Deep impact

Builders and lawmakers revamp fee system

By Janine Anderson

Impact fees worked well in the beginning.

They were designed to help municipalities pay for the services and facilities that new residents would need in the future. And when those fees first appeared in Wisconsin’s construction landscape, the building community and legislators worked together to make sure the fees did just what they were supposed to do.

But over time, problems emerged with the system. Some municipalities charged for items that didn’t make sense, such as golf course clubhouses. Others charged fees for things that were not allowed, like schools.

So builders and legislators recently got together again and hashed out new rules in the form of a bill. The bill was presented by Jerry Deschane, deputy executive vice president of the Wisconsin Builders Association. It was authored by state Sens. Cathy Stepp, R-Sturtevant, and Glenn Grothman, R-West Bend.

The new impact-fee rules require that only cities, villages and towns, and not counties, charge impact fees; recreational facilities, other than playgrounds and general-use parks, are not acceptable uses for impact fees. Also, fees must now be collected when the building permit is pulled rather than during the planning process, and generally accepted accounting practices must be used to track the fees and what they are to be used for.

Matt Moroney, executive director of the Metropolitan Builders Association, said it was time for the legislation surrounding impact fees to be revamped. Some communities’ impact fees had climbed to upward of $10,000, he said.

Gorman & Co. Inc.’s Waterford Glen subdivision in Fitchburg features 67 single and duplex lots. The Madison developer paid about $150,000 in impact fees for the development. Image courtesy of Gorman & Co. Inc.

“We’ve seen excessive fees in our region,” he said. “With tight budgets, communities have been more creative with impact fees.”

When impact fees get too high, they affect housing affordability, Moroney said. Under the previous rules, impact fees were charged during the planning process, and developers were responsible for them. The fees, plus interest and risk, were rolled into the cost of the lot and building the home, he said.

Now, the person building the home sees the exact cost of the impact fees because they are charged when building permits are pulled.

“We are hoping the person that’s actually paying the fee will now be more educated about what their community is doing,” Moroney said.

Scott Nelson, a legislative aide in Stepp’s office, said the old impact-fee system presented other problems. Those included collected fees not being used for the projects they were collected for, counties spending money collected in one part of the county for projects in another and some communities adding impact fees to the general fund, making it very difficult to accurately track the money and its intended purpose.

The new impact fee bill passed in April and was signed by Gov. Jim Doyle in May.