Impact Fees and Other Half-Truths CARROLL COUNTY

June 23, 1993

Since Carroll's homebuilders are once again complaining about the county's impact fees, the commissioners have the opportunity to thoroughly examine all the implications of these special levies that are imposed on new homes. However, the commissioners should not be too quick to accept the homebuilders' assertions that impact fees are responsible for the high cost of residential real estate in Carroll and are crippling the local construction industry.

Impact fees are an increasingly common, if somewhat underhanded, way to raise revenue to pay for public improvements -- schools, roads and parks -- that are needed to accommodate a growing population. Carroll County currently imposes an impact fee of $2,700 per new house ($3,500 for those in the Gillis Falls Reservoir area). Some municipalities, such as Westminster, pile their own fees on top of the county's.

The most glaring problem with impact fees is that they fall only on people buying new homes. New home buyers are supposedly responsible for generating the demand for additional public facilities, but that assumption is faulty. If a new resident, with a large family, buys an existing home, the purchase price doesn't reflect any impact fee, even though that household will increase the burden on local schools. Politicians often favor the fees because they generate revenue without angering voters, as would a general tax increase.

As inequitable as impact fees may be, they are not, however, responsible for the high cost of housing, as homebuilders contend. Other items -- land, building materials, labor, financing charges, builders' profits -- constitute much greater portions of the total cost of a house.

Carroll increasingly finds itself with less affordable housing because builders are targeting a highly profitable segment of the market that is seeking large homes on large lots. The average price of a new home in Carroll is about $176,000 -- nearly $30,000 more than just 2 1/2 years ago. Even though county impact fees have not changed during this span, the prices of luxury homes under construction have jumped dramatically.

Blaming impact fees for Carroll's high-cost housing is disingenuous. Such claims should be regarded with skepticism. Still, there are other, less discriminatory methods of raising revenue.

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