Impact fees are one-time charges assessed by a county, city, or town (local government) on new development activities to help pay for the increased services that will be required because of new growth and development. Development activity includes any construction or expansion of a building or use, any change in use of a building, or any change in the use of land, that creates an additional need for public facilities. Approval of a new development may be conditioned on the payment of impact fees.
Local governments planning under the Growth Management Act are authorized to impose impact fees for public streets and roads, publicly owned parks and recreation facilities, school facilities, and fire protection facilities. Impact fees may only be used on public facilities that are included in the capital facilities element of the comprehensive plan. The public facilities must be reasonably related to the new development, must reasonably benefit it, and must be designed to provide service areas to the community at large. The public facilities on which impact fees can be spent are public streets and roads; publicly owned parks, open spaces, and recreation facilities; school facilities; and fire protection facilities.
The ordinance establishing impact fees must include a schedule of impact fees for each type of development activity and the fee imposed for each kind of facility. The ordinance must also designate one or more reasonable geographic area in which a defined set of public facilities provide service to developments within the area, and within which the local government will calculate and impose impact fees for different land-use categories per unit of development. General improvements to public facilities, and the general benefits thereof, within a service area have been found to be reasonably related to, and to reasonably benefit, new developments within the service area. The ordinance imposing impact fees must also provide that the fees can be adjusted in unique circumstances when it is fair to do so, and developers must be allowed to provide data and studies to support an adjustment of the fee. If impact fees are not used within ten years of collection, they generally must be returned. A developer who has paid an impact fee may receive a refund if the development does not proceed and no impact materializes.
A local government collecting impact fees must provide a program for deferring collection of impact fees imposed for single-family residential construction. The local government must provide a process for an applicant for a building permit for a single-family attached or detached residence to request deferral of the full impact fee payment. The local government must provide at least one of three deferral options:
If the deferral is to the time of final inspection or to the issuance of a certificate of occupancy, the local government may withhold the certification of final inspection or the certificate of occupancy until the impact fees have been paid in full. If the deferral is to the time of the closing of the first sale of the property, the seller bears strict liability for the payment of the fees and the fees must come from the seller's proceeds, unless a different agreement is reached between the buyer and seller. The total deferral period cannot exceed 18 months from the time that a building permit is issued.
An applicant for a deferral must grant the local government a deferred impact fee lien in the amount of the deferred fee against the property. The lien must be in a form approved by the local government, signed by all owners of the property, and recorded in the county in which the property is located. The resulting lien is junior to one construction mortgage on the property.
If the impact fees are not timely paid, then the local government can foreclose on the lien. A school district may also initiate foreclosure proceedings, if it has requested that the local government initiate foreclosure because of unpaid school impact fees and more than 45 days have passed without the local government taking action. The extinguishment of the lien by the foreclosure of a lien having priority does not affect the obligation to pay the impact fees as a condition of final inspection, the issuance of a certificate of occupancy, or at the time of closing on the first sale of the property. Once the fees have been properly paid, the lien must be released.
Each applicant for an impact fee deferral is entitled to receive up to 20 deferrals annually in each city or county. This limit can be increased by the local government, provided that a school district on whose behalf the local government collects impact fees is consulted, and any objections interposed by the school district to the increased deferral limit are given substantial weight. A local government may collect reasonable administrative fees from applicants for the deferral program in order to implement the deferral program.
A local government that had an impact fee deferral process in place on or prior to April 1, 2015, is exempt from the deferred impact fee program requirements, as long as the preexisting program delays all impact fees and remains in place after September 1, 2016.
The Department of Commerce (Commerce) must collect information on impact fee deferrals and provide an annual report to the Legislature. The report must include the number of deferrals, the number of deferrals that were not fully and timely paid, and any other information Commerce deems appropriate. Local governments must cooperate with Commerce in the production of this report, and must provide any data or other assistance that is requested.
Local government must adopt a system for the deferred collection of impact fees by September 1, 2025. The system must include a process for an applicant for a building permit for single family attached or detached residences to execute a promissory note in favor of the local government imposing the impact fees for the full value of the impact fees. The note must be recorded with the county auditor at the expense of the applicant. If lots have not been created in the subdivision, then the note must be recorded for the entire subdivision.
The promissory note must come due at the time of:
If the local government has determined that payment is due at the time of the issuance of a certificate or at the time of final inspection, the local government may withhold the certificate or inspection until the fee has been paid in full.
If the fee has not been paid in full by the time of the first sale, then the fees immediately become due.
If the impact fees have not been paid within one month of the first sale, then the note will bear interest at the rate of the short-term federal rate plus 2 percent. This rate must be adjusted annually, and the county treasurer must provide the local government with the rate prior to December 31st of the year that precedes the year in which the adjusted rate will apply.
In addition to interest, late payment will also subject the applicant to penalties. If the impact fees have not been paid in full at the time of the first sale, the applicant must be assessed a penalty of 5 percent on the amount due. This penalty increases instead to 10 percent if the impact fees have not been paid within two months of the first sale, and to 20 percent if the impact fees have not been paid within three months of the first sale.
Interest and fees may only be collected from the applicant, and cannot be a lien against the property sold by the applicant for which the impact fees were due. If the fees were not paid, and a sale was made but not recorded in the county property record, then the owners of the applicant are personally liable for the full amount of the promissory note.
An applicant for an impact fee deferral must provide written disclosure of a deferral agreement to a property buyer as provided for in laws regulating a seller's disclosure obligations in real property transactions.
The requirement that a lien be imposed on a property receiving an impact fee deferral in favor of the local government providing the deferral, and provisions related to the lien, are repealed.
The annual limit on the number of impact fee deferrals that an applicant may receive is repealed.
The requirement that Commerce provide an annual report to the Legislature on impact fee deferrals is repealed.
The ability of the local government imposing the impact fees to collect a reasonable administrative fee from applicants is repealed.