Background
Historically, school districts in Idaho have funded the construction of additional schools needed to serve new growth through property taxes. Growth in operating costs and restricted property tax levy increases eventually required Idaho school districts to seek supplemental overrides and plant levies to generate additional revenue. With no other sources of revenue for new capital construction, districts then needed to turn to their taxpayers, asking them to approve bonds to finance new schools as well. These facility bond levies have not always passed due to the 66.7% supermajority requirements, and they can be arduous to facilitate. As taxpayers in Idaho become acutely sensitive to increases in property taxes, relying on voter-approved bonds to finance future capital may prove to be inadequate. At the same time, residents and stakeholders are growing frustrated by classroom overcrowding and the use of portable classrooms.
Current Use of Impact Fees in Idaho
Cities in Idaho have utilized impact fees as a funding source for growth-related capital facilities for decades. Recently, a significant number of fire districts have also adopted the use of these fees as growth is challenging their ability to continue to meet necessary response times for life and safety without additional stations and apparatus. Many counties are looking to impact fees as well to address the impact of growth in the unincorporated areas on jails, roads and bridges.
Impact fees being assessed in Idaho are far lower than those assessed in other states, partially due to the relatively lower cost of land and construction. There is no evidence that the use of impact fees in Idaho has stifled growth or economic development. In fact, their use is correlated with the fastest growing Idaho communities.
When calculated carefully and in compliance with statutory requirements, impact fees tend to be supported by the development community, as they know development is not sustainable without investments in necessary infrastructure.
Practice in Other States for School Impact Fees
Approximately 25% of other states allow for the assessment of school impact fees or similar excise taxes paid for by new development. The states that enable school impact fees include many of Idaho’s neighbors including Washington, Oregon, Nevada and Colorado. Washington requires that some portion of the cost of new facilities come from revenue sources other than impact fees because the State pays for approximately 30% of eligible construction costs.
Montana may allow for a similar practice subject to a vote of elected officials. Wyoming and Utah do not currently enable the use of school impact fees.
Impact Fees – A Tool for Growth to Pay for Itself
Impact fees are a one-time charge to new development at the point of building permit to pay for that development’s proportional share of the cost of new capital necessitated by growth. Impact fees are designed to ensure that growth does not result in a decrease in the current level of service to a community. These fees cannot be used to replace or repair existing infrastructure, to improve current levels of service, or to fund operations; other available resources must be used for these costs.
The Idaho Development Impact Fee Act clearly outlines the requirements for calculating and collecting development impact fees consistent with national practice. The Act allows local government entities to assess impact fees for capital facilities costs related to water; wastewater; stormwater; roads, streets and bridges; parks, open space and recreation; and public safety including law enforcement, fire, emergency medical and rescue and street lighting facilities.
Noticeably, the Idaho Development Impact Fee Act does not provide for school districts funding growth-related capital with impact fees. As a result, Idaho school districts continue to pass this burden on to existing taxpayers through bond levies, essentially asking existing taxpayers to subsidize the cost of growth.
Subsidization of growth is a policy decision that is neither correct nor incorrect as a practice. For example, subsidizing growth can be in alignment with general economic development priorities. In other communities, taxpayer resistance is encouraging taxing districts to evaluate alternate ways to assign the burden of these costs. Through a formal legislative agenda process, school board members have overwhelmingly supported the concept of exploring Development Impact Fees as a tool for Idaho School Districts. The timing is right to ensure that Idaho’s schools can continue to fit the needs of growing communities, without laying the entire burden on the existing property owners in those communities.