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TR9303-SY 920101 Traffic impact Fees: A Summary of Requirements and Provisions of Chapter 395, Texas Local Government Code Technical Report Series 41 North Central Texas Council of Governments Ft. O. Box 5888 Arlington, Texas 76005-5888 Traffic Impact Fees: A Summary of Requirements and Provisions of Chapter 395, Texas Local Government Code January 1992 North Central Texas Council of Governments Transpomtion Department NCTCOG Executive Board 1991-92 President Director Regional Citizen Representative Jim Alexander Don Hicks (urban) Councilmember, Denton Councilmember, Dallas Jan Collmer. Dallas Dallas County Vice President Director Lynn Spruiil Jewel Woods Regional Citizen Representative Mayor, Addison Councilmember, Fort Worth {non-metro) Wayne Gent. Kaufman Secretary-Treasurer Director Kaufman County David Doyle Dionne Bagsby ,Mayor, DeSoto Commissioner, Tarrant County, General Counsel Jerry Gilmore Past President Director Attorney at Law, Dallas Bill Lofland Ed Galligan County Judge, Rockwalt County Councitmember, Grand Prairie Executive Director William J. Pitstick Director Gary Slagei Mayor, Richardson Regional Transportation Council 1992 Chairman Donna Halstead Morris Parrish Ed Galligan Councilmember, City of Dallas Councilmember, City of Irving Councilmember, City of Grand Prairie Chades Tandy Mike Anderson 'Vice Chairman Councilmember, Cit~ of Dallas Councilmember, City of Mesquite Art Martin Deputy Mayor Pro Tern, City of Piano Virginia Nell Webber Gary Slagel Mayor Pro Tern, City of Fort Worth Mayor, City of Richardson Secretary Lee Walker Morris Matson Robert Dollarhide Commissioner, Denton County Councilmember, City of Fort Worth Mayor Pro Tem, City of Watauga Jim Jackson Dottle Lynn I.R. Stone Commissioner, Dallas County Counciimember, City of Arlington Texas Department of Transportation, Fort Worth Chris Semos Milbum Gravley Commissioner. Dallas County Counciimember. City of Carrollton James Huffman Texas Department of Transportation, Bob Hampton Mark Wolfe Dallas Commissioner, Tarrant County Mayor, City of Coppell Jim Jenne Tom Vandergfiff Jim Alexander Dallas Area Rapid Transit County Judge, Tarrant Count3, Councilmember, City of Denton George Kemble Jack Hatchell Grady Smithey Fort Worth Transportation Authority Commissioner, Collin County Councilmember, City of Duncanville Michael Morris Jerry Bartos Bob Smith Transportation Director, NCTCOG Councilmember, City of Dallas Councilmember, City of Garland Domingo Garcia Henry Wilson Councilmember, City of Dallas Councilmember, City of Hurst Public Transportation Air Transportation Highway Technical Technical Committee Technical Advisory Committee Committee George Human Don Paschal, Jr. Mark Young Chairman Chairman Chairman PUBLIC TRANSPORTATION TECHNICAL COMMI'I'rEE HIGHWAY TECHNICAL COMMI'i-rEE Traffic Impact Fee and Mitigation Subcommittee Kent Bell Richard Larkins Community Development Manager Transportation Services Director City of Irving City of Grand Prairie Ronnie Bell Michael Morris Assistant Director of Transportation Director of Transportation City of Garland North Central Texas Council of Governments John Brunk Assistant Director of Transportation Don Penny City of Dallas Director of Transportation City of Carrollton Dave Davis Traffic Engineer Walter Ragsdale City of Farmers Branch Traffic Engineer City of Richardson Bob Green Chief of Development Activities Tony Tramel City of Fort Worth Assistant Director of Transportation City of Arlington Billy Hardie District Design Engineer Mark Young TxDOT, Fort Worth Regional Planning Engineer TxDOT, RPO John Higinbotham Traffic Engineer City of Mesquite ABSTRACT TITLE: Traffic Impact Fees: A Summary of Requirements and Provisions of Chapter 395, Texas Local Government Code AUTHORS: Dan Lamers Senior Transportation Planner Michael Copeland Texas Department of Transportation Liaison to the North Central Texas Council of Governments SUBJECT: Traffic Impact Fees SOURCE OF COPIES: Regional Information Center North Central Texas Council of Governments P.O. Box 5888 Arlington, Texas 76005-5888 (817) 640-3300 NUMBER OF PAGES: 35 ABSTRACT: The intent of this report is to provide local governments in the North Central Texas region some guidance with respect to the development, adoption and implementation of a traffic impact fee ordinance. Chapter 395 of the Texas Local Government Code became law in 1987 and provides cities, counties or other taxing entities a method of recouping costs of expanding existing, or building additional infrastructure (capital improvements) necessitated by new development and future growth. Although the law deals with all forms of capital improvements, this analysis will focus on issues related to roadway capital improvements and traffic impact fees. This report is intended only as a guide to local governments. It is not intended to be an exhaustive review or legal interpretation of the impact fee legislation. TABLE OF CONTENTS Page Introduction .......................................................... 1 Outline of Requirements ................................................. 3 Advisory Committee .................................................... 5 Land Use Assumptions ................................................. 7 Capital Improvements Plan .............................................. 8 Calculation of Impact Fees ............................................... 9 Monitor and Update .................................................... 