HomeMy WebLinkAboutResolution 4423 adopting Fire-EMS impact fee study1
Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Chris Saunders
SUBJECT: Commission Resolution 4423 adopting the update to the Fire/EMS impact
fee study to establish methodology, and document required information to conform to statute,
and determine the generalized average cost per unit of service.
MEETING DATE: December 10, 2012
AGENDA ITEM TYPE: Action
RECOMMENDATION: Adopt Commission Resolution 4423 adopting the updated Fire/EMS
impact fee study [also known as a service area report] as presented.
SUGGESTED MOTION: Having received and considered the updated study for Fire/EMS
impact fees, the recommendation from the impact fee advisory committee, and having heard and
considered public comment I move to approve Commission Resolution 4423 adopting the
September 23, 2012 draft of the Fire/EMS Impact Fee Study.
BACKGROUND: The City operates a municipal fire department with three stations and three
engine companies and a ladder company. The department also provides and receives mutual aid
and specialty services to and from surrounding areas. The fire department requires funding for
maintenance and operations to serve existing users, and also funding to expand the system to
serve future users. Funding for operations and maintenance comes primarily from the general fund taxes and special purposes levy charged to properties within the City. This includes funding
for both daily operations such as wages and supplies and for the replacement of existing capital
goods. The City expends approximately 4.5 million dollars per year operating the fire
department. The large majority of those costs are for personnel. Capital goods are generally
defined as having a service life in excess of 10 years and are physical items such as stations, command vehicles, the training facility and other equipment such as portable defibrillators. The
City voters have authorized an on-going special property tax levy to replace existing capital
equipment as needed.
Capital expansion of the system is achieved by combined funding sources such as impact fees, general property taxes, and applicable grants which occur infrequently. All these funding sources
must work together to provide the reliable and adequate service needed for a healthy community.
Coordination is provided through the 2006 Fire Protection Master Plan and the annual capital
improvement programming system as well as the operational oversight of the staff and
Commission.
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This memo discusses one element of the overall funding structure for the fire department, impact
fees. Bozeman initially adopted impact fees in 1996. Most recently the fee studies were updated
in 2007. The present fee study began in 2011. Impact fees have helped the City provide needed
services during high, moderate, and slow growth periods. The memo is structured in sections identified by letter. Each section addresses an individual topic. The majority of the sections are focused on the content of the new fee study, the presentation of information that occurred on
October 8th, and related questions. Section F identifies questions and issues that will be
addressed with implementation. Many of these items interrelate to other issues, programs, and
standards. These interrelationships are often complex and on-going. These items do not all need to be resolved prior to acceptance and adoption of the fee studies.
The sections are:
A. Responses to questions from October 8th
B. Summary History C. Process D. Common Study Elements and Changes
E. Fire specific items
F. Issues for Future Discussion and Implementation
Sections: A. Questions from October 8th:
1) Why is there a deficiency? See the discussion on this subject in Section E, page 5.
2) How to set the level of service – what is the best metric to use? The fire service has some of the most complicated measures of service with the type of response; e.g. structure fire, vehicle collision, or cardiac arrest, changing for each call and needing different numbers
and types of personnel and equipment. Although the stations are geographically
distributed to provide the shortest response time as possible, the various stations all
interact in providing services. The ISO rating only looks at fire response, not emergency medical services (EMS), or other emergent responses. Emergency medical represents the majority of the calls for service. Response time for first unit on scene is the primary
indictor in measuring response capability. The City Commission has adopted a 5-7
minute response time standard. Response time is made up of two components, turn out
time (the time from alarm to the truck rolling out the door) and travel time (the time it takes to physically drive to the address) This indicator is for first apparatus on scene. As our community continues to grow the instances of concurrent events, and calls where the
response time is not met, become more frequent. There is no perfect single measure that
will capture all of the nuances. The most appropriate approach is a hybrid that heavily
weights adopted minimum response time with numbers and types of calls, geographic location, resources required by call type, and equipment density. The area of our community where the response times are routinely beyond the adopted minimum would
be where we would consider our next station. The analysis to do this would reasonably be
included in an update to the Fire Protection Master Plan.
3) When do we need station number 4? When our average response times go beyond the
commission adopted standard response time. Assuming the relationship between
population and structure area is used, the probable due date would be in 2017. However,
there are also other ways to help meet those needs such as basing a second engine or an
EMS vehicle at station three. This would provide ability to respond to calls without an additional physical station. This illustrates the challenge of establishing adequate service
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measures. At some point the amount of additional equipment and staffing would exceed
the ability to be hosted at existing buildings.
The question of when to build the next station also involves when the funds are available to construct and staff it. The impact fee is paid as construction which causes new demand occurs. This can cause a cash flow difficulty as the need for the station happens before
the full amount of the funding to construct the station can be received. It is therefore
likely that funds would need to be borrowed and the debt repaid with future impact fees.
This is similar to how we funded Station Three. However, statute does not provide for issuing bonds against future impact fee revenues so the general fund must stand as security for the bonds.
If the construction of the station is deferred in order to collect funds and reduce
borrowing some may claim that a reduction is service level has occurred which must then be reflected in future fee calculations. However, the payment of the fee is itself a manner to prevent service levels from falling in that it has mitigated the demand for future service
by contributing the proportionate share to a future station. Therefore, the collection of the
impact fee should hold the level of service determination stable even if the physical
construction is deferred for a time.
4) Why is the residential fee amount so different? – This answer requires comparison of key
factors from the previous and proposed fire impact fee studies. One important factor is
the growth share, which is higher in the proposed fees (75%) than in the previous study
(36%).
