Memorandum

City of Lawrence

Legal Services Department

TO:	David Corliss, City Manager Toni Ramirez Wheeler, Director of Legal Services
FROM:	John Jay Miller, Staff Attorney
CC:	Debbie Van Saun, Assistant City Manager
Date:	August 27, 2007
RE:	Consideration of Process to Review Impact Fee Ordinances

In 2005, the Legislature eliminated the authority of the City of Lawrence to create development excise taxes to fund public improvements while continuing to allow other cities in the State to assess their previously existing excise taxes. This excise tax legislation limits the City’s ability to fund public improvements compared to other communities in the state.

In general, impact fees are used by local governments to recover funds expended by a city, either now or in the future, to construct infrastructure to serve and support new development. Impact fees assist the City in covering the costs of infrastructure improvements only attributable to new development. Impact fees represent an alternative financing mechanism that shifts the cost burden of infrastructure needed to support new development on to development and ensures that the cost is prorated to the demand for facilities new development creates. Revenues from impact fees are not general fund resources available for any public expense but must be spent on the public infrastructure for which the fees were collected. Impact fees only reduce general fund expenditures and the taxes to support those expenditures to this extent.

The City has Constitutional Home Rule authority pursuant to Article 12, § 5 of the Kansas Constitution to create impact fee legislation. There is no statutory authority for cities in Kansas to enact impact fee legislation. Once impact fees are established the there must be a nexus between the impact created by new development and the use to which the fees will be put and the fees must be reasonably related to the impact that the new development will have on the City’s need to provide new public infrastructure.

The impact fee concept is not new to the City. The City currently has an impact fee in Chapter XIX, Utilities, Article 9 System Development Charges that assesses system development charges for water and wastewater and follows the legal and administrative requirements of impact fees. The ordinance that establishes the system development charges was passed in 1996. The fees collected and what they have been used for is provided in the System Development Charges annual report. In addition, the new Subdivision Regulations for the City of Lawrence, section 20-810(g) (viewable online at http://www.lawrenceplanning.org/ApprovedSubd.shtml) also allows for the dedication of 5% of the total land area for new residential subdivisions plus $600 per lot for each single family dwelling lot to be dedicated for parks, open spaces, schools and other public facilities.

The City’s comprehensive plan, Chapter 9 - Parks, Recreation and Open Space, of Horizon 2020, envisions additional park facilities in proximity to new development. The comprehensive plan also encourages consideration of new revenues or dedications to make the park standard a reality. To implement the goals of the comprehensive plan, the City recently approved the Oregon Trail Park Benefit District to bond finance a park in the new Oregon Trail subdivision development. A park impact fee would provide the City an alternative financing mechanism to implement the comprehensive plan.

Other cities have successfully implemented impact fees to ensure that public facilities such as arterial roads, public parks and fire stations are operational at the time they are needed for new development. For comparison, Staff has contacted several communities in Johnson County to survey which cities have enacted impact fees and excise taxes and the amount of revenue the fees generate for their respective cities. Cities such as Overland Park and Olathe have not enacted impact fees but instead assess development excise taxes. Overland Park collects as much as $3 million annually in excise taxes. In 2005 Olathe collected $2,731,638 for their street excise tax and $255,387 for their traffic signal excise tax. Olathe is currently considering the need to also impose impact fees.

Lenexa collects both development excise taxes and impact fees. In 2005 Lenexa collected $2,167,655 in excise taxes and $273,000 for a Transportation Improvement Impact Fee. Last year Lenexa also created a Park and Recreation Impact Fee and through 2006 to date they have collected $142,000. Shawnee has also enacted A Park Impact Fee and in 2005 collected approximately $200,000.

Leawood has created five different impact fees including a Park Impact Fee, a Public Art Fee, Street Impact Fee, a K-150 Impact Fee, and a South Leawood Transportation Impact Fee. In 2005 they collected $101,401 for the Park Impact Fee, $20,158 for the Public Art Fee, $96,941 for the K-150 Corridor Impact Fee and $46,619 for the South Leawood Transportation Impact Fee.

Staff last presented the issue of impact fees to the City Commission on December 12, 2006.

Staff is asking the City Commission to receive the report and direct Staff as appropriate.