11 Refund and General Fee Provisions ........................................ 11 Appendix A: Executive Summary of Chapter 395 Appendix B: Traffic Impact Fee Versus Traffic Impact Analysis Appendix C: Trip Generation Appendix D: Survey Results INTRODUCTION For years municipalities in Texas have tried to identify ways to recover the costs of providing transportation services and infrastructure from real estate developers. Historically, cities have only required developers to pay for, or construct, on-site facilities specifically related to the new development. Until recently, cities had very little guidance in the development and implementation of fair and equitable developer participation requirements for off-site facilities. Municipalities were free to impose development fees on a case-by-case basis. With no formal guidelines, members of the real estate, development, or building community who felt that they were treated unfairly were forced to settle disputes in court. Most cities, however, tried to be as fair as possible in the imposition of development fees. Many established formal guidelines and ordinances which based the fee on the impact of the development on the transportation system. Cities generally required that a traffic impact analysis (TIA) be performed to determine, in a technical manner, the impact of the development and any improvements necessary to achieve a satisfactory level of service on the surrounding roadways. Developers were usually required to donate right-of-way or pay for some, or all, of the necessary improvements. There were complaints about this procedure from the real estate, development, and building community who contended that they were paying more than their share of the improvements. Appendix B summarizes the Institute of Transportation Engineers' (ITE) Traffic Impact Analysis guidelines and discusses the issues involved with this type of procedure. To bring some consistency to this process, the Texas Legislature in 1987 established specific procedures which municipalities must follow if developers are charged fees to offset off-site infrastructure costs associated with new development. The requirements are contained in Chapter 395 of the Texas Local Government Code, entitled "Financing Capital Improvements Required by New Development in Municipalities, Counties, and Certain Other Local Governments." This law serves two purposes; it validates a city's authority to charge impact fees, and it also restricts the manner in which a city can impose, collect, and spend the fees. A summary of Chapter 395 is provided in Appendix A. This report assumes the political subdivision has lawful authority to levy an impact fee and has determined an impact fee to be a viable possibility. Other forms of recovering capital improvement costs and developer participation may have been deemed unlawful by the enactment of this law. Many of the details of this law may be clarified in courtrooms in the near future. Included in Appendix D of this report are the results of a survey conducted by NCTCOG to determine the type and amount of current developer participation required by cities in the Dallas-Fort Worth metropolitan area. There is some question as to when it is appropriate for a city to adopt an impact fee ordinance. The answer is not so direct; it depends on the size of the city, the demographic distribution of the city, the general state of the economy, and many other factors. As a general guideline, a city should have sufficient undeveloped land to spread the total capital costs, resulting in a relatively Iow fee per development. The city should not currently have a severe traffic congestion problem because improvements required to remedy existing deficiencies cannot be used in the impact fee calculation. In addition, the regional economic conditions are also a factor. Cities must be able to compete for new development with surrounding cities. Impact fees could prove to be a disincentive if other cities are not charging them. Cities must weigh the benefits and costs to arrive at a decision that is right at that time. It is highly possible to fulfill all necessary requirements to draft an impact fee ordinance and then determine that it is not in the best interest of the entity to pursue this method of capital recovery. However, a detailed study is encouraged to ascertain the financial, administrative and legal implications of adopting or not adopting a traffic impact fee ordinance. OUTLINE OF REQUIREMENTS There are two major technical analyses necessary to meet the requirements of the law in adopting an impact fee ordinance: a "demand" analysis and a "supply" analysis. The demand analysis includes a demographic inventory, demographic forecast, and number of trips generated by the types of activities contained in the land-use plan. Standard trip generation rates established by the Institute of Transportation Engineers or local authorities should be used to calculate the demand. Appendix C contains additional discussion on trip generation. On the supply side is the transportation system. Analysis of the present transportation system is required in addition to determining anticipated needs. Chapter 395 refers to this as the capital improvements plan (CIP). This CIP would be different than a traditional capital improvements plan in that it would contain only improvements attributable to future growth and thus, eligible for impact fee assessment. Projects required to meet present demand or remedy existing deficiencies would be contained in a traditional capital improvements