Even though the recommended growth share is higher, the fee amounts for residential
development have decreased due to a major change in the growth assumptions. The
previous study allocated the growth cost to an increase of only 11,625 persons. The
proposed study is allocating the growth cost to 49,977 persons. A greater number of
persons equals a greater number of homes divided into the same overall costs, which is the reason for the decrease in the fees for residential development.
For nonresidential development, there is also a big difference in the demand units, but the
relationship is reversed. The previous study allocated the growth cost to an increase of
21,258,000 square feet of nonresidential development. The proposed study allocates the
growth cost to an increase of 16,910,000 square feet of nonresidential development. This places the costs against a smaller building area which is the reason for the increase in the fees per unit of measure for nonresidential development.
B. Summary History: The City funds its water, sewer, fire/EMS, and transportation systems
with multiple funding sources including impact fees. The City of Bozeman initially adopted impact fees in 1996. Fees were initially adopted at a fraction of the calculated cost of service to provide a transition period. The percentage of the fees collected has
varied by time and type of fee. It is necessary from time to time to update the study which
documents and sets the upper limit for the unit costs for each type of impact fee.
The City adopted updates to the various facility plans which provide much of the base information for the impact fees for transportation in 2001 and 2009, fire in 2006, and
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both wastewater and water in 2007. The City retained consultants in 2006 to update the
fee studies. The four fees were updated and adopted over the following 14 months.
The City has adopted a three year cycle to update the impact fee studies and a five year
cycle to evaluate and if needed update the facility plans. In 2011, the City began the consultant selection process to again update the impact fee studies. TischlerBise was selected as the consultant for this update cycle with the contract being signed in June
2011.
C. Process: The City conducted a request for qualifications followed by a request for
proposal process to select a consultant to assist the City in updating the four fees. A contract with the selected consultant, TischlerBise, was completed on June 29, 2011. Since that time, the consultant has been collecting and reviewing data, preparing analysis
and draft reports, and meeting with Staff and the Impact Fee Advisory Committee
(IFAC). The IFAC is the body required by statute and formed by local resolution to
advise the City Commission relating to impact fees.
The IFAC conducted public hearings on August 16th and September 13th to hear input
from members of the public on the draft impact fee studies. After conducting the public
hearings the IFAC voted on motions to recommend approval of the individual fee studies.
The Committee recommended favorably on all four studies having found that the studies
were consistent with the requirements of state law regarding impact fees. The minutes of the IFAC hearings are attached and provide greater detail on their actions. Minutes of all
of the IFAC meetings are available through the Planning Department.
On October 8th the City Commission received the reports and heard a presentation from
TischlerBise regarding the reports. No action on the studies was taken. The meeting was
for receiving information, hearing from the public, and formulating questions from the Commission to be answered at a future meeting when all Commissioners are present.
The Commission set November 26th for follow up action on the water study. This action
was moved to December 10th. The Commission passed Ordinance 1843 making structural
changes to the impact fee ordinance language which will be in effect on December 5th.
These changes specify that adoption of the new water impact fee study is by resolution. A draft resolution has been prepared for Commission action should the Commission wish to
take action on December 10th.
A resolution of the Commission can be effective immediately. Staff recommends a delay
in the effective date of the implementing resolution in order for implementation
procedures to be set up and information to be provided to the public. Staff recommends the effective date to be January 1, 2013 and the draft resolution includes that effective
date.
D. Common Study Elements and Changes: Each fee is the subject of an independent study
as each fee is legally independent of the others and relies on different data and demand
characteristics. The introductory material in each study is very similar. There are three main sections of each report: 1) Introduction to impact fees, 2) Impact fee calculations for
each fee type, and 3) Implementation and administration. The second section of the report
contains the data sources and analysis and presents the resulting fee calculation broken
into cost per demand unit. This section will be most interesting to most people.
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Several significant changes are occurring with this round of impact fee updates. Data was
available on home sizes from the MT Dept. of Revenue for the first time. This in
conjunction with other data sets enabled the consultants to perform analysis to document
certain demands for service by home size. Please see the Setting the Stage document for this analysis on home size and occupancy. They were then able to expand on this analysis with each individual fee study for those elements unique to that fee type as documented
in Appendix A of each study.
All four of the fee types now base residential fees on expected occupancy per size of
home. The same home size range was used for all four fees with a lower end of 1,400 square feet and an upper end of 3,000. The range is broken into 200 square foot increments so movement between increments will result in a small impact fee charge.
The consultant had analyzed the home range originally for detached and attached home
styles. After discussing the results with the IFAC it was decided to consolidate the two as
there was a substantial amount of overlap between the size increments. There is also a special residential category for group living which is distinguished by population rather than dwelling area. The occupancy level per home in the studies reflects the population
spread across all housing units constructed from 1990 to 2010. This represents demand at
any given point in time and accounts for vacancies without being tied to a particular
vacancy rate. As a result the occupancy per home used in the calculation is slightly less than the actual number of residents expected to live in an occupied dwelling.
These are averages over large samples of the City housing stock. Therefore, some homes
will have different demands above or below the average at any given point in time.
However, the overall system should equalize to the average. This occupancy approach
has the effect of recognizing the differences which come from smaller and larger homes and reducing fees on smaller units which generate less demand. This appears consistent with the City’s overall encouragement for land efficient development.
Because of this change all residential fees are on home size. Attached and detached
homes are no longer separate categories. Affordable housing distinctions to individual
categories are also removed since the primary difference was also related to size of homes.
