To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Title
Ordinance Amending Chapter 3.16.030 of the Castle Rock Municipal Code Adjusting the Development Impact Fees For Residential and Non-Residential Uses (Second Reading) (First Reading on October 4, 2016 with vote of 5-0)
Body
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The Ordinance was approved on first reading on October 4, 2016 with a vote of 5 to 0 with no changes.
Executive Summary
The Town collects impact fees on new construction projects to ensure the Town’s levels of service to the community can be maintained as Castle Rock continues to grow. The Town updates these and other fees periodically to ensure they are aligned with market conditions.
Recent analysis concluded the Town should be charging significantly higher impact fees, based upon estimated future project needs and higher construction costs.
Staff discussed the needed fee increases with the development community before presenting a recommended fee structure to Council last month. At that time, Council directed staff to prepare an ordinance to implement the proposed fees, which gradually phase up closer to needed levels over a multiyear period. Council is being asked to approve that ordinance on first reading tonight.
If impact fees are not increased, choices include 1) providing reduced levels of service to the community and/or 2) asking voters to provide for additional revenue sources, such as a property tax increase.
Discussion
Impact fees are collected when a building permit is issued to pay for growth-related improvements, facilities and equipment in the areas of transportation, fire, police, parks and recreation and municipal facilities. (System development fees for Castle Rock Water/Utilities are calculated separately, as part of the annual rates and fees study.) These one-time payments must be used solely to fund system improvements that benefit multiple development projects and the entire Town. A recent study (detailed further in (Attachment C)) analyzed the costs of and fees associated with new development.
The Town’s nonutility impact fees were last adjusted in 2011. If those rates were adjusted by 3% per year, they would be 19% higher than current rates. But, the rates have not increased at all. All the while, construction costs have been increasing dramatically in Colorado. This increase, combined with estimated future project needs, indicate the Town should be charging significantly higher impact and cost-of-service fees. While emphasis was placed on all nonutility departments that receive impact fees throughout the impact fee study process, additional information was generated and is provided with this memo in (Attachment B). With the priority in mind of enhancing surface transportation, the information provided includes projects that could be accommodate with the proposed impact fees identified for consideration.
Additionally, the study identified that the valuation schedule the Town currently uses for building permits and building use tax - the sales tax on construction materials - is from 2003. The most recent valuation represents a 46% increase over that outdated model. It is common municipal practice to use the most recent valuation figures from the International Code Council. Therefore, staff included within the Proposed 2017 Budget use of the updated valuation.
Since May, staff has worked with the development community to determine the best way to implement these needed increases. The focus has been on phasing in, or stair-stepping, increases to provide multiyear predictability for both developers and the Town. Consensus was reached on a fee structure that would increase fees by 9% in 2017 and 8.5%, exclusive of any needed utility fee increases, in 2018.
Fee summaries for samples of the various classes of development in Town follow. As previously stated, the proposed increases are needed to ensure the Town’s levels of service to the community can be maintained as Castle Rock continues to grow.
Proposed Single Family (2,400-2,699 Square Feet) Detached Fees
*Subject to change following annual rates and fees studies
**Valuations associated with building use tax are updated annually, which will result in increases to these items in future years
Proposed Multi-Family Permit (1 Bldg with 18 units) Fees
*Subject to change following annual rates and fees studies
**Valuations associated with building use tax are updated annually, which will result in increases to these items in future years
Proposed Commercial Permit (3,842 sq. ft.) Fees
*Subject to change following annual rates and fees studies
**Valuations associated with building use tax are updated annually, which will result in increases to these items in future years
Proposed Industrial Permit (2016 Valuation $326,600) Fees
*Subject to change following annual rates and fees studies
**Valuations associated with building use tax are updated annually, which will result in increases to these items in future years
Proposed Warehouse Permit (2016 Valuation $265,050) Fees
*Subject to change following annual rates and fees studies
**Valuations associated with building use tax are updated annually, which will result in increases to these items in future years
Proposed Office Permit (2016 Valuation $400,700) Fees
*Subject to change following annual rates and fees studies
**Valuations associated with building use tax are updated annually, which will result in increases to these items in future years
Proposed Hotel Permit (10 Rooms) Fees
*Subject to change following annual rates and fees studies
**Valuations associated with building use tax are updated annually, which will result in increases to these items in future years
Staff Recommendation
In order to ensure levels of service can be maintained as the Town grows, staff recommends Council approve the ordinance as presented.
Proposed Motion
“I move to approve an ordinance on second reading amending Chapter 3.16.030 of the Castle Rock Municipal Code adjusting the development impact fees for residential and non-residential uses.”
Attachments
Attachment A: Ordinance
Attachment B: Memo Regarding Transportation Project Implications
Attachment C: Arcadis Development Impact Fee Study, August 2016
Attachment D: September 6, 2016 Agenda Memo