Las Vegas Real Estate and Business News

Impact fees may soon hit home

Local governments considering new charges

By Brian Wargo
Las Vegas Sun

February 20, 2006

With the region's spiraling growth bringing thousands of new residents monthly to the Las Vegas Valley - along with demands for more roads, fire stations and parks - local governments are striving to force growth to pay for itself in ways that would raise new home costs.

Clark County, Las Vegas and North Las Vegas, facing growth-fueled demands for additional public services and facilities, are considering the region's first development impact fees.

Although residential and commercial developers currently pay local governments various fees for projects, the fees often fail to cover the costs of street improvements, new fire and police stations and other infrastructure needed due to growth - leaving existing taxpayers to foot the bill.

The overriding goal of Clark County's effort, Planning Manager Chuck Pulsipher said, is to "provide a level playing field for everybody."

The existing system, officials say, is fraught with inequities. Developers of large master planned communities pay more than smaller home builders. Developers of housing, office, retail and industrial projects also pay more to build in the Southwest Las Vegas Valley than in other areas.

"We have situations now where some people pay fees based on development agreements and others pay no fees," Pulsipher said. Because there is no overall policy, the development agreements are usually negotiated on a case-by-case basis.

The County Commission next month will consider hiring a consultant to study the issue.

Elsewhere in the valley, North Las Vegas already has hired a consultant who is to report soon to the City Council on similar issues. And Las Vegas is weighing development fees to fund public safety and park projects, Finance Director Mark Vincent said.

Currently, local governments operate under a 1989 state law that authorized them to charge developers under a formula based on the effects their projects have on cities and counties.

Even though that law was changed in 2001 to allow for higher charges, it is still more restrictive than the laws elsewhere in the United States, said Paul Tischler, a California consultant who studied impact fees for North Las Vegas.

Nevada law allows local governments to charge developers for impacts on drainage, sanitary and storm sewers, and to build fire and police stations, parks and street and water projects.

But the law does not permit governments to charge for libraries, municipal buildings, most new vehicles and equipment, recreation facilities or parks of more than 50 acres, Tischler said. Schools also are exempt.

A year ago, North Las Vegas discontinued a $400-per-home fee that generated $2.3 million annually for fire services, motivated by city officials' fear that the fee was illegal.

"I am a little surprised impact fees haven't been implemented before," Tischler said of the Las Vegas region. "The rest of the public is likely to be paying for the expansion of those facilities."

Henderson is the lone local Las Vegas Valley government not considering impact fees, said Steve Hanson, the city's finance director. The city has addressed growth by having developers donate land for schools and parks and build fire stations and bridges, he said.

"We have a formula that works," said Henderson Councilwoman Amanda Cyphers. "The proof is that we have a lot of people who keep moving to Henderson. But I think we will keep our options open if we need to look at a better formula."

Clark County Commissioner Bruce Woodbury said while he is not ready to take a position on impact fees, he recognizes that the county's infrastructure has not grown fast enough to keep pace with development.

Historically, commissioners have expressed concerns about such fees, in part because developers pass the higher costs on to home buyers, making housing less affordable.

"We somehow have to strike a balance," Pulsipher said.

In North Las Vegas, the city's attempt to achieve that balance produced an agreement under which the developers of Aliante, a 6,500-home community, built and equipped a fire station, donated land for three schools and a library, set aside property for trails and parks, and built an athletic field and water reservoir.

The project, built by a partnership that includes the American Nevada Company, which is owned by the Greenspun family, owner of the Las Vegas Sun.

The city is currently negotiating a similar development agreement with the Olympia Group, owners of a 2,675-acre site next to Aliante.

The national average of impact fees for roads, parks and public safety was $3,400 in 2004, while fees for water and wastewater treatment averaged $4,000.

While the fees often push up home costs, home buyers also gain something in return, said James Duncan, a Texas consultant who helped Washoe County implement the fees a a decade ago.

"The money isn't going down the toilet," he said. "It is paying for parks and services. A total community is more than just a house, and that adds to the value of a home."

In addition, without the fees, local governments might have to raise taxes or reduce services to deal with growth, he said.

Irene Porter, executive director of the Southern Nevada Homebuilders Association, argues that developers already pay for the impact of growth through existing fees charged by local goverments.

In the Las Vegas Valley, home builders pay about $30,000 per home in various government fees, including building permit charges assessed for processing plans and inspections.

Developers also pay for real estate transfer taxes that go to local governments and spend hundreds of millions of dollars at Bureau of Land Management auctions that pay for parks, schools and water infrastructure, Porter said.

"We have been paying a form of impact fees for 40 years," she said.

Not all home builders, though, equally share the burden of paying for growth under the current regulations.

The developers of master planned communities, for example, must contribute 2.5 acres of land for every 1,000 homes and also pay fees of $200 to $300 per home for traffic signals, Pulsipher said. But the county's existing codes exempt most developments of less than 700 acres from the requirements.

Only in the southwest Las Vegas Valley, where most growth is occurring, do developers of such smaller projects pay impact-type fees for traffic lights, road improvements, parks, police and fire stations.

But the fees are so low - $467 per home and $455 for each apartment unit - that they cover only a minimal amount of the public cost of the growth they generate, Pulsipher said.

"The key is having growth pay for growth," he said.

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