TR9303-CS 891001 City Of Keller
Adopts Impact Fees
by Allen Bogard 1
City Manager
City of Keller
In 1987, the Texas Homebuilders cedures is related to the community's With this eocnomic boom occurring all
Association promoted legislation to limit ' economic environment. Keller is the around Keller, the past rapid growth is
the use of impact fees. The Association fastest growing city in Tarrant County, expected to continue at a conservatively
contended that some cities were abusing which is the third fastest growing county estimated rate of 10% annually, reaching
the impact fees by not performing neces- in the United States this decade. Keller's 22,000 by the year 2000, and ultimately
sary studies, in effect causing new de- population has skyrocketed from 1,474 a population of 50,000 persons. The
velopment to pay for improvements in1970 to 4,156 in1980 and has almost city's area is over fifteen square miles, of
which actually benefited existing residents, tripled this decade. A major attraction to which two-thirds remains undeveloped.
As a result of the Association's effort, the area is its rolling oak tree covered Keller faces major challenges in providing
Texas became the first state to pass hills, a unique attribute in the typically for this future growth.
In August, 1988, the City of Keller, a small, rapidly growing community in
Northeast Tarrant County, became the first city in Texas to adopt impact fees in
compliance with new state mandated procedures contained in SB 336.
legislation (SB 336) allowing cities to fiat, treeless Dallas-Fort Worth area. Keller's leaders also face major chal-
charge impact fees for improvements to Another attraction is Keller's location, lenges because much of the city's past
water, sewer, roadway, and drainage just 13 miles west of the Dallas/Fort growth was allowed to occur aqth rela-
systems. Worth International Airport and within tively low standards. Problems exist with
However, some argue that promoters of easy driving distance to major employ- roads, drainage, and water lines. Most of
SB 336 attempted to made the procedures ment centers in North Dallas, Las Colinas the city is not sewered, so half of the
so time consuming, expensive, and com- in Irving, and downtown FortWorth. Just residents have septic tanks. Until about
plicated, that many cities would find im- two miles to the north, along Highway five years ago, major attractions to Keller
pactfeessimplyweren'tworththeeffort. 114, IBM has constructed' a regional were its low density rural atmosphere
Robert Burchell of Rutgers University headquarters. West of Keller, the United and low development costs. The predomi-
called SB 336, "prolfibition by authori- States government is building the first hate construction style was large resi-
zation." currency plant located outside of Wash- dences on one acre-plus lots with septic
In August 1988, the City of Keller, a ington, DC, in north Fort Worth. tanks. Beginning in 1984 and continuing
small, rapidly growing community in Also in north Fort Worth, five miles until today, subdivision developers have
extended sewer service and developed
Northeast Tarrant County, became the west of Keller, a new concept in economic
more traditional subdivisions with half
first city in texas to adopt impact fees in development is taking shape. The Perot
acre lots being most popular.
compliance with new state mandated Group has combined forces with the City
procedures contained in SB 336. Keller of Fort Worth to develop the first However, this most recent growth
instituted impact fees for water, sewer, industrial airport. Alliance Airport is surge strained all municipal services.
and roadway system improvements, scheduled for completion in late 1989, Residential development occurred in a
but the 9,600' runways are already
Why did Keller push to meet the new visible from Interstate 35. Recently, random pattern across the city, connected
requirements? How did the City overcome American Airlines announced it will locate by old, deteriorating county-type roads.
resistance to the new fees? And, what has a maintenance base at Alliance. The Low water pressure was common and,
resulted from the city's actions? facility will begin operations in 1992, until recent improvements, some areas
Keller's decision to implement impact with 2,000 employees, expanding to were without water for days during
fees according to state mandated pro- 4,500 ~thin 2 years. (Con~tn~ed on page 26)
II · OCTOBER 1989
CITY OF KELLER
Continued from page
summer months. Residents in areas with
septic tank problems demanded sewer
service. Public safety services were lim-
ited by inadequate equipment and facili-
ties. To compound problems, many of
Keller's new residents come from estab-
lished cities where a wide variety of
leisure services such as parks, pools,
libraries, and cultural events were taken
for granted. Demands for these services
and facilities have escalated.
Beginning in 1985, a new City Council
began to deal with these issues. In order
to improve existing roads, utilities and
facilities, an agressive $22 million bond
package was developed and considered
by voters in May, 1986. This proposal ran
headlong into a new element in the local
political scene. Due to the city's apparent
inability to serve existing citizens, let
alone new growth, a relatively strong,
slow-growth mentality appeared among
voters. Also, many of the residents who
had moved to Keller because of its
country atmosphere saw defeat of bond
elections as a way to stall growth. Results
of the election were dismal with all
propositions defeated two to one. A
second effort in september 1986, saw a
trimmed down version of the same
package meet the same fate.
