HomeMy WebLinkAboutImpact_Fee_Reductions Florida Study 2010.pdf 1
Impact Fee Reductions and Development Activity:
A Quantitative Analysis of Florida Counties1
With the collapse of the housing bubble starting in 2006, many communities in formerly
high-growth areas found their economies, which were heavily dependent on housing
construction, begin to slow and even contract. These same high-growth communities had
been using development impact fees as a way to raise funds for growth-related
infrastructure needs, particularly for roads but also for other facilities such as parks,
schools and fire stations. Impact fee revenues began to shrink, and the development
industry began to call for impact fee reductions or suspensions as a way to rekindle
development and stimulate the local economy. Many jurisdictions have heeded these
calls. Now that we have had several years of experience with such efforts, it should be
possible to measure their affects.
This paper focuses on the experience of Florida counties from 2007 to the present.
Florida provides an appropriate setting for this analysis, given the widespread use of
impact fees and the severity of the housing downturn in the state. A focus on counties is
appropriate because of the relative dominance of counties in the provision of non-utility
infrastructure, including roads and schools.2 There are 64 Florida counties, and about 40
of them have used impact fees.
The Public Debate
Prior to the housing downturn, impact fee opponents in Florida generally used a two-
pronged attack: residential fees were resisted on the grounds that they would drive up
home prices and hurt housing affordability, while fees on nonresidential developments
were resisted on the grounds that they would make the jurisdiction less competitive for
economic development projects. Rarely was it claimed that high residential fees would
deter homebuilders, who presumably would be able to pass through these costs to buyers.
Since the housing downturn, however, the nature of the discourse has changed. Now,
reducing or suspending fees for residential development is sometimes promoted as a way
to spur residential construction, which in turn will create jobs and revitalize local
economies.
Even proponents of impact fee reductions or suspensions sometimes admit the effort may
be little more than window dressing. For example, a member of Sarasota County’s impact
fee advisory committee was quoted in 2008 as saying of a proposed impact fee
suspension: “Even if it is just a gesture, I think it's extremely important to encourage the
community, because I don't think we've seen the bottom of the well yet.”3 Others
contend that while there is no assurance that lowering fees will stimulate growth, “If
1 Draft of analysis by Clancy Mullen, Executive Vice President of Duncan Associates, Austin, Texas and
Dr. James C. Nicholas, Professor Emeritus of Florida State University, to be presented at the annual
conference of the Growth and Infrastructure Consortium, November 4, 2010. 2 While school boards have independent taxing authority, their boundaries are coterminous with counties
and they rely on counties to enact and collect school impact fees on their behalf. 3 Sarasota Herald-Tribune, “Sarasota Looks at Impact Fees,” November 15, 2008
2
don’t try it, we won’t know.”4 Even in the face of continuing declines in permits after a
year of reduced fees, the chair of the Indian River County Commission argued that there
is no way to tell how much further building would have dropped off under the full
amount of the fees.5
Are impact fee reductions simply a way for local officials to signal to developers and
builders that they “feel their pain,” or do they actually stimulate construction that would
not have happened in the absence of such action? While a full exploration of this
question for both residential and nonresidential construction would be desirable,
analyzing the effect of fee reductions on nonresidential development poses some
significant difficulties.6 In this paper, we confine the analysis to residential development.
Research Design
The method employed was to define a period of time
during which a number of counties reduced their
impact fees significantly, and compare the number of
single-family permits issued the year before and the
year after for a set of counties that include some that
reduced their fees and others that did not. The first
fee reductions occurred in January 2008. In order to
define a large enough sample, while still allowing a
year of subsequent building permit history, the fee
reduction period was defined as the 19-month period
of January 2008 to July 2009. The year before was
2007, and the year after the 12-month period of
August 2009 to July 2010.
The starting point was to identify Florida counties that charged impact fees in 2007.
Using the 2007 National Impact Fee Survey, 42 Florida counties were identified as
charging impact fees.7 The 2009 National Impact Fee Survey was used, along with an
updated survey of Florida counties, to identify counties that had reduced their impact fees
significantly between January 2008 and July 2009. Nine fee-reduction counties were
included in the analysis: Brevard, Charlotte, Citrus, Highlands, Indian River, Manatee,
Martin, Nassau and Polk. Eleven “non-reduction” counties were identified that charged
impact fees of at least $4,000 per single-family unit in 2007 and did not reduce them
during the period: Collier, Lee, Orange, Osceola, Palm Beach, Pasco, St. Lucie, St.
Johns, Sarasota and Volusia. Characteristics of the 20 counties utilized in the analysis are
summarized in the following table. A number of counties had to be excluded for a
variety of reasons (the excluded counties, their characteristics and reasons for exclusion
are provided in Table 2 at the end of the paper).
