Tuesday, March 14, 2006 | 9:59 a.m.
Southern Nevada cities and counties historically have lagged behind the rest of the country in charging developers for the extra streets, schools, parks and other demands that population growth places on local governments.
But as the Las Vegas Valley's seemingly nonstop rapid growth continues to stretch municipal budgets, that philosophy is starting to change - and may be forever altered by local governments' moves toward so-called "impact fees."
On Wednesday, North Las Vegas is expected to pay a California consultant $42,800 to examine whether developers should pay higher and additional fees to offset the financial impacts that their developments have on the city.
Las Vegas already is conducting an internal review on the same subject, and on March 21, Clark County commissioners are expected to hire a Texas consultant for a $130,000 report - likely to take six to nine months - on whether the county should expand its development fees.
Although commonly used elsewhere, impact fees remain a controversial subject within city halls and the development community.
Advocates argue that impact fees are needed so that existing residents are not forced to bear the expense for police and fire stations, parks and libraries, and street and traffic improvements necessitated by growth.
Developers and others, though, warn that the fees inevitably will increase home prices - to prohibitively high levels in some cases - and could dampen the growth that has been a major driver of the regional economy.
Statistics suggest, however, that even a sizable increase in the development fees currently assessed in Nevada would leave the local homebuilding and commercial and industrial development industries in a strong competitive position.
The national average of development-related fees for the construction of homes, apartments, retail, office and industrial developments, excluding utility hook-ups, was $3,685 in 2005, according to research by James Duncan, a Texas consultant expected to conduct Clark County's impact fee study.
Nevada's average, in contrast, was $1,304, only about one-third the national average. There is an even wider gap between Nevada and California, where impact fees averaged $9,110 last year. Arizona's average fee was $2,482.
Other national studies have shown similar gaps between Nevada and the rest of the country, even though a 5-year-old state law allows local governments to recover from developers their precise impact for police buildings, fire stations and parks. Since 1989, local governments had the right to assess fees for drainage, sanitary sewers, storm sewers, streets and water projects.
Local governments, however, have not taken advantage of the 2001 change in state law, with some local leaders expressing reluctance to perhaps deter development and increase home prices that already are out of reach for some.
"Whatever we do, we can't continue to erode the dream to purchase a house for first-time home buyers," Clark County Commissioner Yvonne Atkinson Gates said. "To a large degree, that is already happening."
North Las Vegas Mayor Mike Montandon admits the region has been hesitant to implement the fees because Nevada's housing is still more affordable compared to California.
"As a whole, there is no question we have benefited tremendously in Southern Nevada from the overregulation of California," Montandon said. "We would like to think we could learn from their mistake."
Impact fees became popular during the 1980s and tend to more prevalent in Sunbelt states such as Florida and California where growth is heavy, said Clancy Mullen, the director of infrastructure finance for Duncan Associates.
"I think it takes a critical mass for communities to use them," Mullen said. "They are reluctant to be the first ones on the block. They think the fees will drive development away and worry about competition from their neighbors. There is a concern about killing the goose that lays the golden egg."
But Mullen notes that impact fees make up only a small cost of development, except for California, where fees can be as much as $20,000 per home.
Although impact fees push up the cost of new homes and developments, the alternative - saddling existing residents with the civic expenses attendant to growth - is equally unpleasant, if not more so.
"It is typical at some point that there becomes a resistance on taxpayers and citizens to approve bond elections and see their water and wastewater rates go up to pay for growth," Mullen said.
An earlier feasibility study for North Las Vegas suggested impact fees ranging from $1,300 and $5,700 per home, which would generate up to $28 million annually for roads, parks, police and fire. While the city currently is eyeing a development fee to cover only fire services, the upcoming study could expand the options.
The city needs to look at fees, Montandon said, to keep ahead of growth. In the past, after initially falling behind in building enough parks and widening streets to accommodate new growth, North Las Vegas found it difficult to catch up, he said.