Several examples of how these different approaches to the fee apply to development are
attached. There are both residential and non-residential examples for different intensities
and types of development as well as for the downtown area which is subject to special
standards.
E. Fire specific study elements and changes
Use categories: The fire impact fee uses the same approach to residential as used in the
other fees. This consolidated two categories and changed to the dwelling size based
approach discussed above. The non-residential categories were divided into four separate
categories after the current analysis found significant demand differences between them. The costs across non-residential categories show significant spread which directly reflects
the demand for services.
Existing Unmet Capital Needs [deficiencies]: The consultant concluded that a portion of
the remaining facilities to be constructed over the full build out of the fire master plan
should not be paid for with impact fees. They found that this amount was one quarter of
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the remaining facilities and does not select how to divide that amount. The remaining ¾
could be paid for by impact fees.
This issue generated more discussion at the IFAC than any other during the update process. First, it is important to recognize that this question is not one of inadequate operational quality of service but of why there are unmet capital needs for the Fire
Department. There are several parts to this answer.
The fundamental challenge is the difficulty in finding a single measure which represents what total capital needs are. This is affected by the density of development, physical location, road networks, type of services delivered, and the infrequency with which major
capital purchases are made. Unlike water and sewer when new piping must be extended
with each new home, fire stations are fixed in their location and the fire truck comes to
the point of service. In the absence of more refined data the consultant used the relationship between building area in the fire stations and the population of the community.
Second, there are some existing areas of the City which lie outside of the present adopted
travel time standard. These areas would potentially receive shorter response times if properly located new stations were constructed. Third, the City did not collect the full cost of service for the fire impact fee from its inception in 1996 until 2008. This left a
short fall in funding. Fourth, due to lengthy litigation there was an extended delay in
updating the fee studies during a time when construction costs significantly increased.
A small amount of fire impact fees, less than $20,000, were also used to match a significant federal grant to install traffic preemption for traffic signals and fire trucks
which enables them to reach their destinations more safely and efficiently. This was a
legitimate use of the funds. However, the match used some money from the Fire Impact
Fee Fund which was then not available for future projects. The traffic signal project occurred after Station Three was built so this use of funds impacts the next set of capital purchases.
The fire impact fee is unusual due to the infrequency with which capital is acquired e.g.
stations are constructed or new engines purchased. As described in Section 4 on page 7 of the study, the time separation between constructions in Bozeman has varied between 90 and 34 years apart. This means that more than any other form of infrastructure the
infrastructure needed to provide service shows the greatest swings from just before and
just after construction. The physical city does not have the same radical leaps in
annexation or population change.
The fire service also has some of the most complicated measures of service capacity with the type of response; e.g. structure fire, vehicle collision, or cardiac arrest, changing for
each call and needing different numbers and types of equipment. Although the stations
are geographically distributed to provide a soonest time response option, the various
stations all interact in providing services. There are also opportunities to improve service response. These include nearest unit dispatch becoming available with recent improvements at the 911 center. In addition, there was not a formal fire facility plan in
place in 1996 when the impact fees were adopted.
As a result of these complexities, it was more difficult to identify and document what
constituted the established level of service to evaluate whether there was any existing
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deficiency in service and to measure ability to provide additional service. Change in ISO
rating is noted which rating was recently upgraded. ISO only looks at fire suppression
and doesn’t include emergency medical responses. After consideration, a relationship
between square footage of fire stations and populations was used by the consultant to attempt a single measure to identify overall service capacity.
The fire facility master plan was adopted in 2006 and identified an eventual need for five
additional stations to be constructed to meet the eventual needs from the service
population by the end of the planning period. The first of those stations was constructed
in 2008 primarily with impact fees but a loan backed by the General Fund was also needed to meet project financing requirements. Four more stations are called for as need occurs. Based upon the future demand the consultants concluded that although the City
does not presently have a deficient service capacity but that a need for more capital
investment may occur before the next station can be built with collected revenues.
Therefore, in order to manage cash flow for station construction it is probable that bonds or other borrowing would be needed to build the fourth station.
The 911 system, funded by existing taxpayers, also added the capability to do “Closest
Available Dispatching” without contribution from development impact fees. It is still
early in data collection but it is anticipated that this capability has assisted in decreasing
average response times across the city. The City has also acquired land for station four independent of the impact fee program and this value would meet some of the non-impact fee contribution required.
As shown in the minutes from the IFAC, there was vigorous debate on the findings of the
consultant. Possible means to address these finding is discussed under Section F.
Alternative: Discussion with the consultants after the October 8th meeting has identified an alternate approach to the study. TischlerBise could revise the latest draft of the Fire Impact Fee Study (dated 09/23/12) to derive fees for two geographic areas. Rather than a
citywide growth share (also known as proportionate share) of 75% for future stations, the
revised study will derive distinct factors for land near to, and farther from, existing
stations. Land near stations will likely have a lower proportionate share, to be determined by City staff’s GIS analysis of the current ratio of vacant acres to total acres within the geographic area. Land farther from stations will probably be assigned a 100%
proportionate share factor.
The revisions to the Fire Impact Fee Study to use two geographic areas could likely be
completed within one week of receiving the GIS analysis indicating the current ratio of vacant to total acres within the area close to existing fire stations. The cost to revise the study is $5,200, excluding the cost of an optional additional trip to Bozeman to present
the revised study. The cost of the additional trip to Bozeman is $3,200.
