Las Vegas Sun

April 25, 2014

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Making builders pay looks like a no-go

Southern Nevada has struggled for decades to keep up with the region's explosive growth.

Houses get built, newcomers move in and years go by before enough additional tax money becomes available to expand police, fire, park and transportation projects.

And it's likely to stay that way, in part because of a little-noted law the state Legislature passed this year.

An amendment to an otherwise innocuous bill helped scuttle plans that had been in the works by Clark County, North Las Vegas and other local governments to implement across-the-board fees on new development.

Phoenix, Albuquerque and other fast-growing areas of the United States also have struggled with how to keep pace with rapid growth. But those communities have bridged the money gap by forcing builders to pay for new services as they go.

Fast-growing areas typically require builders to pay so-called development impact fees levied on each new home and commercial building . Builders often recover the cost by raising prices. Cities and counties have the money immediately to keep up with the demand for roads, fire and police facilities, and other infrastructure created by growth - and it is paid for by the newcomers whose arrival spawns those needs.

That's not true in Southern Nevada, where the only development impact fee is a small one imposed by Las Vegas to pay for traffic lights.

After two years and a $200,000 study, Clark County commissioners are scheduled to discuss imposing impact fees Tuesday. In conversations with staff and elected officials, though, the possibility is all but dead.

Clark County had been moving toward imposing a fee for the first time, the result of the study drawing connections between growth and its cost. The recommendation was to charge $2,600 per home and an equivalent for other development to pay for fire stations, police stations, parks and some transportation improvements.

But homebuilders feared the money would be spent unfairly, where money raised in one part of town would be used in another part.

Homebuilders, backed by building trade unions, persuaded legislators to act, introducing an amendment to a bill that had been designed to allow Nye County to use impact fees to hook up toilets to the sewer system.

In a handout to legislators, the Southern Nevada Home Builders Association said the amendment was necessary to stop impact fees that governments were looking at, which they thought did not follow the original law.

"There's a fair way to do it so it benefits the homeowner," said Irene Porter, executive director of the association.

The law, which specified that fees could not be implemented countywide or citywide, passed unanimously in the Assembly and Senate, despite protests from local governments.

"The new legislation is a new kind of impediment to deal with," said Derek Morse, deputy executive director of the Regional Transportation Commission of Northern Nevada.

That agency already has development impact fees of about $2,000 per home to pay for transportation. Morse said it had begun looking at a countywide fee.

State law has allowed development impact fees since 1989. But Southern Nevada governments have never been able to follow the example of the north and implement them.

"I think the way the statutes are set up for impact fees, it's always been pretty impractical and difficult," longtime Clark County Commissioner Bruce Woodbury said.

Instead, Clark County and local governments have relied on negotiating concessions from developers, a process that national experts on impact fees said can lead to different developers paying different amounts.

"A lot of it depends on the negotiating skill of both parties," said Arthur C. Nelson, director of the Metropolitan Institute of Virginia Tech and author of the definitive book "Development Impact Fees."

Almost all development, even low-income housing, pays for itself - eventually. But it can take decades of homeowners and businesses paying taxes to recoup the costs.

North Las Vegas and Clark County were moving to change that, until recently.

"The study has been put on the shelf," said Chuck Pulsipher, Clark County planning manager.

The change in state law, he said, makes development fees unworkable.

The planning department had opposed the bill's amendment, Pulsipher said. But the county's official position on the bill was ultimately neutral, Assistant County Manager Phil Rosenquist said.

"At least in my view, it was a minor amendment to that block of law, and it didn't rise up to a level of screaming and kicking," he said. Rosenquist cited other factors, such as the housing slump and need for affordable housing, as the reason the county put the brakes on impact fees.

It was a decision made at a staff level, without reaching the County Commission, which is supposed to set policy. The way the decision was made didn't sit well with at least one commissioner.

"Everyone forgot there was a commission," Commissioner Chris Giunchigliani said.

She questioned the assertion that the change to state law makes it too difficult to implement impact fees.

"It didn't really make it more difficult," she said. "I don't know if there is a misinterpretation or whether people just don't want to do it."

Clancy Mullen, vice president of Duncan Associates, the firm the county hired to study the feasibility of an impact fee, said , after reviewing the changes to state law, he didn't see it as a hindrance to what his firm proposed.

"I don't know why they decided not to follow up," he said. "We weren't proposing a jurisdictionwide fee anyway."

That, and other issues, are likely to be hashed out at Tuesday's hearing. After inquiries by the Sun, commission Chairman Rory Reid said he would be open to a public discussion on the item. Staff will recommend that the suggested impact fee is impractical.

Reid said the county doesn't need an impact fee now, given the downturn in the housing market and need for affordable housing. He pointed to a recently passed ordinance that requires builders of large projects to negotiate infrastructure contributions with the county.

MGM Mirage agreed to pay $28 million in public infrastructure improvements as part of the $7.4 billion CityCenter.

"I don't think you can argue that it's political when the biggest company in Nevada is being required to spend millions of dollars to mitigate its impact," he said. "No one did anybody any favors here. If there's a good ol' boy system, it sure ain't working."

But he acknowledged that eventually, the county would have to revisit the fees.

"At some point, we need to do something about impact fees in Southern Nevada," he said. "I question whether this is the right time to do it."

James Duncan, president of Duncan Associates, said periods of slow growth are the best time to reconsider fees, because it would affect fewer projects already in the pipeline.

Higher impact fees might slow some projects, Duncan said. But that could help existing inventory sell , rather than build up the number of houses on the market. It also would give government a chance to catch up with infrastructure improvements.

"The homebuilding industry is not known for its foresightedness," Duncan said.

North Las Vegas, since spring 2006, had been studying a fee to pay for fire stations. Just as staff members were about to take the proposed fee before the planning commission, the Legislature folded those plans.

"We're kind of back to square one to reevaluate what impact fees should be," North Las Vegas Fire Chief Al Gillespie said.

With the county officially neutral on the bill, Kimberly McDonald, North Las Vegas assistant county manager, testified at the Legislature about the city's reservations concerning the bill. But she also was officially neutral, at least on the public record.

Assemblywoman Marilyn Kirkpatrick, D-North Las Vegas, said she did not think there was significant opposition to the amendment.

"This clarified what the service area is," she said. "It is still broad enough to leave people to create service areas. The bill is pretty straightforward."

North Las Vegas officials and other lobbyists had a different recollection.

"They knew we had concerns," McDonald said. "You also have the political dynamics. Politics is involved in everything."

When asked whether the political clout of developers simply won out over local government, she said: "It may have."

But, she added, the local governments can always go back in two years and try to get the law changed.

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