plan but are not a part of the traffic impact fee ClP and are not eligible for recovery under Chapter 395. Below is an outline in the form of sequential steps as defined in Chapter 395 for drafting, adopting, and implementing a traffic impact fee ordinance. I. Advisory Committee A. Appoint Committee B. Hold Orientation Workshop C. Select Consultant/Team Selection II. Land-Use Assumptions A. Define Service Area B. Develop Land-Use Assumptions C. Solicit Advisory Committee Comments D. Conduct Public Hearing E. Approve Land-Use Assumptions III. Capital Improvements Plan and Impact Fees A, Develop CIP B. Identify Existing Deficiencies C. Identify Improvements For "New Growth" D. Define Service Units IV. Impact Fees A. Calculate Fee Per Service Unit B. Solicit Advisory Committee Comments C. Conduct Public Hearing D. Approve Capital Improvements Plan and Impact Fee V. Monitor and Update A. Monitor Development and Amend Land-Use Assumptions B, Monitor and Amend Capital Improvements Plan C. Recalculate Impact Fees D. Solicit Advisory Committee Comments E. Conduct Public Hearing F. Approve Amendments A time line is provided as Figure 1 to illustrate the process chronologically and to demonstrate the realistic possibility of the process to require ten months. This is mainly due to the 30-day wait periods built into the law to ensure adequate public involvement. The remainder of this report describes the steps outlined above in more detail. ADVISORY COMMFI'I'EE Chapter 395 outlines the basic requirements for developing and adopting an impact fee ordinance. The initial step is the appointment of an advisory committee to assist and direct the technical staff and make reviews and comments when required. The advisory committee is appointed by the governing body (e.g., City Council) of the political subdivision. The committee must have at least five members; 40 percent of which shall represent the real estate, development, or building industry and not be employees of the political subdivision. Chapter 395 states that the Planning and Zoning Commission may also act as the advisory committee if at least one member represents the real estate, development, or building industry. Specific duties of the committee include the following: 1. Advise and assist the political subdivision in adopting land-use assumptions; 2. Review the capital improvements plan and file written comments; 3. Monitor and evaluate implementation of the capital improvements plan; 4. File semiannual reports with respect to the progress of the capital improvements plan and report to the political subdivision any perceived inequities in implementing the plan or imposing the impact fee; and 5. Advise the political subdivision of the need to update or revise the land use assumptions, capital improvements plan, and impact fee. FIGURE 1 SAMPLE TIME DIAGRAM - IMPACT FEE ORDINANCE DEVELOPMENT AND IMPLEMENTATION (MONTHS) 0 1 2 3 4 5 6 7 8 9 10 ~limlnan/miminl~ation Organize Impact Fee Study mmmm A~lx)lm Advisory Committee I: Retain comuttant~ ~ ~pam Land Use assumptions ~ previous lend case ~rllqDtlofl~ Draft naw land use assumptions ~ Advlsory Committee review and comments · Council review of Land Uae aeaumpUon~; = calls public ~eartng and Council comment~ Publish first, rm~ce of public * i 30 DAY MINIMUM I Publ~ H®adng - Land Use ~ I 30 'DAY IMAXlMUM Modity assumptions if ,)q--X- ~ necessary based on Approve Land Uae assumption~ · Prepare ¢.I.P, Review prevlotm C,I.P. Draft nawC.I.P. Ao~ Committee review draft C.I.P. Final C.I.P. to Ao'vJsory Committee Advisory Committee review and comments on C,I.P. ~ and Ordinance Council reviews C.I.P. and Ordinance; calls public / RevJso C.I,P, ba~ed on Advisory Comm~ee and Council comments Publish flr~ notlco of public ~' ~o DAY MINIMUM ~ hearing; meke C.I.P. available ............ lor public irmpection Public Hearing - C.I.P. and Ordinance Modl~ C.I.P; and Omllnance If %~ 30 DAY MAXIMUM necesaery baae on public Approval of C.I.P. and adopt Ordinance smd · 0 1 2 3 4 5 6 7 8 9 10 % additional hearing noUce~ to be published In three consecutive edtttom of local papers · ~-~ may require additional public Ilellriflgs 6 LAND USE ASSUMPTIONS A political subdivision must develop at least a ten-year forecast of land-use assumptions. Land-use assumptions must contain a description of the types and amounts of land uses, densities, intensities and population. Land-use assumptions are summarized by "service areas" which must be defined prior to developing the assumptions. The term service area, as it applies to transportation impact fees, is defined within the legislation as follows: For roadway facilities, the service area is limited to an area within the corporate boundaries of the political subdivision and shall not e ceed a distance equal to the average trip length from the new development, but in no event more than three miles, which service area shall be served by the roadway facilities designated in the capital improvements plan. This definition can be interpreted in different ways; however, as a conservative measure, the city should be subdivided within its corporate boundary into service areas no larger than three miles in diameter, as NCTCOG studies in the Dallas-Fort Worth metropolitan area show that average trip lengths by purpose are all greater than three miles. This ensures that no new development within a service area will pay for improvements farther than three miles away. When developing the service area boundaries, land uses, land availability, growth potential and the