This alternate approach would be somewhat similar to that used for the transportation
impact fee trip exchange district. A location near to existing stations would be expected to have less need for new infrastructure than one far away. The response needed to an EMS call generally requires one engine company. A response to a home structure fire
generally requires three. As the City goes beyond a three station system it may be timely
to begin to consider whether a multi-zone system in merited. There is no assurance that
the conclusion of the analysis would show an overall difference in the total percentage of the future station costs which could be covered by impact fees.
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F. Issues for Future/Additional Discussion related to Fire/EMS. Several of these items are
generally applicable to all impact fees and are repeated with each individual Commission
cover memo. Notes on action are shown at the end of each segment in italic text.
Facility Plan: As described in Section E, there is a question on future unmet capital needs for the Fire/EMS impact fee. One of the possible remedies to the confusion is an update to the facility plan to more precisely document existing conditions, service capacities, and
to establish a more robust set of service capacity metrics. The current plan was adopted in
2006 and is our oldest facility plan. An update could also provide an opportunity to more
clearly establish level of service standards reflecting the diverse missions and activities of the Fire Department in a way that will simplify future impact fee updates. As with all facility plan updates, much of the present information would move forward. Adjustments
can be made to account for activities which have taken place since the last plan such as
the building of Station 3 and additional roads which change travel routes. Finally, new
and updated information can be used to evaluate how best to measure service delivery.
Generally Applicable Items
Capital Improvements Program (CIP): One of the responsibilities of the IFAC is to advise
the Commission regarding the spending of impact fees. This is fit into the regular CIP
document which the City Commission considers and adopts annually. The CIP covers a
rolling six year window with the current budget year and five future years. A point of discussion at the IFAC is the relative merits of how to list projects on the CIP.
Three options were discussed. First, having a short list of high priority projects which are
all funded and leave no material uncommitted funds and no unfunded projects on the list.
Second, have a lengthy list of projects which are impact fee eligible but which
collectively are beyond the five year financial reach of the program in order to communicate possible options for the future. Third, have a short list of high priority
funded projects and deliberately leave an uncommitted balance in the program to enable
the City or individual developers to ask for partner funding as opportunities arise. No
action is required related to the study on this item. This is more of a preference for the
Commission to express as it considers the CIP update.
Credit management: One of the public comments during the public hearings before the
FIAC was related to how credits are managed. This is related to the CIP item above. The
current approach used by the City requires CIP listing prior to work being eligible for
funding with impact fees either as a city project or as a developer request. The request
was to allow as credit projects all qualifying work whether or not CIP listed and would establish the value of credits available based on the CIP listed values. Staff has
considered this option and believes it would cause several difficulties in managing the
impact fee funds and in showing that fees were expended appropriately. No action is
required related to the study on this item. This change would require an ordinance.
Data tracking: The revised approaches for assessing the impact fees by home size will require additional data tracking. Coordination among departments will be needed to
ensure consistent collection and retention of the needed information. It is believed that
this can be accomplished with existing software tools. No action is required related to the
study on this item.
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Facility Plan and Impact Fee Study Updates: As noted above, the City relies upon its
facility plans as essential information in preparing and administering the impact fee
program. The City has completed several major projects in the various plans and in some
cases the documents were prepared several years ago. The City’s ordinance requires a periodic review, and if needed update, to these foundation documents. It is likely that
updates to the water, wastewater, and fire facility plans will be needed before the next
impact fee update. These are major endeavors and use a lot of staff and commission time
and financial resources. It is advisable to begin this process soon so as to be completed
before the next required study update.
The City has established a schedule of updates in Section 2.06.1700.J, BMC. This schedule was put in place at a time of high growth rates and when the impact fee program
was new. The impact fee and facility plan updates require significant investments of
money, staff and Commission time, and time from the public. It is recommended to
consider the possibility to lengthen the cycle time. Recent inquiry to Missoula shows that they don’t have a fixed update cycle for their impact fees studies but do so about every five years. There are advantages to coordinating the processes to review and update the
monthly service rates and the impact fee study updates. No action is required related to
the study on this item. Changes to the update schedule requirement require an ordinance. No action on this item is required before adopting the updated fee study.
Deferred payment: A member of the IFAC raised the question of timing of the required
payment of impact fees. Presently the fees are due at issuance of building permit or
connection to water or sewer systems. The Commission has considered this issue several
times before and concluded the benefits were not adequate to justify the change. It is
important to remember in discussing this topic that the amount of immediate impact varies among the different fees. The individual fees may be treated differently for the
manner in which they are collected although this would add complexity. An additional
matter is whether there is a minimum threshold of cost below which fees would not be
deferred. Additional discussion on this item is presented under the economic
development segment below. A change of timing for required payment of fees would require an ordinance.
Economic Development Considerations
How does the implementation of a revised impact fee methodology synchronize with the
Commission’s established economic development goals, priorities and policy initiatives? Specifically, how will the application of a new impact fee methodology impact the
implementation of the adopted economic development plan?
It is important to discuss if, and how the implementation of a new impact fee
methodology will complement, or challenge, other guiding economic development
principles and priorities of the Bozeman City Commission. For context please refer to the City’s broad economic development policy direction shown in Sections 1 – 4 below.
Section 1.
The adopted 2012 – 2013 Work-Plan includes the following priorities:
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1. Implement the adopted economic development plan, integrating
economic development principles throughout the organization;
2. Adopt comprehensive strategies and financial plans to address
deferred maintenance;
3. Improve parks and recreation amenities;
4. Complete an integrated water resources plan;
5. Create a storm-water utility;
6. Enhance downtown development opportunities;
7. Support Gallatin College programs;
8. Implementation of the community climate action plan; and
9. Develop a legislative agenda.
Section 2.
