Developers in the greater Mullan area could be asked to pay impact fees on new construction to help cover the cost of expanding city services ahead of the region’s current and future growth plans.
On a 12-0 vote, the Missoula City Council on Wednesday set a public hearing to consider two separate fees, including transportation impact fees and a utility development fee.
“A special impact fee is an equitable way to assess the cost of new infrastructure,” said Jeremy Keene, director of Public Works and Mobility. “This places the costs more closely to the folks who benefit from the improvements were making.”
The city and county last year received a $13 million federal grant to help build out a transportation network and associated utilities in the Mullan area. Placing the infrastructure ahead of development, combined with an area master plan, ensures orderly growth and viable services.
However, city and county leaders applied for a $23 million grant, which would cover the true cost of the work needed to be done. Only half the cost was provided in the $13 million grant, leaving the remaining work unfunded.
Efforts to secure the remaining $10 million in a second grant application were unsuccessful and growth is coming. Projections over the next 30 years anticipate nearly 18,000 new residents in the Mullan area and 8,521 housing units of varying types.
“We have about 50 percent of the funding needed to construct the project,” Keene said. “It gives us a good start in creating this network. We’re looking at ways to fund the remainder of the project to complete the rest of that network. Impact fees will fund it.”
As proposed, impact fees are a one-time payment placed on new development within a designated area. The resulting revenue provides the funding needed to accommodate new development without taxing other property owners in other parts of Missoula.
New residential development within the service area will pay an additional $1,035 to $2,647 per unit, depending upon the size of the unit. New commercial and industrial development within the service area will pay an additional $410 to $2,201 per 1,000 square feet.
The special transportation fees would be in additional to the citywide fees already in place.
“Special fees are to fund specific improvements. It’s a plan based approach so we have a list of projects and costs associated with those projects, and fees are set up to pay for those projects,” Keene said. “Infrastructure is expensive no matter how you do it.”
While a number of commercial projects and subdivisions are already underway in the area, several others have been approved but have not yet applied for a building permit. It’s there when they’ll pay the impact fees.
The infrastructure work will provide the backbone of the area’s road and utility service and guide new growth. In doing so, it provides more predictability to both developers and existing property owners.
“Most of the development out there hasn’t gotten a building permit yet. We’ll capture most of those with these impact fees,” Keene said. “There’s a couple projects already started, and we’re working out some cost-share agreements with them to help get their contribution to the project in an equitable way.”
Council member Jordan Hess said the proposed fees represent an innovative way to pay for development, and to ensure those who benefit from the improvements pay their share.
“It spreads out the cost in a way that’s equitable,” Hess said. “It allows us to get this road network built and associated amenities built in a more efficient manner, which will make it cheaper to develop if we were to do it piecemeal. It’ll be a benefit to the area.”