transportation system all need to be considered. Neighboring service areas will most likely have different impact fee rates, and since the collected funds are to be spent only within the service area in which they were collected, careful planning is required to obtain the maximum benefit of the fees. As a practical point, if an impact fee service area contains a substantial amount of unprogrammed road construction, it should also contain a significant amount of expected new development over which to spread the financial burden. With the assistance of the advisory committee, the land-use assumptions are developed. Prior to formal approval of the assumptions by the city council, a public hearing is required to inform the general public and provide a forum for public comment and input into the process. After the public hearing, the assumptions must either be approved or rejected for revision by the city council within 30 days. The legislation contains specific instructions regarding proper public hearing notification. CAPITAL IMPROVEMENTS PLAN A critical step in the impact fee process is the preparation of the required capital improvements plan. The capital improvements plan identifies needed improvements and facility expansions based on the demand for the system generated by development in the land-use plan and for which impact fees may be assessed. As defined in the legislation, an impact fee may only be assessed to new development for improvements and expansions required by and attributable to the new development as identified in the land-use assumptions. Chapter 395 lists six requirements of the capital improvements plan. These requirements are listed and briefly discussed below: 1. Evaluate existing infrastructure and determine costs of improvements needed to meet existinq demand. Improvements necessary to accommodate existing demand deficiencies may not be included in the impact fee calculations. This evaluation must be performed by a registered professional engineer. 2. Analyze total capacity in terms of current usage and commitments to existing infrastructure (i.e., determine amount of excess capacity on existing roadways.) If a 8 roadway was previously constructed "oversized" and currently has excess capacity, the recoupment of the costs for oversizing may be allowed. The legislation is not clear on this point, it neither specifically allows nor prohibits recoupment for previously constructed facilities. This must be determined by a registered professional engineer. 3. Define the improvements needed and related costs necessitated by future growth as defined in the approved land-use assumptions. This must be determined by a registered professional engineer. 4. Create a table or list showing service unit rates for each land-use type and capital improvement type. (A service unit may be any meaningful measure of roadway usage such as generated vehicles or vehicle miles.) 5. Sum total service units within each service area attributable to new development as identified in the approved land-use assumptions; 6. Summarize capital improvements necessitated by new service units within each service area for a maximum of ten years. Review and approval of the ClP is required but may be combined with the review and approval of the impact fee. CALCULATION OF IMPACT FEES The maximum fee allowed is calculated, by dividing the cost of the ClP within each service area by either 1) the total additional service units for each service area at full development, or 2) the total additional service units generated for a maximum of ten years. If the number of service units for ten years is less than the number of service units for a service area at full development, the second method shall be used. The equations for the two methods are shown below: a. Full Development fee,~ = cos~ SU,~ where: feem,=e = the maximum fee allowed using the service units at full development cost~ = ClP cost for service area at full development = total additional service units generated by new development for service areas at full development 9 or b. Ten-Year Development feem~=lo = cost~o where: fee,=~0 = the maximum fee allowed using the service units for ten years cost.,o = CIP cost for service area for ten years SU,~o = total additional service units generated by new development for service areas for ten years It should be noted that this is the maximum fee which may be charged. As a practical policy, many cities substantially reduce the fee for social, political, or administrative reasons. For example, if a city begins charging impact fees and neighboring cities do not, the city may not be able to attract new development. It should also be noted that the administrative requirements necessary to adequately administer an impact fee process as described in the ordinance can become expensive. The legislation is very clear regarding refund provisions if alii fees are not utilized in a timely and appropriate manner. There is no requirement for cities to construct all facilities programmed in the CIP, but if collected fees are not spent, they are to be refunded as outlined later in this report. Prior to approval of the impact fee, a public hearing is required by Chapter 395. During this hearing, in addition to discussion regarding the imposition of impact fees, the Capital Improvements Plan is also discussed. The previously established advisory committee is required to review and file comments on the capital improvements plan and impact fees. After meeting review requirements, the plan and impact fee