In 2009 the Bozeman City Commission adopted its first economic development plan. Since adoption, the City’s Economic Development Council and city staff implement programs, practices and partnerships that add value to the City’s economic development
efforts and builds capacity to serve more businesses in the area. The tenets of the
economic development plan are:
1. Support the expansion and retention of existing businesses and economic clusters that will continue to strengthen and diversify the economy and create higher paying jobs in Bozeman.
2. Maintain and upgrade infrastructure to support current and future
needs of business.
3. Support education and workforce development initiatives to provide Bozeman with the qualified workers to meet the needs of business.
4. Leverage local, state and federal economic development resources
to enhance economic growth in Bozeman.
5. Create a more collaborative and effective working partnership between the business community and the City of Bozeman and effectively manage the City of Bozeman’s regulatory environment
to accomplish goals without hindering business expansion and
economic growth.
6. Maintain the high quality of life that is considered an important asset to the business community.
Section 3.
Additionally, from the adopted plan, the EDC delineated the following priorities
and recommendations:
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1. Commitment to a business-friendly process with a focus on
retention and expansion of existing local businesses.
2. Stabilize existing local incubators and create a full service business
incubator program to achieve a healthy business ecosystem.
3. Core Services and Infrastructure.
4. Identification and Establishment of Business Incentives.
5. Workforce Development.
Section 4.
The City of Bozeman’s economic development goals are rooted in a job creation and industry diversification strategy adopted in the 2009 Economic Development Plan. The City has determined that supporting the start-up, growth or relocation of the following
high growth potential sectors will create high paying jobs and add diversity to the local
economy:
1. Manufacturing and fabrication;
2. Bio-Sciences and Bio-Technology;
3. Hi-Technology ;
4. Photonics; and
5. the Outdoor industry.
Support for high growth potential sectors includes creating partnerships where others can take the lead in areas of workforce training, appropriate incentives, business resources. The City has taken the lead on streamlining the development review process and
facilitating economic growth by strengthening and creating partnerships and matching
businesses with resources.
Impact Fees and Economic Development
New development relies upon the availability of infrastructure to move forward in a
timely manner. Delay can be a strong disincentive to investments. Impact fees help
provide infrastructure in a timely manner thereby avoiding delays. Impact fees help
provide predictability in short and long term cost structures to business by identifying
costs up front and avoiding unplanned large tax or user fee increases in the future. Different users are more or less sensitive to the known and upfront costs compared to
more predictable long term costs over the average business lifecycle. The impact fee
ordinance makes allowance for the City to provide financial support to offset the effects
of impact fees on desired development. The City can take advantage of this to focus
efforts on desired economic sectors. The change in the transportation impact fee to consolidate non-residential uses for initial use and reuse should be supportive of reuse
and redevelopment in existing facilities.
A well integrated policy and regulatory environment is advantageous for both the public
and private entities who work with the regulations. The effect of the new impact fee
methodology on the adopted work plan and implementation of the City’s Economic Development Plan should be considered in the overall impact fee implementation discussion.
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Ideally, in its’ consideration of the implementation of an impact fee policy, the
Commission discuss the synchronization of the impact fee program with the
Commission’s established economic development goals, priorities and policy initiatives.
The Economic Development Council (EDC) discussed the issue of impact fees on numerous occasions, hosting various experts on the issue. Through their staff liaison, the
EDC submitted the following discussion points for Commission consideration:
1. Prepare materials to educate potential investors, business owners and
entrepreneurs, on the short and long-term investor-advantages of charging impact
fees when compared to other fee recovery solutions;
2. Identify specific sectors, job creating, industry diversifying sectors with high
growth potential, for deferral of commercial impact fees, or a percentage thereof,
until the application for Certificate of Occupancy.
i. Manufacturing and fabrication (industrial production, in which raw
materials are transformed into finished goods on a large scale
which may include but are not limited to textiles, outdoor goods
and products, bio-science and technology products and photonics)
ii. Bio-Science and Bio-Technology (including but not limited to
technological applications that use biological systems, living
organisms or derivatives thereof, to make or modify products or
processes for specific uses)
iii. High-Technology (including but not limited to aerospace, artificial
intelligence, information technology, electrical engineering,
information systems, nanotechnology, nuclear physics, robotics
and telecommunications)
iv. Photonics (including but not limited to laser manufacturing,
advanced measuring devices, biological and chemical sensing,
medical diagnostics and therapy, display technology, and optical
computing)
v. the Outdoor industry (active outdoor recreation businesses
including but not limited to manufacturers, distributors, suppliers,
marketers, sales representatives and retailers in the industry)
3. Commit to training and educating employees that interface with investors and
developers because there is value in appreciating that the City competes locally,
regionally and nationally to attract new and retain existing business. City
attitudes, customer service, professionalism and shared values for business
attraction and retention each play a part in the business decision. Economic
development is everyone’s business.
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4. Regularly compare the City’s development fee schedule against the development
fee schedules of other communities;
5. Identify specific sectors (see sector details in 2. i – iv above) for targeted impact
fee assistance.
6. Work deliberately to make raw land developable as appropriate (with respect to
subdividing and infrastructure development);
Options to address EDC comments:
Comment 2: There are several options for changing the time fees are due. Changes in payment
timing should likely be made uniformly across all users. Careful legal review would be needed to
restrict procedural benefits to only some users.