4 Mike Secor, President, Highlands County Builders Association, CentralFloridaPolitics.com, posted on
June 17, 2009 by Heath.Whiteaker 5 TCpalm.com, March 16, 2010 6 There is no “standard” unit of nonresidential development comparable to the single-family house for
residential, fees vary significantly for various types of nonresidential development, and building permit
data is much more difficult to acquire. 7 Wakulla County was identified as charging impact fees, but was not included in the 2007 survey.
Figure 1. Sample Counties
3
Table 1. Summary of Sample Counties
2008 2000-08 Pop. Fee %
County Population ChangeGrowth Before After ChangeBefore AfterChange
Fee Reduction Counties
Brevard 556,213 79,983 17% $9,187 $4,834 -$4,353 2,039 1,129 -45%
Charlotte 165,781 24,154 17% $8,380 $4,002 -$4,378 932 271 -71%
Citrus 142,043 23,958 20% $9,314 $6,920 -$2,394 933 154 -83%
Highlands 100,207 12,841 15% $5,218 $0 -$5,218 918 68 -93%
Indian River 141,667 28,720 25% $9,877 $8,185 -$1,692 1,130 269 -76%
Manatee 317,699 53,697 20% $15,529 $5,499 -$10,030 1,086 1,181 9%
Martin 143,868 17,137 14% $11,511 $9,839 -$1,672 318 143 -55%
Nassau 71,915 14,252 25% $6,211 $3,726 -$2,485 626 288 -54%
Polk 585,733 101,809 21% $13,415 $9,765 -$3,650 3,854 1,199 -69%
Average 247,236 39,617 19% $9,849 $5,863 -$3,986 1,315 522 -60%
Non-Reduction Counties
Collier 332,854 81,477 32% $24,428 $28,416 $3,988 1,069 760 -29%
Lee 623,725 182,837 41% $15,503 $15,310 -$193 4,356 1,118 -74%
Miami-Dade 2,477,289 223,510 10% $6,157 $7,999 $1,842 3,246 913 -72%
Orange 1,114,979 218,635 24% $12,217 $18,067 $5,850 4,053 2,199 -46%
Osceola 273,709 101,216 59% $17,941 $18,173 $232 2,389 784 -67%
Palm Beach 1,294,654 163,463 14% $11,367 $11,367 $0 2,101 1,279 -39%
Pasco 438,668 93,900 27% $11,686 $16,828 $5,142 2,052 1,006 -51%
Sarasota 276,585 83,890 44% $12,203 $12,203 $0 1,129 535 -53%
St. Johns 393,608 67,647 21% $9,605 $10,122 $517 2,139 1,225 -43%
St. Lucie 426,413 61,214 17% $8,729 $9,602 $873 1,690 269 -84%
Volusia 510,750 67,407 15% $9,108 $9,108 $0 1,520 654 -57%
Average 742,112 122,291 20% $12,631 $14,290 $1,659 2,340 977 -56%
All County Avg. 519,418 85,087 20% $11,379 $10,498 -$881 1,879 772 -58%
Single-Family Fees Single-Fam Permits
Notes: Some “after” fees changed in 2010 as follows and are not reflected here: Citrus suspended road fees 5/26/2010 ($1,577
reduction); Martin suspension of all fees except roads and schools ended 10/1/2010 ($4,749 increase); Collier reduced road and
park fees in 10/2010 ($3,671 reduction); St. Lucie increased some fees on 10/1/2020 ($1,662 increase)
Source: Population from University of Florida, Bureau of Economic and Business Research, Florida Population Studies, Vol. 42,
Bulletin 154, June 2009; single-family fees “before” from Duncan Associates, 2007 National Impact Fee Survey, August 2007; single-family fees “after” from Duncan Associates survey, October 2010; single-family building permits issued from U.S. Census,
http://www.census.gov/const/www/permitsindex.html (“before” is 2007 calendar year, “after” is August 2009 through July 2010).
All of the sample counties experienced significant population growth between 2000 and
2008. The fee-reduction counties tend to be considerably smaller than the non-reduction
counties (average population of 247,236 versus 742,112). All of the counties had
relatively high impact fees in 2007, averaging almost $10,000 per single-family unit in
the fee-reduction counties, and over $12,000 in the non-reduction counties, with none of
the counties charging less than $6,000 per house. The fee-reduction counties reduced
their single-family fees by an average of almost $4,000 from 2007-2010, while the non-
reduction counties on average increased their fees by about $1,600. Consistent with the
state-wide trend, annual single-family permit issuance declined from 2007 to the 12-
month August 2009-July 2010 period in all counties but Manatee, with the average
decline among fee reduction counties slightly higher than among the non-reduction
counties (60% versus 56%).