must either be adopted or rejected by the city council within 30 days. 10 Optionally, the land-use assumptions and capital improvements plan may be considered together, thus combining the two public hearings and Advisory Committee reviews into one. It is recommended to combine the land-use and ClP review process as it could prove to be a small time-saving measure, and any problems requiring a recycling in the process may yield a greater delay than time saved. MONITOR AND UPDATE Chapter 395 requires continuous review of both the land-use assumptions and the capital improvements plan. The advisory committee is required to monitor the implementation of the plan and file semiannual progress reports. The land-use assumptions, capital improvements plan, and impact fees must be updated every three years, or less. The same review and approval process described above is required. However, if the city determines that no modifications are necessary after a maximum of three years since implementation of the last update, it should be announced to the public. This decision should follow a formal review by city staff, officials, and the advisory committee. REFUND AND GENERAL FEE PROVISIONS The legislation provides for refunding all or a portion of the fees paid to ensure that the funds are properly used. The collection of impact fees is a commitment by the city to provide all services which were determined to be necessary by new development. All or a portion of the fee must be refunded under the following conditions: 1. If the fee is not spent within the service area in which it was collected within ten years of collection of the fee. 2. If collected fees for a service area exceed the actual cost of improvements in the ClP by more than ten percent. 3. If access to services for which the fee was collected did not exist at the time of collection and construction is not started within two years of fee collection or service is still not available after a reasonable period of time or a maximum of five years. 4. If access to services for which the fee was collected is denied. The legislation also contains several other points regarding the general imposition, collection, and use of fees. Several of the more critical points are described below: 1. Fees may be imposed to pay for construction costs, surveying and engineering fees, land acquisition, court costs (if applicable, including attorney's fees), CIP preparation costs (non-city employees only), and interest and finance charges. 2. Fees may not be used to pay for anything not contained in the CIP, repair or maintenance costs, upgrading existing facilities solely to serve existing development, administrative or operating costs, or interest or finance charges associated with other bonds or financial obligations. 3. Fees may be assessed and collected at any time during the platting, development approval, building process, or when certificate of occupancy is issued as defined in the legislation. 4. After the initial assessment of the fee, additional fees may not be assessed for any reason unless the number of service units increases. 5. The city may collect and spend other funds to off-set all or part of the ClP in order to reduce the impact fee. 6. Right-of-way or facility construction, either required or donated, must be credited against the impact fees. 7. Funds must be spent only for those purposes for which they were collected and within the service area in which they were collected. APPENDIX A Executive Summary of Chapter 395 SUMMARY~ TEXAS LOCAL GOVERNMENT CODE, CHAPTER 395 "FINANCING CAPITAL IMPROVEMENTS REQUIRED BY NEW DEVELOPMENT IN MUNICIPALITIES, COUNTIES, AND CERTAIN OTHER LOCAL GOVERNMENTS" Subchapter A: General Provisions §395.001 Definitions 1. CAPITAL IMPROVEMENT means a roadway facility with a life expectancy of three or more years that is owned and operated by or on behalf of a political subdivision. 2. CAPITAL IMPROVEMENTS PLAN (ClP) means a plan that identifies capital improvements or facility expansion for which impact fees may be assessed. 3. FACILITY EXPANSION means the expansion of the capacity of an existing facility that serves the same function as an otherwise necessary new capital improvement. 4. IMPACT FEE means a charge or assessment imposed by a political subdivision against new development in order to generate revenue for funding or recouping the costs of capital improvements or facility expansions attributable to new development. This includes amortized charges, lump-sum charges, capital recovery fees, contributions in aid of construction, and any other fee that functions as described by this definition. The term does not include: a) dedication of land for public parks in-lieu of payment or b) dedication of ROW, easements, or construction of on-site facilities if the dedication or construction is required by a valid ordinance and attributable to the new development However, an owner is not required to construct facilities which are in the CIP and in no case required to construct or dedicate facilities and pay impact fees which will be used to pay for the same facility. 5. LAND USE ASSUMPTIONS includes a description of the service area and projections of changes in land uses, densities, intensities, and population in the service area over at least a ten-year period. 6. NEW DEVELOPMENT means any use or extension of the use of land which increases the number of service units. 