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

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road impact fees in virginia

Road Impact Fees in Virginia

Arthur C. Nelson, Ph.D., FAICP

Director, Metropolitan Institute

Virginia Tech – July 24, 2007

impact fees generally
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)

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.
how it works in virginia
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.
impact fee calculation
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.
interesting nuances i
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”.