The implications of two failed bond
elections were not wasted on the City
Council, which immediately began ex-
amining the city's direction. Since growth
was continuing, and existing residents
refused to invest in improvements, a new
revenue source had to be found. The City
began investigating methods by which
new growth could pay its fair share for
improvements.
This investigation
identified the pore:
realized by the us,
capital recovery
bore fruit as the city
rial benefits to be
of some form of
es. Acting quickly,
engineering studies were performed in
the fall of 1986, and the city's new
"Access Fees" were instituted in Decem-
ber 1986. The fees were based on a
twenty year capital improvements plan
for water and sewer systems' major
facilities. The cost of these facilities was
proportioned between existing customers
and new growth. Using water meter size,
a fee was developed with each new water
customer .paying $983 and each new
sewer customer paying $949. These new
fees immediately generated over $40,000
per month. The revenue from access fees,
combined with revenue from a massive
water rate increase, allowed the city to
issue debt and begin improvements to
the water system.
Although progress was being made in
the utilities area, this was not the case
regarding road improvements. Essentially,
new roads had been built to relieve
the rural county roads which pre-dated
growth of the city. In an attempt to
alleviate this Problem, the city enforced a
provision in its subdivision ordinance
requiring developers to improve peri-
Problem? Munidpal planning issue: are often
complex and costly. At E., ~ey, Huston
& Associates, Inc. we ha~: the expertise
oo.Or . and experience to meet ti e challenge.
c , nortunOv? our pub,c sector supporcapabilities
include:
· Land U~ Analysis
· Financial/Utiliw RatelStudies
· Trans~ation Plann~g
Environmental Analy ;is/Planning
Local, State & Feder~ Regulatory
Guidance
meter roads adjacent to newly platted
developments. However, the result was
ineffective, as short pieces of roads were
built in an uncoordinated manner through-
out the city. Developers learned that
picking parcels with short frontages on
roads requiring improvement would
maximize profits. With growth occurring
in relatively small parcels, less than fifty
acres, selected in a hopscotch pattern
· Community Infrastru
Public Facility Plann
· Impact Fee Analysis
· Urban and Regional
· Civil Engineering
· Air and Water Quail
· Airport Planning
ture &
~g
~lanning
Studies
across the city, the perimeter road
improvement requirement was ineffective
in improving Keller's roads.
Then, in 1987, the state legislature
passed SB 336. Although the new require-
ments were tremendously burdensome,
Town & City · 26
If your municipality or a§
assistance, please contac
ESPEY,
HUSTON &
ASSOCIATE
Engineering & Enviro~
Austin Dallas
$12-327-6840 214-669-9{
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mental Consultants
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especially for a small town, city offidals
agreed that the new revenue source had
to be protected. Instead of a hindrance,
SB 336 was seen as an opportunity to
further strengthen the fee structure. In
addition, since the Act allowed impact
fees for roadway improvements, expan-
(Contiaued os page 27)
I '[
CITY OF KELLER
Continued from page 26
sion of the fees to include a roadway
impact fee was also a possibility.
SB 336 defines all off-site improve-
ments which are a pre-requisite to de-
velopment approval as impact fees. Only
park land dedication or fees in lieu of,
dedication of right-of-my and water and
sewer pro rata are excluded.
Simply put, SB 336 specifies a required
procedure to adopt impact fees. Studies
required include:
requires exhaustive notice and public
meeting requirements. In addition, an
Impact Fee Advisory Committee which
includes representatives of the develop-
ment community, must be established to
advise the City Council regarding adoption
and administration of the fees. Finally,
the Act specifies aCcounting and refund-
ing procedures of extreme complexity.
Existing fees, such as Keller's water
and sewer access fees, already generating
much needed revenue for water and
sewer expansion,were brought under the
Act. Cities were given until May 1988 to
bring existing fees to no more than 10%
as the Impact Fee Advisory Committee,
with four additional members represent-
ing the development community and the
extra-territorial jurisdiction. The city
hired its first professional planner, Bill
Thomas, as Community Development
Director and assigned him the task of
overseeing the project.
In the water and sewer areas, the
process was fairly straightforward. It
began with revising the city's master
water and sewer plans to reflect lower
densities identified in the land use study.
The actual procedure required in SB 336
was not all that different from that used
SB 336 defines all off. site improvements which are apre-requisite to development
approval as impact fees.
1. Adoption of land use assumptions
Growth projections in population or
service units over at least a ten year
period.