7. POLITICAL SUBDIVISION means a municipality, district, or authority created under State law. 8. ROADWAY FACILITIES means arterial or collector streets or roads that have been designated on an officially adopted roadway plan, together with all necessary appurtenances. This does not include any roadways designated on the federal or Texas highway system. Summarized by Dan Lamers (NCTCOG) and Brian Gardner (FHWA) A.1 9. SERVICE AREA means an area contained by the corporate boundaries and which is within the lesser of (1) the average trip length or (2) a three-mile radius. 10. SERVICE UNIT means a standardized measure of use for roadway improvements or facility expansions. Subchapter B: Authorization of Impact Fee §395.011 Authorization of Fee 1. Only a municipality specifically authorized by this chapter or other state law may impose impact fees. 2. Impact fees for roadway facilities may only be assessed within the corporate bounds of the municipality. §395.012 Items Payable by Fee Items for which an impact fee may be imposed include and are limited to: a) construction contract price, b) surveying and engineering fees, c) land acquisition costs, d) consultant fees for the preparation of the CIP, and e) interest and finance charges which may be included for the payment of obligations issued to finance the CIP or portions thereof. §395.013 Items Not Payable by Fee Impact fees may not be used to pay for: a) capital improvements or facility expansions not identified in the CIP; b) repair, operation, or maintenance activities; c) upgrading existing facilities to serve existing development in order to meet stricter standards; d) upgrading existing facilities to provide better service to existing development; or e) administrative or operating costs of the political subdivision. §395.014 Capital Improvements Plan 1. The CIP must contain the following: a) a description of the existing capital improvements within the service area and the costs to upgrade the improvements to meet existing needs and standards; b) an analysis of the total capacity of the existing capital improvements, the current usage of the existing capital improvements, and the usage commitments of the existing capital improvements; c) a description of the portions of the capital improvements and facility expansions and their costs necessitated by and attributable to new development in the service area based on the land-use assumptions. This analysis may be prepared on a systemwide basis within each service area. d) a table establishing the specific level of usage for each category of capital improvements and/or facility expansions and an equivalency or conversion table establishing the ratio of usage in terms of service units to various types of land uses, including residential, commercial, and industrial; e) the total number of projected service units attributable to new development within the service area based on the land-use assumptions; and f) the projected demand for capital improvements or facility expansions required by new service units projected over a period of time not to exceed ten years 2. The political subdivision shall use qualified professionals to prepare the ClP and to calculate the impact fee. The governing body is responsible for supervising the implementation of the CiP in a timely manner. §395.015 Maximum Fee per Service Unit The maximum fee per service unit within a service area may not exceed the fee calculated by either of the two methods: 1. dividing the total cost of capital improvements attributable to new development by the total number of projected service units generated by the land-use plan attributable to new development or 2. dividing the cost of the portion of the capital improvements required due to new development by the projected service units for a maximum of ten years. §395.016 Time for Assessment and Collection of Fee 1. Cities may assess the impact fee at or before the time of platting. 2. If no plat is involved, assessment can be at any time during the building process. 3. Impact fees may be collected at the time of platting or at the issuance of the building permit or certificate of occupancy. 4. If a development is platted before the city's impact fee ordinance is adopted and a building permit is issued within a year after the adoption of the ordinance, no impact fee may be collected. §395.017 Additional Fee Prohibited: Exception After the assessment of impact fees, no additional impact fees may be assessed unless the number of service units in the development increases. §395.018 A_areement with Owner Regarding Payment The political subdivision may enter into an agreement with the property owner regarding time and method of payment of impact fees. §395.019 Collection of Fees if Services Not Available This section does not apply to roadway facilities. A.3 §395.020 Entitlement to Services Any development which has paid impact fees is entitled to: 1. permanent use and benefit of the services for which fees were paid and 2. immediate service from existing facilities with capacity to serve the new development, subject to other regulations. §395.021 Authority of Political Subdivision to Spend Funds to Reduce Fee~ Funds from any lawful source may be used to pay for all or part of the capital improvements to reduce the amount of impact fees. §395.022. Authority of Political Subdivision to Pay Fee~ Governmental entities may pay impact fees. §395.023 Credits Against Roadway Facilities Construction of, contributions to, or dedication of off-site roadway facilities, agreed to, or as a requirement of development, must be credited against roadway impact fees due. §395.024 Accountin,q for Fees and Interest 1. All impact fees collected must be deposited into interest-bearing accounts identifying the type of capital improvements within the service area that the fees were collected from. 2. Interest earned in the account is subject to the same restrictions placed on the use of the impact fees. 3. Impact fees may only be spent for the purposes for which they were imposed. 