MISSOULA - The Missoula City Council on Wednesday amended the fees it charges for new construction, and while it's not the most tantalizing topic, it could have negative impacts on future city budgets.
The Montana Legislature recently amended state law regarding impact fees, including the fees cities can charge for development. The adjustments adopted by the Missoula City Council on Wednesday bring Missoula's “fee schedule” into compliance with the changes.
Eric Hallstrom, the city's chief operations officer, said an early analysis suggests the fee reductions could impact the city's budget.
“We expect around $670,000 in reduced impact fees,” he said. “We'll have a much better sense when we start seeing new projects come in after the October deadline.”
Cities use impact fees as a tool to ensure new development pays its share of the cost of the services needed to support it. That includes impacts on schools, police, fire, water and transportation, among other things.
Under the changes adopted Wednesday, the average multifamily housing project will see an $8,000 reduction in fees, while a single-family home will see a reduction of $731. A commercial project, such as a bank, will see an average fee reduction of $10,260.
The changes also eliminate the city's 5% surcharge on impact fees and remove previously allowed fees from the schedule. Under the changes, impact fees cannot exceed the annual rate of inflation.
“I think (the new law) was an effort to restrict municipalities' ability to gather the full scope of fees that cities are currently charging,” Hallstrom said. “It really restricts it to transportation, police and fire. That ends up being the core impact fees.”
A fee study conducted earlier this year on behalf of the city found that most departments within Development Services aren't currently charging the full cost of the services they provide, resulting in subsides worth more than several million dollars.
The city has also contracted a consultant to review the city's Impact Fee Program and offer recommendations for changes. That could include new special impact fee districts, including Lower Miller Creek, Grant Creek and Hillview Way.
Hallstrom said the recommendations should be released early next year.
“That's a good opportunity for us to update on what we're seeing in terms of the changes to state law,” he said. “That can be taken into account as we set out the new impact fee for the future. But there's very little we can do specifically that isn't in line with the law's changes.”
The city's estimated loss of $670,000 is already looming over next year's budgeting cycle.
“We'll look forward to seeing if your retrospective look ends up being a forecast as well,” said council member Amber Sherrill.