In Las Vegas, where the city is weighing impact fees for park projects and public safety, City Manager Doug Selby said the city actually became the first local government to implement an impact fee in 2003 as a way to more equitably charge developers for traffic signals. That "trial balloon" on impact fees has collected more than $1.1 million a year, prompting officials to consider expanding them.
Beyond worries about driving up home prices, the added municipal bureaucracy that comes with establishing impact fees also has likely deterred local governments from implementing them, Selby said.
But with population growing by 3 percent a year and the demand for services increasing by 9 percent annually, the city needs to look at alternatives to fund police and fire stations.
"I think we were doing without because we were making ends meet so to speak," Selby said. "We have gotten to the point where the ends are not meeting quite as well as it used to and we want to explore our options."
Other Nevada cities and counties already have launched plans designed to recover the full cost of development.
In 1995, Washoe County, Sparks and Reno implemented impact fees that have generated about $130 million for transportation projects. Developers pay more than $2,000 a home in some cases, far surpassing a $700 fee charged in the Las Vegas Valley under a regional transportation tax.
In 2005, Nye County implemented $1,961-per-home fees in Pahrump for fire, police, street and park facilities, charges that will generate about $2 million a year, said Pahrump Finance Director Mike Sullivan.
The year before, Nye approved a school development fee that generates $1,600 for every new home; state law, however, allows only counties with less than 50,000 people to charge the tax.
"I think it is a value to the community because it means growth helps pay for itself," Sullivan said. "They pay their fair share or services would be diluted."
The Southern Nevada Home Builders Association, which backed the 2001 state legislation expanding impact fees, is awaiting proposals from Clark County and North Las Vegas before taking a position. The Southern Nevada chapter of the National Association of Industrial and Office Properties also is in a wait-and-see mode.
Homebuilders, though, scoff at any suggestions that they are not paying their fair share, pointing to existing fees and their donations of park land and fire stations under development agreements.
They also cite a recent North Las Vegas study that showed new office, industrial and most residential developments bring more money to the city than the city spends on services.
"We have been paying for things that we should never be paying for - community centers, museums and art galleries," said Home Builder Association Executive Director Irene Porter, who's concerned other developers don't share the same burden as homebuilders.
Ralph Murphy, president of the local chapter of the National Association of Industrial and Office Properties, noted that his members already pay "very significant" fees and taxes.
While the Las Vegas Valley has been growing at a rapid rate for the last 15 years, local governments have found ways to pay for infrastructure and other capital expenses to support that growth, Murphy said.
"It is not clear to us what is different," Murphy said.
Like elected officials, homebuilders fear any additional fees will add thousands of dollars to the price of homes.
"Impact fees are always going to be passed on to the home buyer," said John Ritter, chief executive of master plan developer Focus Property Group.
The Home Builders Association said it currently pays nearly $50,000 in government-required costs for constructing a $300,000 home in unincorporated Clark County. That includes $3,500 in sales taxes, $12,500 in utility hookups, building permits, inspections and government reviews, and $33,000 per home for streets, sidewalks, trials and street lights within the subdivision.
Duncan, however, stresses that those fees "have nothing to do with paying for fire, roads, parks, libraries, fire and police."
Despite homebuilders' concerns, they actually may benefit under a revised fee system in the Las Vegas Valley, he said.
"Many developers could come out ahead with impact fees because it spreads out expenses and makes the playing field level," Duncan said. "Negotiating (fees) on a project-by-project basis leads to inconsistency and can be frustrating to the development community."
Under the existing fee structure, Clark County Planning Manager Chuck Pulsipher said, commercial and industrial developments and small homebuilders do not pay for parks, roads, public safety and other expenses in unincorporated Clark County, as large master plan developers do.
There also are geographical inequities, with developers of housing, office, retail and industrial projects paying fees in the southwestern part of the Las Vegas Valley that are not assessed elsewhere.
"It is true they are paying a lot of fees," Pulsipher said of large homebuilders. "Nobody will dispute that, but the question is are they paying enough? This analysis will determine that."
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