permit issuance, whichever comes first. Also, webpage for the ordinance includes links to documents related to adoption process
  • Redmond Ordinance No. 2501, 11/2009, and Ordinance No. 2469, 06/2009 - Impact fees must be paid at time of drywall construction for individually permitted single family and detached residential construction; Ordinance includes sunset clause
  • Woodland Ordinance No. 1169 - Allows for deferral of impact fees until 01/2012, adopted 11/16/2009

Impact Fee Deferral Programs and Documents