2. New Impact Fee LawCity of Kalispell
Charles A. xarball Office of City Attorney
City Attorney 312 First Avenue East
P.O. Sox 1997
Kalispell, MT 59903-1997
MEMORANDUM
TO: Mayor Pamela B. Kennedy
and Kalispell City Council
FROM: Charles 1-Iarbal.l, City Attorney
James H. Patrick, City Manager
SUBJECT: New Impact Fee Law
MEETING DATE: Monday, May 9, 2005 - Workshop
Tel 406.758.7708
Fax 406.758.7771
charball@kalispell.com
kalispell.com
BACKGROUND: The recently completed legislative session provided us with a
new law regulating the use of impact fees. While the use of the term. "impact fee"
was historically verboten in council chambers due to the apprehension it would
rouse a lawsuit, Council may now bandy it about with impunity and utilize it so
long as the City follows the very strict guidelines prescribed in the statute. The
Governor signed the law into effect on April 19, 2005 as Chapter 299 of the Session.
Laws. The City has until October 1, 2006 to bring any impact fees it is now
imposing into compliance. We will answer any questions you have about the new
law and lay out a proposed schedule of implementation at the work session.
I have attached a copy of the law in its final version for your perusal. Note
particularly the study that must precede implementation of the law as well as the
commission of an Impact Fee Advisory Committee.
I believe this is a refreshingly well -conceived and worthwhile law that the
City should welcome and consider utilizing.
Respectfully submitted,
de 1
Char r yah City Attorney Jies H. Patrick, City Manager
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S130185.03
SENATE BILL NO. 185
INTRODUCED BY MANGAN, LAIBLE
A BILL FOR AN ACT ENTITLED: "AN ACT AUTHORIZING COUNTIES, CITIES, TOWNS, AND
CONSOLIDATED LOCAL GOVERNMENTS TO IMPOSE IMPACT FEES UPON NEW DEVELOPMENT TO
FUNDALL ORA PORTION OF THE PUBLIC FACILITYCAPITAL IMPROVEMENTS AFFECTED BYTHE NEW
DEVELOPMENT; PROVIDING DEFINITIONS; PROVIDING A METHOD FORCALCULATING, IMPOSING, AND
COLLECTING IMPACT FEES; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE ANDAN APPLICABILITY
DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
(Refer to Introduced Bill)
Strike everything after the enacting clause and insert:
NEW SECTION. Section 1. Definitions. As used in [sections 1 through 4], the following definitions
apply:
(1) (a) "Capital improvements" means improvements, land, and equipment with a useful life of 10 years
or more that increase or improve the service capacity of a public facility.
(b) The term does not include consumable supplies.
(2) "Connection charge" means the actual cost of connecting a property to a public utility system and
is limited to the labor, materials, and overhead involved in making connections and installing meters.
(3) "Development" means construction, renovation, or installation of a building or structure, a change
in use of a building or structure, or a change in the use of land when the construction, installation, or other action
creates additional demand for public facilities.
(4) "Governmental entity" means a county, city, town, or consolidated government.
(5) (a) "Impact fee" means any charge imposed upon development by a governmental entity as part of
the development approval process to fund the additional service capacity required by the development from
which it is collected. An impact fee may include a fee for the administration of the impact fee not to exceed 5%
of the total impact fee collected.
(b) The term does not include:
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1 (i) a charge or fee to pay for administration, plan review, or inspection costs associated with a permit
2 required for development;
3 (ii) a connection charge;
4 (iii) any other fee authorized by law, including but not limited to userfees, special improvement district
5 assessments, fees authorized under Title 7 for county, municipal, and consolidated government sewer and water
6 districts and systems, and costs of ongoing maintenance; or
7 (iv) onsite or offsite improvements necessary for new development to meet the safety, level of service,
8 and other minimum development standards that have been adopted by the governmental entity.
9 (6) "proportionate share" means that portion of the cost of capital system improvements that reasonably
10 relates to the service demands and needs of the project. A proportionate share must take into account the
11 limitations provided in [section 2].
