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F I S C A L I M P A C T R E P O R T

SPONSOR Feldman

DATE TYPED 2/23/05

HB

SHORT TITLE Development Fees for Municipalities

SB 1017

ANALYST Kehoe

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Mortgage Finance Authority (MFA)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

Senate Bill 1017 amends sections of the Development Fees Act.

Significant Issues

Senate Bill 1017 expands the definition of “capital improvement” to include water rights, trans-

portation facilities, libraries, community centers and schools. The bill requires that a municipal-

ity or county impose development fees consistent with comprehensive plans and allows them to

waive or reduce the impact fee requirements to encourage efficient development patterns and

affordable housing projects. Impact fees, as defined in the Development Fees Act, is a charge or

assessment imposed by a municipality or county on new development in order to generate reve-

nue for funding or recouping the costs of capital improvements or facility expansions necessi-

tated by and attributable to the new development.

Senate Bill 1017 allows municipalities and counties to impose impact fees on libraries, commu-

nity centers, schools, projects for economic development and employment growth, affordable

housing or apparatus and equipment of any kind except for those facilities that have a life expec-

Senate Bill 1017 -- Page 2

tancy of ten or more years and are owned and operated by or on behalf of a municipality or

county. Finally, the bill limits the number of members that represent the real estate, development

or building industries to a composition of no more than forty percent that may serve on the advi-

sory committee.

OTHER SUBSTANTIVE ISSUES

According to the Local Government Division of the Department of Finance and Administration,

many governmental entities consider the current Act too burdensome. Therefore, only a few lo-

cal governments in New Mexico including Santa Fe City and County, Bernalillo County, Los

Lunas, Rio Rancho, and Las Cruces have taken steps to impose impact fees. On December 2004,

the City Albuquerque imposed an Impact Fee Ordinance on new construction. The new ordi-

nance establishes standards against which to evaluate a building project’s impact on existing

public infrastructure and the fees.

While imposing impact fees could generate more revenues for municipalities and counties as a

means to pay for capital improvements, opponents indicate such change would increase the

amount of impact fees assessed resulting in a negative impact on support for school bond issues

if homeowners feel they are already supporting the development in the increased cost of their

home and that the impact fees could increase the cost of construction of public schools.

For example, the Real Estate Department of the Albuquerque Public Schools recently commis-

sioned a civil engineering consultant to estimate the fees for a new Albuquerque west side high

school by applying the rules defined by the new city ordinance on a proposed site on the Albu-

querque northwest mesa. The estimated cost of impact fees imposed on the school district by the

City of Albuquerque would increase the cost of construction of the school by approximately $1.1

million. The estimate includes the City of Albuquerque’s 60 percent reduction for the road im-

pact, which public projects can claim, and the estimate was only for off-site infrastructure for

roads, drainage and public safety. The estimate did not include other on-site construction work

the school is required to build such as road paving, curbs, gutters, or extension of water and

sewer lines to the property. The Albuquerque Public School District supports exempting public

school districts from paying development impact fees, indicating that public schools are just an-

other element of public infrastructure that the public expects to be constructed and demands.

On the other hand, this bill allows for the limiting or waiving of impact fees for efficient devel-

opment and affordable housing which could provide municipalities and counties with greater

flexibility in encouraging smart development and protecting affordable housing. Issues warrant-

ing consideration would be the equity of the waiver process or the reduction of the impact fee on

both the moderate income homebuyer and public school districts.

LMK/yr:lg