Let's Just Raise Fees
by Jess Traver, P.E, Director of Government Affairs

  The United States of America is unquestionably in the midst of its worst financial and economic crisis since the 1930s. Home prices are falling rapidly across the nation, which has resulted in more than $2 trillion in losses in the last two years. The declining stock market has obliterated trillions more. These enormous losses have created a vicious downward spiral.  To avoid a 1930s-style economic collapse requires government to approach decisions based on inclusive financial analysis of impacts to all segments of our society.
   Despite protests from The Builders Association of Northern Nevada, one local government has increased building fees twice in six months and has scheduled adoption of new impact fees by the end of the year.  

• The current state of affairs in the Truckee Meadows:
  
  A growing number of foreclosures (perhaps approaching 1 in every 46 homes)
• 48% of all homeowners in the area are upside down in their mortgage
• A growing number of bankruptcies (1,800 filings since January)
• High unemployment (which could go as high as 11%)
• The home construction industry unemployment near to 33% compared to this time last year and estimated at over 50% compared to 2005.
• The average home in Reno has lost over 30% of its value.
• The typical citizen is just struggling to pay the mortgage or rent

Why fee increases and new impact fees at this time?

   A report from the National Association of Home Builders on the impact of government regulation on housing finds that each $1,000 increase in the cost of a new median-priced home forces 217,000 prospective buyers out of the marketplace. The studies show that even modest fees can have a dramatic effect on housing affordability. Local governments need to understand that higher regulatory costs frequently increase the price of housing beyond the means of many moderate-income workers.  The analysis found that every $819 rise in fees paid at the beginning of the construction process—such as an increase in the price of a construction permit, a tap fee, a proffer or an impact fee—adds an additional $1,000 to the final price of the home. The differential occurs because when construction costs rise, other costs such as financing costs and broker commissions, rise in tandem.  Should any government increase fees at this time?
   The Truckee Meadows Regional Plan suggests an impact fee framework to subsidize facility plans proposed by the local governments. In fact most agree on “fair” impact fees versus arbitrary monetary demands placed on final subdivision maps.  Discussions for new impact fees should include the following:

• Developers for many years contributed many millions of dollars to local governments for fire and police stations during the good times.  Why do we not have new stations?  Why tear down the perfectly good downtown station for a baseball stadium and charge the people for a new one?  (Don’t get me wrong, I do love the ball games at the new stadium, but I had to say it.)
• The facility plans should include shared services with neighboring fire and police.
• The cost for the facilities should be based on solid estimates and not a “magic wish list” with mathematically formulated “placeholders”.
• Since State law requires the existing residents to pay for two thirds of the cost of improvements, the citizens need to be included in the approval of matching funds.  I believe that the county-wide vote failed for a quarter-cent sales tax increase for public safety in 2006.

   It is startling how much the developer already expends in fees to develop one lot.  Costs include water rights, parks tax, building fees, road impact fees, sewer tap fees, water hook up fees, tentative and final map fees, fire and police obligations, school site dedications, storm water impact fees, title fees, recording fees, other inspection fees, drainage and wetland requirements and permits, map extension fees bonding requirements, business licenses, professional licenses, and the list goes on.  Before a developer even starts lot improvements and construction of the home, they have entitlements costing an estimated $35,000.  The home building community is paying its way.
   The Builders Association of Northern Nevada supports excellence in government and responsible financial expenditure.  Just like the private industry, some segments of local governments have started to take pay cuts and make budget reductions.  It is important for our industry to recognize noble government also.    
   In response to the extraordinary downturn in Nevada’s economy, The Builders Association of Northern Nevada is asking that state and local governments contemplate their actions before imposing more regulation and fees.  The economic engine in the Truckee Meadows will be hard enough to restart without adding more water to the fuel.  We encourage government to consider a moratorium on detrimental fees and costly changes in law which could stall recovery and delay employment efforts for the construction work force.
   In the evolving world of Nevada construction, it is important for the contractor to stay well informed of changes that may affect the way they perform business or that may open up new liabilities for work performed.  It is more important now than ever to get involved!!

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(For more information on how to make a difference for your business and the industry, or for how other communities nationwide have come up with ways to jump start construction through a reduction of up-front fees and costs, contact Jess Traver, the Builders Association of Northern Nevada’s Government Affairs Director, at 775-329-4611 or email jesst@thebuilders.com)