4
The average percentage change in permit issuance between fee reduction and non-
reduction counties does not suggest a strong correlation between fee reductions and an
increase (or a lower decline) in building permit issuance. However, the averages conceal
large variations between counties. To take into account those variations, it is necessary to
employ linear regression analysis. Regression analysis plots a line that most closely fits
the data, and produces statistics that indicate the percent of variation explained (r-square),
and the level of confidence that the relationship is not a random one (f-statistic).
Regression Analysis Results
If fee reductions do stimulate increased
development (or at least slow declines in
permit issuance), one would expect to see
a negative correlation between fee
increases and changes in building permit
issuance. In other words, an increase in
impact fees should be associated with a
greater percentage decline in permit
issuance, while a reduction in impact fees
should be associated with an increase (or a
lower decline) in the rate of permit
issuance. To test this hypothesis, a linear
regression analysis was performed, with
the independent variable equal to the
absolute change in the amount of impact
fees and the dependent variable equal to
the percent change in building permit
issuance. The results indicate that there is
no significant relationship between the
two variables. While the coefficient has the predicted sign (negative, indicating an
inverse relationship), it is very small (a $1,000 decrease in impact fees is associated with
0.7% more building permits), explains only 1% of the variation, and has a 64% chance of
being a random relationship.8 Plotting the data, as shown in Figure 2, reveals the extent
to which Manatee County is an outlier.
8 The linear regression equation is y = -0.00000694 x– 0.582, the r-square is 0.0126, the f-statistic is 0.637
and the t-statistic for the x coefficient is -0.480
Figure 2. Fee Change vs. Permit Change
5
Running the regression analysis without
Manatee County results in a weak but
statistically significant relationship in the
opposite direction. The equation explains
22% of the variation, and there is only a 4%
chance of a random relationship. The
equation indicates that a $1,000 increase in
impact fees is associated with 2.6% more
building permits being issued.9 The
researchers do not suggest that the results of
this regression analysis indicate causality (i.e.,
increases in impact fees stimulate
development), particularly since it was
necessary to exclude the one county that
reduced its fees the most and experienced an
actual increase in building permits in order to
achieve this result. Nevertheless, it clearly
shows that the opposite relationship is not
supported by these data.
Conclusion
This analysis has been unable to confirm any statistically significant relationship between
impact fee reductions and higher rates of building permit issuance for single-family
development. This finding will certainly not end the debate about the effects of impact
fees on development activity, but hopefully it will inject some rationality into a discourse
that up to now has been largely dominated by wishful thinking.
9 The linear regression equation is y = 0.00000262 x– 0.600, the r-square is 0.2225, the f-statistic is 0.041
and the t-statistic for the x coefficient is -2.206
Figure 3. Fee Change vs. Permit Change
(Excluding Manatee County)
6
Table 2. Impact Fee Counties Excluded from Analysis
Growth
County 2008 Pop. 2000-08 2007 2010 Notes
Counties that both adopted and suspended fees during the period
Clay 185,168 31% $7,034 $7,034 rd fee adopted 1/1/09, suspended 2 yrs eff. 1/1/2009
Columbia 66,121 17% $0 $0 fees adopted 2/2008; suspended 1/1/2009
Counties that reduced fees during period, then increased them
Wakulla 30,717 34% ? ? 1 yr suspension 9/2008, fees reinstated 3/17/2010
Counties that reduced fees after the period
Hernando 164,907 26% $9,238 $4,862 rollback all fees to 2001 levels for 1 yr eff. 12/1/2009
Lake 288,379 37% $10,026 $10,127 rd fees suspended 1 yr eff 3/1/2010
Marion 329,418 27% $5,714 $4,254 road fees suspended for 1 yr eff. 1/1/2010
Counties with relatively low fees in 2007
Alachua 252,388 16% $2,508 $5,776
Broward 1,758,494 8% $2,718 $5,731 road fee could not be determined
Gilchrist 17,256 20% $3,500 $3,500
Hillsborough 1,200,541 20% $3,878 $5,878
Levy 40,817 18% $1,249 $1,249
Santa Rosa 181,180 47% $1,801 $0 1 yr suspension eff. 2/19/2009, later extended thru end of 20
Seminole 144,136 22% $2,635 $6,251
Sumter 93,034 74% $2,393 $2,997
Low-growth counties
DeSoto 34,487 7% $9,212 $0 suspended all fees 1/1/2008
Glades 11,323 7% $8,143 $0 suspended all fees on 11/24/2008 until 12/1/2010
Hardee 27,909 4% $2,628 $2,628
Monroe 76,081 -4% $1,534 $1,534
Pinellas 938,461 2% $2,066 $2,066
Putnam 74,989 6% $7,023 $0 all fees suspended for 2 yrs eff. 3/1/2009
Counties for which building permit data not available
Flagler 95,512 92% $5,307 $5,307
Hendry 41,216 14% $7,591 $0 all fees suspended c 9/2008, extended 2/24/09 until 1/1/2011
Single-Family Fees