City: Increase to impact fees needed to fund public services as Missoula grows

The 10% increase would help fund capital improvements needed to serve developing areas of Missoula including roads, parks and emergency services. The fees were last adjusted in 2005. (Martin Kidston/Missoula Current file photo)

A proposed increase in impact fees to fund public improvements alongside new development received an initial hearing on Wednesday before members of the Missoula City Council.

The 10% increase would help fund capital improvements needed to serve developing areas of the city including roads, parks and emergency services. The fees were last adjusted in 2005.

“They’re one-time payments charged to new development to consider the impact of that development at that time,” said city CAO Dale Bickell. “They’re limited to capital improvements needed to accommodate that new development.”

The fees can only be used to fund capital improvements attributed to new growth to cover infrastructure costs and can’t be used for long-term maintenance.

The city collected roughly $1.2 million in impact fees in 2019 and directed them toward a number of needs, including a contribution to a new evidence storage facility for the police department, trail and park additions, street improvements, crosswalks and bike lanes.

“In fire service, we were able to purchase an ambulance to mitigate some of the effects growth has had on their response rates. Impact fees were able to pay for that,” Bickell said. “This is a tool we can use to help support new capital without having to use general taxpayer money to do that.”

The city adopted impact fees in 2004 and added transportation impact fees in 2005. The fees haven’t been adjusted since, though the cost of services provided to the public have increased, as has development across the city.

“We’re trying to not put more costs on taxes. But on the other hand, we have growth happening,” said council member Gwen Jones. “It’s a balancing act, and we try to have a significant contribution from impact fees and make it work. When we grow, we increase our capacity, and impact fees are a tool we use to build capital expenditures.”

Advocates contend that impact fees ensure that new development helps fund essential services, thereby keeping existing taxpayers from absorbing such costs. Residents in the Rattlesnake, for example, shouldn’t be charged additional taxes to fund services needed as new development fills in west of Reserve Street.

Still, some expressed concern that developers will simply pass the 10% increase on to home buyers, thereby increasing the cost of new housing.

“What do you say to those folks and some critics that say the higher we raise impact fees the greater the impact it will have on affordable housing?” said council member Jesse Ramos. “Ultimately, the impact fees aren’t going to be paid for by the developer, they’re going to be paid for by the eventual homeowner.”

Bickell said it was important to strike a balance between the impact on housing and the city’s existing residents. The transportation impact fee for capital improvements is more than $4 million in deficit, he said.

That represents needed improvements in the Mullan Road area to meet growth and development.

“We don’t want to create a barrier to housing, but we have all these costs and we have to balance that,” Bickell said. “We are trying our best not to impact affordable housing. But we still need these tools to meet our level of service.”