Thank you to Kamuela attorney Margaret Wille for allowing us to post the commentary she published in West Hawaii Today (Mar. 7, 2009), but which is not available on line. Posting on inversecondemnation.com is not an endorsement of the views expressed or the conclusions reached, but we thought it was worthwhile to hear others’ voices on this important subject. Disclosure: we represent the property owners in the eminent domain cases instituted by the County, County of Hawaii v. C&J Coupe Family Ltd. P’ship which she discusses. Our thoughts on the topic are posted here.
Who Pays For Impacts: You Do
by Margaret Wille
Recently there have been several articles in West Hawaii Today about “fair share” versus “impact” fees. Probably there are many readers who wonder why do these fees matter to me. In other words, does this issue affect the ordinary Big Island taxpayer? Yes, very much so.
These fees, regardless of name, are charged to developers to defray a portion of the cost to maintain the current level of service for one or more categories of public facilities impacted by the proposed development.
The first question to ask is whether you believe the developer who reaps the financial benefit of the new development should shoulder a portion of the financial cost to maintain the current level of service for affected public facilities that are off of the developed property, e.g. area roads or police and fire stations. Would you rather all of the resulting costs to maintain the current level of service of these affected public facilities be paid for by us existing taxpayers? By way of example, when Costco went in, who paid the 5.5 million in cost to upgrade the Queen K intersection, just to maintain the current level of service at that intersection (I believe the level of service of that intersection was level D if not worse.) We did, you, me, all of us existing taxpayers and businesses paid for the improvements needed just to continue at that same low level of service (and if bond money was used for a portion of either the County’s or the State’s cost, you could say we saddled our kids with some of this expense). If the County had passed a development fee ordinance consistent with the State’s 1992 impact fee law, some of the County’s cost of those intersection improvements would instead have been paid by Costco’s owners.
At present the County has a development fee program in place that is only imposed upon lands being rezoned (say rezoning from agricultural to residential zoning). Development that does not require rezoning is not subject to these development fees regardless of the extent of the burden they impose upon existing public facilities. The result is easy to see, for example: congested roads, inadequate emergency facilities, and overcrowded neighborhood parks. Based on a 2006 consultant’s study, the County assessed 74 million dollars under its “fair share” program, but only collected $3.6 million with an additional $15.2 being given in credits. Had this program instead collected development fees according to the proposed County impact fee ordinance, the County would have assessed $170 million in fees between the years 2001 and 2006. According to the County’s consultant, if impact fees had been collected in 2006 and 2007, the County would have collected at least 22 million in each of those years. Think about all the public facilities that could have been upgraded to compensate for the impact of those approved developments. Think about the money you would have saved in gas expenses and also the extra time you could have spent with your family had road congestion not worsen because the County choose to allow infrastructure to further deteriorate rather than charge developers for some of the negative impact their development had on existing roads.
Now you may ask, whether requiring these fees for rezoned developments and not for developments that do not need rezoning makes sense. Not so. Rezoning is primarily a paper work reclassification of the land from one zoning category to another — say from agriculture to residential zoning). Rezoning alone does not entail “development”. Accordingly only requiring these fees for developments subject to zoning reclassification of the land does not make sense. Under the current “fair share” fee program although fees are assessed at the rezoning stage based on a proposed future development, the fees are not collected until one of the later development approval stages. The problem here is that by the time those fees are eventually due, it is amazing how often they have been renegotiated or reduced for one reason or another. In this piece meal process, accountability and meaningful transparency is difficult.
The logical conclusion is that given the objective of development fees, requiring these fees of those who need to rezone their land, and not requiring these fees of other developments that do not need to rezone, is simply arbitrary and irresponsible. By only imposing this development fee on rezoned developments, existing taxpayers are certainly being unfairly saddled with higher real estate taxes.
