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Incentive to build: City proposes buy-in fee deferral for developers to eliminate the up-front costs

Grangeville City Hall

Grangeville City Hall

— “Some places call them capacity fees, some places call them interceptor fees. It’s all about the city trying to recoup its costs,” said Jeff McFrederick, Grangeville public works director, “what it costs to add on developments, what our demand may be 20 years from now.”

McFrederick and city attorney Adam Green helped guide discussion at a recent city council meeting as members hashed out proposed options for a deferred payment schedule for contractors as concerns equity buy-in fees. This continues the council’s ongoing efforts in reviewing and revising the fees — which are charged to new developments that do not have existing services — to provide financial incentives to developers and ensure the city is covered for the impact additions will have on municipal infrastructure.

Consensus on Monday, Aug 6, was to draft an ordinance revision providing deferral of 100 percent of the buy-in fee that would be paid when the lot sells and a building permit is taken out. Currently, a developer pays 25 percent up front with the rest passed onto each lot purchaser that is required to be paid before a permit is issued. When ready, this will be reviewed at an upcoming meeting.

“That’s an incentive. It’s a small one,” McFrederick said, “but it’s what I would be looking for if I was going to be developing a piece of property.”

In its discussion, council heard options for revising the fee schedule that included the upfront 25 percent where developers could lock-in fees at the current price, or providing an either/or option for both this and the current fee schedule. But locking in fees was called into question by councilor Beryl Grant, especially as those charges are expected to be increased.

“The city is going to end up subsidizing the rest of that, rather than the contractors or owners,” Grant said. “Why should the city subsidize that? It’s not my subdivision. We’re not making money at it?”

Elaborating on that, city attorney Adam Green noted a fee lock-in at today’s prices would provide developers a discount of the property value increases during the time of that deferral. McFrederick continued that with value of city utility assets, what those cost to maintain and the capital projects on top of that – “For sewer alone, it’s been $7 million since I’ve been here,” he said – he would agree with Grant.

McFrederick’s recommendation – which council settled on – was for eliminating the 25 percent, allowing developers to pass that fee on to the lot and they are not obligated to put that money up front.

“My attitude is I don’t care if we get it today, next week or next year, as long as we get our money,” he said.

In discussion it was noted the incentive in the 100-percent deferral option for developers could be substantial, such as on a 20-lot development where the current 25 percent up front would add up to $22,000. Such an incentive, Grant said, would provide the city its money and it would not be subsidizing a subdivision.

With the obligations already on the developer to put in water, sewer, street and curb infrastructure, the 100-percent deferral, “would be nice to help move things forward a bit… Because he doesn’t have to pay the 25 percent, he just passes that on to the people who buy his lots.”


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