1) The time of payment was originally set prior to permit issuance as it provides the most surety of payment prior to impacts on the systems beginning. This timing of payment is the current
standard. The city has the funds in hand and can therefore have the greatest ability to carry
forward construction of necessary improvements to meet demands for service. Payment prior
to permit means the fee is paid early in the process. It a project is abandoned after permit
issuance and before construction begins fees can be refunded as no impact has yet occurred. Early payment of a fee requires greater financial commitment by the private party earlier in
the construction process but provides the least risk to the City.
2) The next most reliable time would be prior to issuance of an occupancy permit. An
occupancy permit is certification by the Building Division that the requirements of the
building code have been met and the building is ready for safe use. Not all types of construction which generate new service demand require an occupancy permit and would
therefore need some exception to this timing requirement to ensure fee payment.
The positive argument for this change is that it does not require as much financial
commitment as early in the process which may reduce interest paid on a loan or simplify
financing for certain owner constructed homes. A review of a recent sample of single detached homes showed a time range between permit issuance and certificate of occupancy
of 53-204 days with an average of 132 days. Deferral to occupancy could then possibly
provide an opportunity to avoid interest charges on $9,455 for a median size home and lot
assuming 100% collection of cost of service. Commercial construction is more variable in
demand and is expected to take longer. Therefore no commercial example is provided. As a single point in time payment the occupancy permit approach is less complicated than a
distributed payment.
The negative argument is that it is more likely that a project will reach completion and have
exhausted its available budget and not have the funds to pay the impact fee. The City would
then be in the position of having to deny occupancy of a completed building after significant expense. It may be possible to help mitigate this risk by requiring provision of an escrow of
funds to ensure the fees are held and available although not paid immediately. This would
require development of appropriate procedures both internally and with the lending
institutions. Also, by deferring availability of funds it adds some complexity in planning for
expenditure of the funds. This also has potential for additional stress on Building Division
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personnel who must handle the issuance of the certificates of occupancy and who are the
receiving point for the impact fee payments.
3) A third option is payment over a period of time. Kalispell has set up this process but also
requires payment of any outstanding amounts upon sale of the property. The sale requirement would make this approach less beneficial for many residential projects which sell shortly after completion. Selection of duration of the time period would be up to the City. Use of the
approach requires several steps and has some direct costs for recording documents at the
Clerk and Recorder’s office.
The positive argument for this change is the deferral of costs which reduces the upfront expenses of development. However, it is important to note that this does not reduce the total expenses and if interest on the deferral is charged as Kallispell does may actually increase the
end cost.
The negative argument is that significant additional legal and procedural complexity is added
for an undependable amount of benefit. The additional complexity adds costs to the process of collecting and administering the impact fee program. There is no judicial sanction for this approach at this time in Montana. Contact with Kalispell staff indicates that the option is
infrequently used. Staff does not recommend this approach. A change of timing for required
payment of fees would require an ordinance.
Comment 4: Comparison to Other Communities: Settlement and development of the Gallatin Valley has been actively ongoing since the 1860’s. People have chosen to settle in many different locations for many different reasons and have created several villages, towns,
municipalities and other settlements in our area. These decisions came long before any
discussion of impact fees. Location of resources, costs, service quality, timing of land
availability, and many other factors affect the decision to choose a particular site. At this time three of the four municipalities in the Gallatin Valley have adopted impact fees. A comparison sheet is attached showing Bozeman, Belgrade, and Manhattan; Missoula is also included. This
sheet shows impact fee costs for various types of development. Please note that the orange
highlight shows those costs which are highest in the comparison. Some communities have
reduced the percentage of the fee they collect. The cost comparisons for other communities shows actual collected amounts. The Bozeman column shows actual cost of service as determined by the new studies and does not reflect any reductions. Conversation with the other
communities indicates that they do not have a funding program in place to make up the
uncollected portion of the impact fees.
A second comparison sheet is provided which summarizes costs from three types of non-residential uses: manufacturing, retail, and office. This comparison is based on costs per thousand square feet for sample projects applying the proposed methodology of the four fee
update studies. Please note that for purposes of simplifying the comparisons the actual project
costs are divided to be presented on a cost per thousand square feet although not all fees are
assessed in that manner. The referenced 271 city averages are from the attached impact fee survey by Duncan. Please note the fact that differences in revenue options affects reliance upon any particular funding source. There are a wide range of types of fees and costs of fees imposed
as shown in that study.
A set of four reports produced by the Montana Building Industry Association is also provided.
This set tracks single detached home construction statewide in counties and larger cities. The
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report set is provided on a quarterly basis. The second quarter (April-June) is provided for 2009-
2012. As shown in this data set, even during the significant downturn of the past few years and
as the economic recovery has begun Bozeman has remained more active with construction than
most locations in the state.
Not all fees charged to expand system capacity are called impact fees. They are also called system development charges or system investment fees among other names. These fees can be
charged by water and sewer utility providers under a different statutory authority than the impact
fee program relies upon. Three examples of this are those charged by the Rae Water and Sewer
district west of Bozeman, Helena, and by the City of Billings. Copies of the fee amounts they charge are attached. All these use the equivalent of meter size to determine the fee for various commercial and multi-household developments. Costs vary as would be expected as the
infrastructure necessary to provide service also vary across communities. Note that Billings
made the policy choice to charge a single amount for all residential meter sizes thereby choosing
to undercharge multi-household users.
A comparison and contrast with other communities must also look at more than just impact fees. The following table from the FY2013 City of Bozeman budget depicts mill levy rankings.
