Missoula County adopts impact fees for new development to fund services
(Missoula Current) Saying new development should bear the cost of the services needed to support it, Missoula County on Thursday adopted a resolution enabling it to collect impact fees whenever a building permit is issued.
The county in 2021 created an impact fee advisory board to study and make recommendations on fees to county officials. The board suggested that any fee includes a 5% administrative fee, allows for annual adjustments for inflation, and waves certain fees related to the construction of affordable housing.
The county also defined its view of affordable housing.
“It includes deed-restricting dwellings that serve individuals or families earning less than 60% of the area median income,” said county CAO Chris Lounsbury. “It also includes projects that meet the definition, making them eligible to apply for federal low-income tax credits.”
Impact fees represent a one-time payment to cover the cost of the services needed to support growth and future development. The exact amount of the fee varies depending on square footage.
Some contend that placing impact fees on new development will increase the cost of housing. Commissioner Josh Slotnick said it was true, but said the amount was minimal when calculated over time.
“This isn't a tax, it's a fee,” said Slotnick. “The amount the houses go up due to impact fees is spread out over 30 years or the length of a mortgage. It's a small amount spread out over time.”
The fees also ensure that new development and the residents who call it home help fund the cost of the services they rely upon. Slotnick said it wouldn't be right to make all county residents pay such costs.
“When a new house is built, the property taxes the folks pay don't cover the full cost of bringing services to that house,” said Slotnick. “The cost they don't pay is made up for on the back of all the other existing tax payers.”
The fees are supported by the Missoula Organization of Realtors, among others. But the Missoula Building Industry Association has concerns that with rising interest rates, additional fees placed upon large projects could be substantial.
Instead, the building industry suggested that impact fees be collected with annual property taxes, thus allowing the developer to spread their cost out over time rather than one lump sum.
While the idea was enticing, county officials said it would create an administrative challenge.
“The short answer is that it might be something that's possible under the existing statute,” Lounsbury said. “The challenge is, because we're looking at an intergovernmental agreement, where the city would be collecting some of these inside the city limits, we'd end up with an administrative challenge.”