4. The records of the impact fee accounts are open for public inspection. §395.025 Refunds 1.The property owner may request a refund of his paid impact fees if: a) he is denied the use of or service of existing facilities, b) construction of new facilities is not started within two years after fees are paid if no services or facilities currently exist, or c) services are not available within a reasonable period of time not to exceed five years. 2. After the capital improvement is completed, the fee must be recalculated based on actual costs incurred. If the new fee is less than what was paid, the difference must be refunded if the difference exceeds 10 percent of the original fee. 3. Any impact fees that are not spent as authorized within ten years of collection must be refunded. 4. All refunds shall include the appropriate interest earned as defined by state law. 5. Refunds shall be made to the owner of the property at the time of refund unless the fees were paid by a governmental agency, in which case the refund shall be made to the agency. Subchapter C: Procedures for Adoption of Impact Fee §395.041 Compliance with Procedures Requirer; Except as otherwise provided, a political subdivision must comply with the requirements of this chapter if impact fees are levied. §395.042 Hearingj on Land-use Assumptions A public hearing must be held to consider the land-use assumptions within the service area from which the ClP will be developed. §395.043 Information About Assumptions Available to Publin Land-use assumptions, time period for projections, and nature of capital 'improvements proposed must be available to the public on or before the date the first public hearing notice is published. §395.044 Notice of Hearing on Land-use Assumption-~ The requirements for publishing the public hearing notice regarding land-use assumptions are clearly defined. §395.045 Approval of Land-use Assumptions Require,~ The land-use assumptions must be either approved or disapproved within 30 days following the public hearing but not as an emergency measure. §395.0455 Systemwide Land-use Assumption~ This section does not apply to roadway facilities. §395.046 Capital Improvements Plan Required After Approval of Land-use A_$~umption," If the land-use assumptions are approved, a ClP must be developed as described in §395.014. §395.047 Hearin.q on Capital Improvements Plan and Impact Fe~, Once the ClP is completed, a public hearing date must be set to discuss the adoption of the ClP and impact fees. A.5 §395.048 Information About Plan Available to Public The ClP must be made available to the public on or before the date the first public hearing notice is published. §395.049 Notice of Hearin.q on Capital Improvements Plan and Impact Fees The requirements for publishing the public hearing notice regarding the CIP and impact fees are clearly defined. §395.050 Advisory Committee Comments on Capital Improvements Plan and Impact Fee-- The advisory committee (see §395.058) must file its written comments on the proposed ClP and impact fees before the fifth business day prior to the public hearing date. §395.051 Approval of Capital Improvements Plan and Impact Fee Required The CIP and imposition of impact fees must either be approved or disapproved within 30 days following the public hearing, but not as an emergency measure. §395.0515 Consolidation of Land-use Assumptions and Capital Improvements Plan 1. Instead of separately adopting the land-use assumptions and CIP for a service area, both may be adopted along with the impact fee simultaneously. 2. If consolidation is chosen, the land-use assumptions must be available to the public (§395.043), and the requirements for the public hearing on the ClP and impact fees (§395.046 - §395.050) must be followed except as specified in this section. §395.052 Periodic Update of Land-use Assumptions and Capital Improvements Plan Required Land-use assumptions and CIP must be evaluated and updated at least every three years. §395.053 Hearin~l on Updated Land-use Assumptions and Capital Improvements Plan Within 60 days after a political subdivision receives the updated land-use plan and Capital Improvements Plan, they must set a public hearing to discuss and review the new plans. §395.054 Hearing on Amendments to Land-use Assumptions~ Capital Improvements Plan, or Impact Fee A public hearing on the proposed ordinance amending the land-use plan, CIP, or the impact fee must be held on or before the first public hearing notice is published; the proposed plans and any impact fee amount amendments shall be made available to the public. §395.055 Notice of Hearin.q on Amendments to Land-use Assumptions, Capital Improvements Plan, or Impact Fee The requirements for publishing the public hearing notice are clearly .defined. A.6 §395.056 Advisory Committee Comments on Amendment,-. The advisory committee (see §395.058) must file its written comments on the proposed amendments before the fifth business day prior to the public hearing date. §395.057 Approval of Amendments Requirer; The amendments to the land-use plan, CIP, or impact fees must either be approved or disapproved within 30 days following the public hearing, but not as an emergency measure. §395.0575 Determination That No Update of Land-use Assumptions, Capital Improvements Plan, or Impact Fee is Needed 1. If no update to the land-use plan, ClP, or impact fees is required at the end of three years (§395.052), it may elect to publish notice that no updates are to be made rather than follow the update procedures in §395.052 - §395.057. 