12 (7) "Public facilities" means:
13 (a) a water supply production, treatment, storage, or distribution facility;
14 (b) a wastewater collection, treatment, or disposal facility;
15 (c) a transportation facility, including roads, streets, bridges, rights -of -way, traffic signals, and
16 landscaping;
17 (d) a storm water collection, retention, detention, treatment, or disposal facility or a flood control facility;
_lice. medical
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Itf (e) a police, emergency nieui4e�� rescue, v'i [fire Nru�Cuaiuii iauiii€y, diiu
19 (f) other facilities for which documentation is prepared as provided in [section 2] that have been
20 approved as part of an impact fee ordinance or resolution by:
21 (i) a two-thirds majority of the governing body of an incorporated city, town, or consolidated local
22 government; or
23 (ii) a unanimous vote of the board of county commissioners of a county government.
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25 NEW SECTION. Section 2. Calculation of impact fees -- documentation required -- ordinance or
26 resolution -- requirements for impactfees. (1) For each public facility for which an impact fee is imposed, the
27 governmental entity shall prepare and approve documentation that:
28 (a) describes existing conditions of the facility;
29 (b) establishes level of service standards;
30 (c) forecasts future additional needs for service for a defined period of time;
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1 (d) identifies capital improvements necessary to meet future needs for service;
2 (e) identifies those capital improvements needed for continued operation and maintenance of the
3 facility;
4 (f) makes a determination whether one service area or more than one service area is necessary to
5 establish a correlation between impact fees and benefits;
6 (g) makes a determination whether one service area or more than one service area for transportation
7 facilities is needed to establish a correlation between impact fees and benefits;
8 (h) establishes the methodology and time period over which the governmental entity will assign the
9 proportionate share of capital costs for expansion of the facility to provide service to new development within
10 each service area;
11 (i) establishes the methodology that the governmental entity will use to exclude operations and
12 maintenance costs and correction of existing deficiencies from the impact fee;
13 0) establishes the amount of the impact fee that will be imposed for each unit of increased service
14 demand; and
15 (k) has a component of the budget of the governmental entity that:
16 (i) schedules construction of public facility capital improvements to serve projected growth;
17 (ii) projects costs of the capital improvements;
18 (iii) allocates collected impact fees for construction of the capital improvements; and
19 (iv) covers at least a 5-year period and is reviewed and updated at least every 2 years.
20 (2) The data sources and methodology supporting adoption and calculation of an impact fee must be
21 available to the public upon request.
22 (3) The amount of each impact fee imposed must be based upon the actual cost of public facility
23 expansion or improvements, or reasonable estimates of the cost, to be incurred by the governmental entity as
24 a result of new development. The calculation of each impact fee must be in accordance with generally accepted
25 accounting principles.
26 (4) The ordinance or resolution adopting the impact fee must include a time schedule for periodically
27 updating the documentation required under subsection (1).
28 (5) An Impact fee must meet the following requirements:
29 (a) The amount of the impact fee must be reasonably related to and reasonably attributable to the
30 development's share of the cost of infrastructure improvements made necessary by the new development.
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1 (b) The impact fees imposed may not exceed a proportionate share of the costs incurred or to be
2 incurred by the governmental entity in accommodating the development. The following factors must be
3 considered in determining a proportionate share of public facilities capital improvements costs:
4 (i) the need for public facilities capital improvements required to serve new development; and
5 (H) consideration of payments for system improvements reasonably anticipated to be made by or as a
6 result of the development in the form of user fees, debt service payments, taxes, and other available sources
7 of funding the system improvements.
8 (c) Costs for correction of existing deficiencies in a public facility may not be included in the impact fee.
9 (d) New development may not be held to a higher level of service than existing users unless there is
10 a mechanism in place for the existing users to make improvements to the existing system to match the higher
11 level of service
12 (e) Impact fees may not include expenses for operations and maintenance of the facility.
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14 NEW SECTION. Section 3. Collection and expenditure of impact fees -- refunds or credits --
15 mechanism for appeal required. (1) The collection and expenditure of impact fees must comply with [sections
16 1 through 41. The collection and expenditure of impact fees must be reasonably related to the benefits accruing
17 to the development paying the impact fees. The ordinance or resolution adopted by the governmental entity must
18 include the following requirements:
19 (a) Upon collection, impact fees must be deposited in a special proprietary fund, which must be invested
20 with all interest accruing to the fund.
21 (b) A governmental entity may impose impact fees on behalf of local districts.
22 (c) 1f the impact fees are not collected or spent in accordance with the impact fee ordinance or
23 resolution or in accordance with (section 2], any impact fees that were collected must be refunded to the person
24 who owned the property at the time that the refund was due.
