Cities dump fees to bolster building in recession « IBR Real Estate Update

{ Posted on 8:22 PM by JR Erickson }

Cities dump fees to bolster building in recession

By ibrealestate

Associated Press

Developer Frank Varriale hoped his plans to build shops, apartments and a hotel in this sprawling Boise suburb would have become reality by now. Instead, about the only things standing on his land are knee-high wheat and corn.

But the city has taken steps to help revitalize those projects by eliminating what are commonly known as “impact fees” — charged by municipalities nationwide to pay for the additional services that come with increased development, such as schools, sewer lines and roads.

Meridian is among a growing list of hard-hit communities across the country that are lowering or suspending impact fees. Measures have been debated in Washington state, Texas, New Mexico, New Hampshire, California and elsewhere. Florida made it easier for residential developers to challenge fees; Arizona lawmakers froze them for two years.

Cities are increasingly realizing that they need to eliminate as many deterrants to development as possible during the economic slump, and the impact fee are among them.

“They want business to come here,” Varriale said.

Average 2008 fees were $1,520 in Texas; California’s average was $19,536, up 38 percent from 2004 excluding sewer and water fees, according to a 185-city survey by Duncan Associates, an Austin, Texas-based planning consultancy.

The trend to suspend or lower fees has prompted debate over whether spurring a construction resurgence is more important than forcing new businesses or residents to pay upfront for services, or if these communities are laying the groundwork for haphazard development and higher taxes for current residents.

In Meridian, the city suspended fire and police impact fees on commercial projects. For a 50,000-square-foot building, somebody breaking ground before Sept. 30 on Varriale’s land would save $15,500.

Varriale, who has already built about 1,000 residential homes on land surrounding his proposed commercial site, isn’t expecting any miracles from the council’s move. But he said every little bit helps.

“It’s just that upfront cost,” he said. “The lower you can keep that, the sooner you can turn a profit.”

Interesting Article I saw in the Idaho Business Review.

Posted via web from jrerickson's posterous

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