2. Designation of service areas
A geographical area identified for
each service in a manner which
establishes a relationship between
the property to be served and the
fee paid. A service area may cover an
entire city and its extra-territorial
jurisdiction, depending upon topo-
graphy and other factors, However,
roadway service areas are specifically
restricted so that fees must be spent
within three miles of the property
from which they are collected.
3. Preparation of a Capital Improve-
merits Plan
A maximum ten year capital improve-
ments plan must be developed for
each system, identifying improve-
ments necessitated by new growth.
4. Preparation of fee calculation
table
A table must be prepared which
identifies fees to be charged for
different types of development, re-
lating service units to the capital
improvements plan.
Beyond the actual studies, the Act
above the maximum which could be
assessed under the Act or face significant
penalties. In addition, within three years,
by May 1990, these fees must be replaced
with ordinances meeting all of the Act's
requir~ements.
This was the situation facing new City
Manager Allen Bogard when he joined the
Keller city staff in August 1987. One of
his first objectives was to protect this
important new revenue source by bringing
the city into compliance with SB 336. He
also believed a roadway impact fee
should be seriously considered.
In December 1987, the city began
implementing a detailed program that
would allow adoption of the new ordi-
nances by mid-summer 1988. This pro-
gram relied heavily on a Master Plan
revision process begun in the Fall of
1987. This Master Plan revision, con-
ducted byJ.T. Dunkin & Associates, Inc.,
was used as the basis for the adoption of
land use assumptions. The engineering
firm of Hogan & Rasor, Inc. determined
service areas, developed the Capital
Improvements Plan, and prepared the
fee table. City Attorney Carter Hampton,
of Staples, Foster and Hampton, prepared
the ordinances. The city chose to have its
Planning and Zoning Commission serve
to develop the fees that existed at the
time. The required formula is:
Cost of Capital
Improvements Projected Increase
Planned Over In Service Units Impact
Ten Years To -~- Over Ten Year -' Per Ser~e
Serve New Gro~xh Period Unit
Less Credits For
Existing Facilities
The major change was to reduce to a
ten-year capital improvement plan and
develop service areas. In addition, it was
necessary for the city to revise other fees,
including tap fees and pro rata fees, to
ensure that there was no double collection.
One service area was established for
water and three service areas for sewer,
reflecting three major drainage areas to
be serviced by distinct systems.
By May it was apparent lowering
current fees would be necessary. Since
the city was subject to penalties if it
overcoilected, the City Council passed an
interim ordinance amending its existing
fees as follows:
1. The water fee was reduced from
$983.00 to $669.11 per dwelling
unit equivalent defined as a 5/8"
water meter.
2. A separate fee was established for
each sewer service area to replace
the $949.00 fee charged all new
(Com~nued on page 29)
27 · OCrOBF. R 1989
! '[
The problem encountered here was that lng Equivalent (DUE), one single family
CITY OF KELLER
the standards were very detailed and residence.
Continued from page 27 specified traffic generation projections Based on months of study, the staff
for literally hundreds of uses. Some of and Advisory Committee recommended
sewer customers previously. The these uses had such high numbers the the $1,436 Roadway Impact Fee to be
new fees were $919.28, $81.04 and fees would literally prohibit those services charged city-wide and a Sewer Impact Fee
$1,058.51 for service areas !, 2 and or types of development from locating in that differed for each of the three service
3 respectively, the city. areas of $919.28, $81.04, and $ 1,058.00.
The sewer fee for service area two was Keller officials chose a very simple These fees achieved the city's objective of
reduced significantly as the area is served approach. The service unit was established protecting the current revenue source
by a major sewer interceptor built by a as ten trips per day for the average and adopting a Roadway Impact Fee
developer at no expense to the city. residential home, which is the ITE stand- while still maintaining Keller's market
Revisions to other fee areas were also ard. Using the broadest averages available position in the competition between
necessary. Tap fees were reduced to from ITE, Keller established a conversion cities for new development.
