Road Impact Fees in Virginia

1. Road Impact Fees in Virginia Arthur C. Nelson, Ph.D., FAICP Director, Metropolitan Institute Virginia Tech – July 24, 2007

2. Impact Fees Generally • A charge on new development to pay for its proportionate-share of the cost of existing, new or expanded facilities benefiting it. • Allowed explicitly in 26 states and through Home Rule in another half dozen or so. • Varies from a few $100s to more than $30,000. • Highest fees in California and Florida but others gaining. • Generates more than $2 billion/year nationally. Proffers & Impact Fees • Impact fees applied to all new development requiring a building permit. • Broad-based • Predictable fee schedule • Somewhat predictable revenue stream • Proffers in Virginia applied only to rezonings and often only to residential development. • Narrowly applied • Often not predictable • Shifts costs disproportionately to new residential (Many Northern Virginia proffers >$40,000)

3. Proffers VA Proffer definition: (i) any money voluntarily proffered in a writing signed by the owner of property subject to rezoning, submitted as part of a rezoning application and accepted by a localitypursuant to the authority granted by (Virginia statute), or (ii) any payment of money pursuant to a development agreement entered into authority granted by (Virginia statute)… Impact Fees Virginia Impact Fee definition:. . . a charge or assessment imposed against new development in order to generate revenue to find or recover the costs of reasonable road improvements benefiting the new development. Differences & Nuances • Proffers • Discretionary application to only rezonings • Often applied to only residential development • In addition to other non-cash proffers (exactions). • Impact Fees • Applies to all development including “by right” unless such already has a permit. • In addition to other “conditions of development” • Nuances • Cash proffers are credited against impact fees if applicable.

4. How it Works in Virginia(?) • Eligibility • Population > 20k + Census 10-year growth of 5%. • Or Census 10-year growth of 15%. • Process • 5 to 10 person impact fee advisory committee with at least 40% from development (may be Planning Commission). • Ordinance adoption procedures. • Time-Frame • Essentially a 10- to 20-year planning horizon. • Implemented with 6-year improvement plans adopted as part of comprehensive plan. Service Area & Level of Service • Service area design • One or more in the jurisdiction. • Advice: Need to “right size.” • Level of service standards implied (“service levels” and “capacity”) • A-E standard. • Fixed trips per lane mile by type of facility and time of day (peak hour or average daily). • Volume to capacity ratio Road System Analysis • Analysis • Current capacity (based on LOS). • Current demand + permitted additions. • Projected 10- 20-year demand (based on LOS). • If demand + current + permitted demand exceeds capacity then impact fees may be used: • Demand based on population, land-use, density, intensity projections and assumptions as they relate to demand. • Estimate of expansion needs within service area • Advice: This is not a link-based analysis but a system-based analysis of the service area as a whole.

5. Impact Fee Calculation • Calculation • Estimate cost to meet capacity needs. • Less value of off-site dedications & proffers. • Less external revenue (such as federal, state, local special district, special assessment funds). • Not sure if gas tax and other revenues that help finance roads in service area road system applies (statute is silent but this standard practice in US) • = Net impact cost. • Divide net impact cost by “demand units” = impact fee per demand unit. • Multiply impact fee by units of demand Development Credits • Not to be confused with • External revenue (called “credits” in statute) • Revenue credits from road entities • Possibly other Revenue credits (silent in statute) • Past or committed contributions from existing development. • Value of dedication, contribution or construction of off-site development from new development can be credit in service area. • But what if credit exceeds impact fee? No statutory guidance as in other states.

6. Interesting Nuances I • Relation to Proffers. High proffers based on one set of plans can wipe out impact fees needed to finance the CIP of another plan. • Urban areas may be excluded  not a bad thing as it may encourage infill & redevelopment. • The “Texas-One Step 15%” rule  refund required if actual cost of a single project is less than 15% of estimate but no cost recovery if fee is more • Induces low estimates but this can reduce revenue needed to solve real problems. • May induce locally broad definition of “project” • No adjustment for inflation (although implied) • “Off-site” not defined so a major highway inside a project may be paid entirely by the project itself. Interesting Nuances II • Strong planning connection with 10- to 20-year planning horizon. • All “by-right” development pays (if adopted) • Broadens the base to include all new development • Allows impact fees to substitute for cash proffers for roads and thus reduce potential assessments on new residential that now pay a disproportionate share of some costs. • Improves equity, certainty, predictability, and “dynamic” efficiency – although conditions of approval with non-cash proffers remain. Parting Observation Impact fees may increase revenue for roads but they do not solve the transportation “problem”.