City 2010 Census Populations FY2012 Mills Levy Rank As a % of Bozeman’s Levy
Havre 9,310 241.26 1 145%
Missoula 66,788 233.34 2 140%
Livingston 7,044 209.06 3 125%
Great Falls 58,505 183.24 4 110%
Kalispell 19,927 175.93 5 106%
Billings 104,170 168.73 6 101%
Bozeman 37,280 166.75 7 100%
Belgrade 7,389 156.69 8 94%
Helena 28,190 155.82 9 93%
Whitefish* 6,357 120.40 10 72%
West Yellowstone* 1,271 88.21 11 53%
*West Yellowstone and Whitefish both utilize Local Option Resort Taxes as an alternative or
supplement to property taxes, which the City of Bozeman is currently prohibited from doing by state law.
There are many different comparisons between communities on this issue which could be made.
When determining comparisons to make in this report it was decided by Staff that the scope
must, of necessity, be restricted to keep the discussions focused. Evaluation of specific communities outside of Montana brings in additional factors such as different tax and infrastructure financing tools and statues. This increases the level of complexity beyond what
could be achieved with the resources available.
Comment 5: This comment discusses the possibility of creating methods to offset costs for
targeted industries which significantly advance the City’s economic development goals. The impact fee program does not specify who needs to pay the impact fee. Section 2.06.1700.H states that the City may pay impact fees from other funding sources to advance economic
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development. Unlike water or sewer the City does not have a source other than the general fund
form which to draw funds to reduce Fire/EMS impact fees. No change to the impact fee
ordinance would be required to commit general funds to offsetting impact fees. However, such a commitment would likely be done in conjunction with the annual budgetary process.
Comment 6: Impact fees make certain costs of land development explicit instead of hidden in land costs or monthly bills. They therefore help to provide better information for decision
making. They also act to overcome one of the principal barriers to availability of land which is
the lack of needed infrastructure. For example, it is very difficult for a single development to
overcome a barrier such as a needed but not funded traffic signal. However, when costs are shared and that development may pay a small portion of the cost of the needed traffic signal and move forward both time and dollar expenses are reduced. This helps to make land more readily
available for development. Effectiveness of public infrastructure investments can be increased by
more active coordination between long range facility planning, CIP scheduling, and operational
activities in the Public Works, Economic Development and Community Development departments. This does not require any change in ordinance. UNRESOLVED ISSUES: As shown in Sections E and F there are implementation items
needing additional discussion. However, the primary focus of the December 10th meeting is to
decide whether or not to adopt the Resolution accepting the Fire/EMS impact fee study update. Additional discussion and actions will be necessary to carry out the options presented under
Section F of the memo and these may occur after adoption of the study.
ALTERNATIVES:
Study: 1. Adopt the Fire/EMS impact fee study as presented.
2. Delay adoption to a future time.
3. Adopt the Fire/EMS impact fee study with directed changes after having made findings
to demonstrate why the changes are needed.
4. Decline to adopt the Fire/EMS impact fee study and continue to use the study now in place.
Implementation:
1) Discuss the various options described under Section F and give direction on which ones
to pursue further.
2) Defer discussion to a future date.
FISCAL EFFECTS: The fiscal effects of this specific policy discussion are not immediate.
These proposed studies directly impact the amounts the City will collect in Impact Fee revenues
in the coming years. Expenditures of the fees will enable continued new construction which
contributes on-going revenues and which will incur on-going expenses for provided services.
Below are the total Impact Fee revenues collected for each of the past 5 years. The street fee
collection reflects the 40% discount now in place. How much the city collects each year depends
on a number of factors:
1. The level of the fee charged to the developer/property owner. (i.e. 60%, 80%, 100% of the study amount.) and,
2. The mix of projects built in the City each year. (A Drive-Thru Restaurant will have a
higher Street Impact fee than a Single Family Residence; a change in use to remodel an
office might require additional street impact fees but no water impact fees, etc.)
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City Impact Fee Collections FY08 FY09 FY10 FY11 FY12 TOTAL FY08-FY12
Street Impact Fees $1,948,550 $1,198,319 $ 751,223 $1,208,135 $1,090,715 $ 6,196,942
Fire Impact Fees $259,726 $186,690 $187,476 $190,292 $245,250 $1,069,434
Water Impact Fees $1,237,939 $768,363 $744,557 $713,387 $981,095 $4,445,341
Sewer Impact Fees $1,306,893 $663,766 $667,909 $636,878 $986,905 $4,262,351
$4,753,108 $2,817,138 $2,351,165 $2,748,692 $3,303,965 $15,974,068
These studies also affect the policies around how Impact Fees may be spent. For instance,
• if the adopted Fire Impact Fee study only supports 75% contribution to Fire Stations, our
Capital Plans will need to be updated and/or changed to reflect this change in policy. We will need to find another source of revenues to offset 25% of the costs of building future fire stations and purchasing apparatus.
• if the Water Impact Fee study no longer contains an element related to Water Supply
development costs, we will need to change our funding plans for some of the future
IWRP outcomes and projects.
• If the Street Impact Fee Study does not contain collector streets then additional funding
sources must be identified and implemented.
Attachments: Commission Resolution 4423
Fire/EMS Impact Fee Study dated 9/23/2012
The remaining attachments listed below are the same as and provided with the agenda item
materials for the Water Impact Fee and Commission Resolution 4421 and are relevant but are not duplicated with this agenda item.