ensure the fees only recover the actual table, Exhibit II, with categories for The ordinances revising current fees
cost of connection to water and sewer residential, commercial, office and insti- and establishing Roadway Impact Fees
mains· Pro rata fee calculation pro- tutional, and industrial. This made the were enacted in August, 1988. Problems
cedures were revised so any facilities process fairly simple. Also, if a developer encountered in meeting publication and
included in the Impact Fee Capital Ira- feels the process does not treat, his public hearing schedules, although greater
provements Plan were not included in the project fairly, he has the option of than expected, were manageable. Less
calculation, performing a traffic generation study for opposition than expected came from the
The Roadway Impact Fee was more the city's consideration· development community, although two
difficult· This process started with re- The second major difficulty came landowners holding multi-family zoning '
visions to the 1984 Thoroughfare Plan when the staff and the Advisory Commit- objected to the city's adoption of land
reflecting reduced land use intensity and tee found that Roadway Impact Fees for a use assumptions showing single family
lower traffic generation. In order to meet single family residence ranged from land uses. These property owners at-
the requirement that Roadway Impact $1,436.49 in service area five to $5,228.02 tempted to delay the process and ulti-
Fees collected not be spent more than in service area two. In addition, these mately filed suit against the city. They
three miles from the property from fees could easily be doubled if the city have admitted their concern is with land
which they were collected, the city opted were to include debt service costs. It was use, not impact fees.
to establish a grid of six service areas, feared such fees, when added to water
SB 336 allowed immediate collection
each with a diameter no greater than and sewer fees, would stop development of water and sewer impact fees since they
three miles. Next came preparation of the in its tracks. To deal with these issues, the
were previously existing. However, for
Capital Improvement Plan. Although city made the following decisions·
the first year, Roadway Fees were only
somewhat unrelated, the city. was, at this 1. Since roadway service areas were collectable on property platted after
time, also changing its street construction somewhat arbitrary in that they enactment of the ordinance. Roadway'
standards to require 'all concrete roadway were established for administrative Fees paid on four subdivisions this first
construction. This factor had to be purposes only, the city would take year exceeded$1OO,OOO. Property platted
included in the costs for the Capital the lowest fee from any service area prior to adoption is exempt for one year.
Improvement Plan. Exhibit I illustrates and charge it across the city. After August 16, 1989, Roadway Fees on
the calculation of the Roadway Impact
Fee. 2. To keep the total fees at a reasonable these properties will be collected at build-
The first major difficulty the city level, debt set'vice costs would not lng permit time. After the first year, it is
encountered in developing roadway ira- be included in the fee calculations, estimated Roadway Fees will exceed
$500,000 per year.
pact fees centered on establishing a 3. To limit the negative perception of
service unit that could be used to assess the roadway impact fee to developers Over the last two years, Keller has
the fees. The city found that a separate and avoid double charging, the city solidified an explicit growth strategy of
traffic impact study could be justified for would not require perimeter road which impact fees are a key element.
Because of Keller's geographic location,
each new development. An alternative to improvements.
this expensive approach would be to the citywill grow primarily as a bedroom
utilize Institute of Traffic Engineering The net result of these decisions were community with limited non-residential
· z W
(ITE) standards for traffic generation, roadway xmpact fees of $1,,i36.49/D ell- (Continued on page 29)
Texas Town & City · 28
CITY OF
Continued from page 28
tax base. Therefore, a growth strategy to
guide the city's development is essential.
Keller's plan includes:
· Low density, high quality residential
development
· Low maintenance public improve-
ments
· Agressive, city-backed economic de-
velopment
· New development paying for off-site
improvements needed to serve that
development
According to SB 336, impact fees are
the only tool available to effectively
accomplish this last objective.
Significant efforts have gone into
communicating the city's growth strategy
to the residents. This was determined to
be necessary to offset some of the slow
growth sentiment in the community.
In late 1988, the City Council concluded
it was time to try again to pass a bond
election. A citizen's committee was formed
to develop the propositions and later to
sell the program of improvements to the
citizens· Four propositions were devel-
oped to improve roads, parks, library
and public safety facilities. Once the $9·8
million program was defined, the citizen's
committee organized an aggressive public
relations campaign to support the pro-
positions. A major element of this cam-
paign x~,as the city's well conceived program
to make new growth pay its own way.
Citizens appreciated the fact that they
were not being asked to fund improve-
ments to serve future residents.
The election was held April Ist and all
four propositions passed with three-to-
one margins. Also, the city has issued
$4.0 million in water and sewer revenue
bonds without opposition. The city is
now implementing a major five-year $16
million capital improvement program to
prepare for the future. These successes,
though not entirely due to adoption of
impact fees, were the result of a growth
strategy, of which impact fees are a major
element. To this point, a total of $1.2
million has been raised by impact fees in
Keller. It is intended that these funds be
used for debt service payments for
facilities contained in the ten year capital
improvement program.
Keller is continuing to grow at an
EXHIBIT I
annual rate exceeding ten percent, while
growth in many cities has stopped or
slowed considerably. It is too early to
knowwhat the long-term growth implica-
tions will be for the city. Presently, Keller
is continuing to get its share of area
growth, while still solving infrastructure
financing problems. Close monitoring of
the situation is necessary, and procedures
to accomplish this have been implemented.
