Impact fees are what some local governments impose on newly built homes. They’re a kind of preemptive tax on new residents, the intention being that by charging a fee to build each new home, growth helps pay for itself. Money gets collected from new residents to help build schools and expand infrastructure as needed to accommodate new households.
In the pro column for governments, impact fees don’t put the expenses of growth onto the shoulders of existing residents.
But impact fees are not a perfect answer. For one thing, they’re tightly regulated by the state as to what a collecting agency can do with the money. For another thing, money collected from impact fees needs to be used within three years.
And while that sounds doable, it’s not always something a county or municipal government can actually accomplish.
Such is often the case for Chester County.
“At the rate we would collect an impact fee in Chester,” said County Administrator Brian Hester, “we wouldn't collect enough to make a substantial difference before the three-year period was up.”
Mainly, that inability to spend in that time frame has to do with a combination of scale – at last count, last July, the U.S. Census put Chester County’s population at just over 32,000, and growing slowly in the past five years – and the fact that impact fees get carved up for various purposes. So by the time the county gets any money for a project, it’s not going to be able to pay for much of anything.
If $1.5 million came to the county from impact fees, for example, there would be little left for anything substantial.
“It won't even buy me an ambulance,” Hester said. “It won't buy me a firetruck. I can't collect enough money to make a real capital infrastructure investment.”
Enter developmental fees. Like impact fees, they’re assessed on new home builds before construction even starts. Unlike impact fees, developmental fees aren’t on a time limit. Plus, they can be used for more direct purposes, such as infrastructure buildout, in the area from where they’re collected.
Two other things about what Chester County is doing with its developmental fees: One, the county is making it so that a developer can’t do an end run around paying impact fees by going to local governments to strike an annexation deal, like a developer recently did in Richburg.
Richburg Mayor James Harris said, “I have no comment on the matter at this time” when asked about the deal which allowed a contractor to negotiate annexation with the town.
Hester, however, said that the whole reason the developer went to the town was, essentially, so that it would not have to be subject to county impact fees, thanks to annexation.
Chester has closed that loophole, and will, if needed, put the costs of developmental fees on municipalities that don’t work with the county, or that provide an out for developers.
The second thing that’s so unusual in Chester County is that its developmental fees are negotiable.
At most, a new house would be assessed $5,000 in developmental fees. But, “ I have the ability, the authority, and with council's blessing, to negotiate that number down to something minuscule,” Hester said. “Maybe to nothing, because that is a project that we think benefits the community in more ways than just providing housing.”
This is playing out in Chester City at the site of the former Eureka Mill – a textile plant sitting on 20-odd acres, about eight of which are too toxic to build homes on. So the developer – JM Cope – is converting that brownfield area into a solar panel bed that will power the homes built on other parts of the site.
While the deal Cope struck with Chester County isn’t public, what is known is that the parties negotiated a fee lower than $5,000 per home – which is just below the statewide average of $6,000 per home – because the Eureka Mill project is about more than just housing, Hester said.
“They're taking … a brownfield area and they're going to put some solar panels on it, which is, I think, a really unique use of land that can't be used for a whole lot else,” he said. “And [the project] brings affordable, attainable housing into an area of our community that we want to help revitalize.”
“We've been able to strike a deal that's both beneficial for the county and beneficial for the development to move forward,” said Wes Drummond, president of JM Cope in Rock Hill. “With Chester's Aging infrastructure, some sort of fee arrangement is needed. Raising tax dollars for all the residence is not going to be a great answer, so a development fee that puts some more burden on the actual people bringing the project in is the best option.”