25 (2) All impact fees imposed pursuant to the authority granted in [sections 1 through 4] must be paid no
26 earlier than the date of issuance of a building permit if a building permit is required for the development or no
27 earlier than the time of wastewater or water service connection or well or septic permitting.
28 (3) A governmental entity may recoup costs of excess capacity in existing capital facilities, when the
29 excess capacity has been provided in anticipation of the needs of new development, by requiring impact fees
30 for that portion of the facilities constructed for future users. The need to recoup costs for excess capacity must
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1 have been documented pursuant to [section 2] in a manner that demonstrates the need for the excess capacity.
2 [Sections 1 through 4] do not prevent a governmental entityfrom continuing to assess an impact fee that recoups
3 costs for excess capacity in an existing facility. The impact fees imposed to recoup the costs to provide the
4 excess capacity must be based on the governmental entity's actual cost of acquiring, constructing, or upgrading
5 the facility and must be no more than a proportionate share of the costs to provide the excess capacity.
6 (4) Governmental entities may accept the dedication of land or the construction of public facilities in lieu
7 of payment of impact fees if:
8 (a) the need for the dedication or construction is clearly documented pursuant to [section 2];
9 (b) the land proposed for dedication for the public facilities to be constructed is determined to be
10 appropriate for the proposed use by the governmental entity;
11 (c) formulas or procedures for determining the worth of proposed dedications or constructions are
12 established as part of the impact fee ordinance or resolution; and
13 (d) a means to establish credits against future impact fee revenue has been created as part of the
14 adopting ordinance or resolution if the dedication of land or construction of public facilities is of worth in excess
15 of the impact fee due from an individual development.
16 (5) impact fees may not be imposed for remodeling, rehabilitation, or other improvements to an existing
17 structure, or rebuilding a damaged structure, unless there is an increase in units that increase service demand
18 a5 described i€ i LacCut i vc t € IUl7• €€ € €ftcct n €cca are i€i€poscu €v€ € c€€€vucn€ €y, rci €cav€€ccauu€ a, yr vu €cc €€€€}j€uvci€€c€ us
19 to an existing structure or use, only the net increase between the old and new demand may be imposed.
20 (6) [Sections 1 through 41 do not prevent a governmental entity from granting refunds or credits:
21 (i) that it considers appropriate and that are consistent with the provisions of [section 2] and this chapter;
22 or
23 (ii) in accordance with a voluntary agreement, consistent with the provisions of [section 2] and this
24 chapter, between the governmental entity and the individual or entity being assessed the impact fees.
25 (7) An impact fee represents a fee for service payable by all users creating additional demand on the
26 facility.
27 (8) An impact fee ordinance or resolution must include a mechanism whereby a person charged an
28 impact fee may appeal the charge if the person believes an error has been made.
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30 NEW SECTION. Section 4. impact fee advisory committee. (1) A governmental entity that intends
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to propose an impact fee ordinance or resolution shall establish an impact fee advisory committee.
(2) An impact fee advisory committee must include at least one representative of the development
community and one certified public accountant. The committee shall review and monitor the process of
calculating, assessing, and spending impact fees.
(3) The impact fee advisory committee shall serve in an advisory capacity to the governing body of the
governmental entity.
NEW SECTION. Section 5. Transition. A general powers local government that is imposing impact
fees ADOPTED ON OR BEFORE [THE EFFECTIVE DATE OF THIS ACT] shall bring the iHpositi6t3-Bf those fees into
compliance with [this act] by October 1, 2006.
NEW SECTION. Section 6. Codification instruction. [Sections 1 through 4] are intended to be
codified as an integral part of Title 7, chapter 6, and the provisions of Title 7, chapter 6, apply to [sections 1
through 4].
NEW SECTION. Section 7. Saving clause. [This act] does not affect rights and duties that matured,
penalties that were incurred, or proceedings that were begun before [the effective date of this act].
NEW SECTION. Section 8. Effective date. [This act] is effective on passage and approval.
NEW SECTION. Section 9. Applicability. (1) [This act] applies only to THE PORTION or an impact fee
ordinance or resolution enacted or amended by a self-governing local government on or after [the effective date
of this act].
(2) Except when an impact fee ordinance or resolution is amended as provided in subsection (1),
nothing in [this act] may be construed to affect ANY PORTION OF an ordinance or resolution enacted prior to [the
effective date of this act].
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