Arlington is possibly the only other
city in the state to have completed the
impact fee process outlined in SB 336.
Many cit" ~.s have waited, hoping the 1989
legislative session would revise the bur-
densome requirements. TML was success-
ful in.getting HB 1786 passed, which does
give some procedural relief. However,
the basic required studies remain the
same. Every Texas city requiring per-
imeter road improvements or charging
some form of capital recovery fees,
including tap fees which recover capital
investment, must meet the requirements
of SB 336 and HB 1786 by May, 1990.
Keller is an example of a community
which has used impact fees with success
as a key element in an overall strategy for
managing growth. ·
Thoroughfare Impact Fee Calculation--Service Area Five
Wilson Lane ............................................. 5,000 Feet
West Bursey Addition to Rufe Snow and Little Bear Creek to 400 feet west of Highland Oaks
Addition--Build new B6D
Rapp Road ............................................. 1,000 Feet
US 377 to Whitley--Build new A4U
Rapp Road ............................................. 6,200 Feet
Whitley Road to Rufe Snow--upgrade existing road to A4U and credit existing road
Rapp Road ............................................. 2,000 Feet
Rule Snow to Shady Grove--upgrade existing road to A4U, build only 2 of 4 lanes; and credit
existing road
Rapp Road ............................................. 1,800 Feet
Shady Grove to Keller-Smithfield Road--build ~ of new A4U
Escrowed Funds
TOTALS
Cost Credit
$1,992,750 $ -0-
$ 128,783 $ -0-
$ 798,457 $217,oo0
$ 144,989 $70,000
$ 130,490 -0-
$ -0- $ 65,645
$3,195,469 $352,645
($ 3,195,469-$ 352,645)
IMPACT FEE = 1,979 DUES = $ 1,436.49/DUE
29 · OCTOB~e 1~9
CITY OF
Continued from page 29
I~XHmiT Il
LAND USE
Residential:
Roadway Facility--Conversion Table
DWELL~G UNFY EQUIVALENTS
· . ........ l.OO/Unit
Single Family ................... · .................
Multi-Family .............................................................................. 66/Unit
Commercial/Retail ......................................................................... 18.2/Acre'
Industrial ................................................................................ 2.9/Acre:
Office/Institutional ........................................................................ lO'9/Acre~
] Assu~ng a minimum floor area ratio of .25
: Assuming a minimum floor area ratio of .4
~ Assuming a minimum floor area ratio of .5
Hoot area ratio is the ratio of gross leuseable floor area to the total lot area.
In the event that the actual floor area ratio is less than that shown on the table above, dwelling unit equivalents may be adjusted by the percentable difference
between the assumed floor area ratio and the actual floor area ratio. ·
L C, AZ 9 ZA
Continued from page 10
qualified person. Negotiations must be
undertaken in this sequence until a contract
is made.
Q: How quickly must a city make
payments to a person that supplies
goods or services to the city?
A. The dty must make payment for
supplies, goods, or services by the later
of the following time periods: the 30th
day after the date the city received the
supplies, materials, or equipment; the
day the performance of services was
completed; or the day the city received
the invoice. The city must pay interest if
payments become overdue. Interest ac-
crues at the rate of one percent per
month. The statute, however, would not
apply to a contract that specifies other
times and methods of payments or other
methods of resolving disputes or interest
owed on delinquent payments. Addi-
tionally, it does not apply when a bona
fide dispute exists between a vendor and
a subcontractor and its supplier which
causes the payment to be late. Finally, if
the city is prevented from making a
payment with federal funds because of
the terms of a federal contract, grant,
regulation or statute, payment within
this time period is also not required. This
statute requires that the invoice is mailed
to the address in strict accordance with
the dty's instructions. TEX. REV. CIV.
STAT. ANN. art. 601f (Vernon Supp.
1989). ·
LA W SEM/NAR
Continued from page 7
registration fee includes lunch and course
materials.. Proceeds from the seminar
benefit TML Pre-registration is recom-
mended.
Foster, Bettac & Belier, P.C. represents
and advises numerous Texas municipali-
ties on an ongoing basis. Mthough the
firm maintains a vigorous trial and
appellate practice, its attorneys place
strong emphasis on educating clients in
the avoidance of litigation through care-
fully planned personnel polities and
sound human resources practices. The
firm is situated at 4040 Broadway, Suite
401, San Antonio, Texas, 78209.
For more information about the sem-
inar, ca~ the TML Program Development
Deparunent at (512) 478-6601. ·
Mark Your Calendar!
OCTOBER 26-28
TML Annual Conference & Exhibition
Tin. sTows&City. 30
! I