In the recent 2007 “Hokulia–Coupe Family” condemnation case (County of Hawaii vs C&J Family Limited Partnership), the Third Circuit Court raised a “red flag” – concluding that the “fair share” fees being charged were illegal and inconsistent with the state’s impact fee law. [note: the court’s Findings of Fact and Conclusions of Law are available here] Judge Ibarra explained: “The ‘fair share’ assessment under the Development Agreement, in substance, is tantamount to an impact fee that does not conform to section 46 -141 of the Hawaii Revised Statues [Hawaii’s impact fee law]”. One would assume that the prudent response by the County would be to bring the current “fair share” program into alignment with our State impact fee law. Councilman Pete Hoffmann and a few other council members encouraged that course of action. A number of the County Council members however continue resist that effort and choose instead to support continuation of Hawaii County’s “fair share” development fee program. In support of that position, Corporation Counsel and the Planning Department point out that Judge Ibarra did not explicitly say the current “fair share” system is in all cases illegal – though that is clearly a possible logical conclusion. So at this point, we as a County unnecessarily put ourselves at risk of a judicial challenge. Hawaii County has taken a similar risk before in other land use approval cases where the County’s practice was of “questionable legality” and in each case I am aware of the County lost – at considerable expense to us taxpayers. For example: in the 2006 Leslie case against the County, the County argued that the word “shall” in the subdivision code does not mean “shall” (in the instance of whether the gathering of certain information from a developer to make available to the public is required), and the County lost. Or in the 2006 case of Kelly vs. 1250 Oceanside Partners et. al., Hawaii County argued that although the Hawaii Constitution says “public trust” natural resource conservation obligations are the responsibility of the state and its “political subdivisions” (Hawaii County being a political subdivision), only the State not the County has these “public trust” responsibilities. Hawaii County lost that argument as well. My point is: to fight Court battles over legal issues that may not be of “certain illegality” but are admittedly of “questionable legality” is ill-advised when there is a reasonable alternative.
With respect to the specific question at hand, most any law student who has taken the Hawaii bar exam, can explain why the County’s fair share program is of questionable legality based on the following legal principle of preemption: if there is a state law covering a subject and that law provides for a comprehensive and uniform system, it preempts local laws that do not conform to the state law. Admittedly, following passage of a comprehensive state law, there would be some allowance for a transition period from an existing local program to one that is consistent with the state law, and such a transition is in fact expressly recognized in Hawaii’s state statute, “Transitions” Hawaii Revised Statute §46-148. However by now it is a bit difficult to argue that we are still transitioning to a 1992 law. Other state courts have addressed the question of whether local governments can require developers to pay for off-site impacts to public facilities in the absence of an impact fee ordinance that is consistent with a state impact fee law. For example, in 2000, the New Hampshire Supreme Count ruled illegal a local governments’ development fee program that was inconsistent with the state’s impact fee law. Certainly there are arguments Hawaii County could raise to support the position that the “Fair Share” program is legal even if inconsistent with the state Impact Fee Law (such as by trying to differentiate between the definition of “fair share” development fees and “impact fees” as defined in the state impact fee law along with arguing these different “fair share” fees are separately authorized under the County’s authority to rezone.) But why take the risk of another prolonged legal battle, when we have a clearly legal development impact fee alternative.
What makes this situation even more difficult to understand is that Hawaii’s State Impact Fee statute is considered one of the best and most comprehensive in the nation, and in my view, bends over backwards to provide fairly for developers – even to the point that the fees are returned to the developer if not used within six years for the designated purpose.
Likewise the recently proposed and rejected County impact fee ordinance provided for affordable housing, and only charged a 50% impact fee to developers for a limited number of public facilities affected by the development. Without a doubt there are improvements that can be made to the previously proposed county impact fee ordinance. And it is, in my view, that task that should now be undertaken with all deliberate speed. If not, why not? Is it possible that developers who benefit by not being subject to the current program, or the developers who are and have been able to satisfactorily manipulate the system, continue to wield significant power in this County? Or is there just a general fear of transparency and accountability? Or, perhaps a fear that of losing developers’ campaign contributions? You figure.
So taxpayer beware! When the County addresses the upcoming budget short fall, and says to you it will raise your real estate taxes or raid other funds that have been set aside (such as the 2% fund that overwhelmingly passed by referendum), consider that the County choose to, and continues to, forgo collecting development fees for all developments not subject to rezoning. This favored treatment of a large segment of the development community at the expense of us existing taxpayers makes me angry and it should make you angry too.