Impact Fee Advisory Committee minutes from 8/16 and 9/13
Examples of applied and current fees
Comparison of I-90 corridor impact fees Comparison of Bozeman to national averages National impact fee survey 2012
Impact fee reduction Study – Florida 2010
Bozeman building permit history
MBIA housing starts Rae system investment fees Billings water and sewer system development fees
Helena system development fees
Report compiled on: 11/29/2012
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Resolution 4423 Page 1 of 5
COMMISSION RESOLUTION NO. 4423 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, ADOPTING THE FIRE/EMS IMPACT FEE STUDY PER ARTICLE 2.06, BMC.
WHEREAS, the City of Bozeman is committed to addressing the community’s
expressed needs and desires for services; and
WHEREAS, the City of Bozeman is committed to meeting those desires and demands
for services in a fiscally responsible manner; and
WHEREAS, the City of Bozeman is committed to meeting those desires and demands
for services in a manner which recognizes the fiscal and legal interest of all of the system users
now and in the future and not a limited subset of users; and
WHEREAS, the City of Bozeman has developed and adopted a fire services master
plan which examined current and future needs and provides a lawful, logical, balanced,
operationally sound, and cost effective basis upon which to maintain and develop the City’s
transportation system; and
WHEREAS, the City Commission has chosen to utilize impact fees as one element of
an integrated approach to fund and provide fire and emergency medical services (Fire/EMS); and
WHEREAS, Sections 7-6-1601 through 7-6-1604, MCA provide specific authority
and guidance regarding the documentation necessary to establish an impact fee and procedures to
adopt and administer an impact fee; and
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Resolution 4423 Page 2 of 5
WHEREAS, the City contracted with TischlerBise, Inc. to provide professional
services in development of an updated Fire/EMS impact fee study (the “Fee Study”);
WHEREAS, TischlerBise, Inc. reviewed the existing demand and needs for
transportation facilities, the existing facilities available to meet that demand, and the method of
financing the existing systems and needed new facilities; and,
WHEREAS, TischlerBise, Inc. also reviewed the contribution made or to be made in
the future in cash or by taxes, fees, or assessments by property owners towards the capital costs
of Fire/EMS facilities; and,
WHEREAS, TischlerBise, Inc. reviewed and relied upon the City of Bozeman’s level
of service (LOS) standards and facility cost assumptions as established by recently constructed
projects in recommending Fire/EMS impact fees; and,
WHEREAS, TischlerBise, Inc. prepared the Fee Study dated September 23, 2012,
including the assumptions, population and residential and non-residential development
projections, capital infrastructure and impact fee calculations, which study has been submitted to
and reviewed by City staff, Impact Fee Advisory Committee, and City Commission; and,
WHEREAS, in addition to the Fee Study, TischlerBise, Inc. and the City have
prepared, updated, and relied upon other documentation, as required by section 7-6-1602 of the
Montana Code Annotated, in developing the Fire/EMS facilities impact fees adopted pursuant to
this Resolution, including but not limited to the following which has been summarized in the
required service area report:
(1) 2006 Fire Master Plan;
(2) Adopted Fire Impact Fee Capital Improvement Program; and
(3) the City Budget; and
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Resolution 4423 Page 3 of 5
WHEREAS, the Consultant found that there was a likelihood of future unmet capital
needs that impact fees could not be used to correct; and
WHEREAS, the City finds that the imposition of the impact fee and collection of
impact fee revenues is mitigation of service demand which blocks any further deterioration in
unmet capital needs; and
WHEREAS, the City develops its Fire/EMS facility plans, and its capital
improvements program in a manner open to the public and accepts and responds to public
comment and input; and
WHEREAS, the City and TischlerBise Inc. developed the Fire/EMS impact fee study
in a manner open to the public and accepted and responded to comment and input; and
WHEREAS, the City of Bozeman Impact Fee Advisory Committee has considered
and made a recommendation to the City Commission on the Fee Study; and
WHEREAS, the Impact Fee Advisory Committee conducted public hearings on the
subject of the transportation impact fee study on August 16, 2012 and September 13, 2012, and
the City Commission conducted a public hearing on October 8, 2012, and a public meeting on
December 10, 2012; and
WHEREAS, public comment was received and considered; and
WHEREAS, the City Commission reviewed and discussed the Fee Study and accepts
and agrees with the content of the Fee Study and recognizes that updates and modifications will
be made to the fee schedule in the future in accord with the annual cost adjustment requirements
of Chapter 2, Article 6, Division 9 BMC; and
WHEREAS, the City Commission finds that all required elements necessary for
compliance with standards for development of an impact fee have been satisfied.
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Resolution 4423 Page 4 of 5
NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of
Bozeman, Montana, that
1. The September 23, 2012 draft of the Transportation Impact Fee Study Update, as contained
in Exhibit "A", attached hereto and by this reference made a part hereof, is hereby adopted.
2. As of the 1st day of January, 2013, any person who seeks to obtain any of the forms of
development listed 2.06.1650, BMC must pay a Fire/EMS Impact Fee pursuant to the
schedule included in Exhibit A of this Resolution.
Effective Date.
PASSED AND APPROVED by the City Commission of the City of Bozeman, Montana, at a regular session thereof held on the _____ day of ________, 2012. This resolution shall be in
full force and effect on January 1, 2013.
___________________________________
SEAN A. BECKER
Mayor
ATTEST:
________________________________________
STACY ULMEN, CMC
City Clerk
APPROVED AS TO FORM:
___________________________________
GREG SULLIVAN
City Attorney
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Resolution 4423 Page 5 of 5
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