2. The requirements for publishing the notice are clearly defined. §395.058 Advisory Committee 1. A capital improvements advisory committee must be appointed on or before the date on which the land-use assumption public hearing notice is approved. 2. The committee must be composed of at least five members, of which not less than 40 percent must be representatives of real estate, development, or building industries. A planning and zoning commission may act as the advisory committee if the commission includes at least one representative of the previously mentioned industries. An ad hoc voting member from one of these industries may be appointed if not already present. 3. The advisory committee is established to: a) advise and assist in adopting the land-use assumptions, b) review the ClP and file written comments, c) monitor and evaluate implementation of the CIP, d) file semiannual reports on the progress of the ClP and report inequities in implementing the ClP or imposing the fee, and e) advise the need for revisions or updates to the land-use assumptions, CIP, and impact fee. Subchapter D: Other Provision- §395.071 Duties to be Performed Within Time Um~-~ 1. Any person who has paid an impact fee may present a written request to the political subdivision to have a delinquent duty performed. 2. The duty must be started within 60 days if it is indeed delinquent and must proceed until complete. A.7 §395.072 Records of Hearings Records for any public hearing held under the chapter must be kept and made available for publiC inspection for at least ten years. §395.073 Cumulative Effect of State and Local Restrictions Other state and local restrictions that apply to the imposition of impact fees are cumulative to those in this chapter. §39S.074 Prior Impact Fees Replaced by Fees Under This Chapter An impact fee that is in place on June 20, 1987, must be replaced by June 20, 1990. Any political subdivision having an impact fee that has not been replaced before June 20, 1988, is liable to any party who pays an impact fee after June 20, 1988, that exceeds the maximum fee by more than 10 percent for an amount equal to twice the difference between the maximum fee allowed and the actual fee paid, plus attorney's fees and court costs. §395.075 No Effect on Taxes or Other Charges This chapter does not prohibit or affect any tax, fee, or assessment authorized by any other state law. §395.076 Moratorium on Development Prohibited No moratorium on new development may be enacted while waiting for development, adoption, or update of impact fee process. §395.077 Appeals 1. Any person not satisfied with the outcome of all administrative remedies to his grievance is entitled to a trial. 2. Any suit to contest an impact fee must be filed within 90 days after adoption of the ordinance establishing this fee. 3. Paid impact fees do not guarantee specific performance of roadway facilities. 4. No specific facility is required to be constructed to provide services. 5. Suits must be filed within the county where the property is located. Successful' litigants are entitled to recover attorney's fees and court costs. §395.078 Substantial Compliance with Notice Requirements An impact fee is not invalid due to noncompliance with public notice requirements as long as the actual compliance was substantial and in good faith. §395.079 & §395.080 These sections do not apply to roadway facilities. A.8 APPENDIX B Traffic Impact Fee Versus Traffic Impact Analysis TRAFFIC IMPACT FEE VERSUS TRAFFIC IMPACT ANALYSIS In an attempt to standardize the way in which traffic impact analyses were performed, organizations such as the Institute of Transportation Engineers (ITE) and the American Planning Association (APA) developed guidelines for determining the impact of new development on the surrounding transportation system. In their reports, Traffic Access and Impact Studies for Site Development, Proposed Recommended Practice, Institute of Transportation Engineers, 1988, and Traffic Impact Analysis, Planning Advisory Service Report Number 387, American Planning Association, 1984, step-by-step guidelines are presented. Although the details of each method may differ, the basic steps in performing a traffic impact analysis for a proposed development are consistent: · Inventory existing and proposed land use plans. · Inventory existing and proposed transportation systems. · Calculate the travel demand generated by the new development. · Determine the directional distribution of trips to and from the development. · Assign the new trips to the roadway system and add them to the background traffic. · Pedorm a capacity analysis for all roadway segments and intersections impacted by the development. · Evaluate and recommend improvements for facilities which are expected to operate at an unacceptable level of service. This approach, while straightforward, has many underlying assumptions which have been the source of debate between cities and developers. B.1 One important distinction between a traffic impact fee analysis and a traffic impact analysis is the way in which the land-use and thoroughfare plans are developed. Traffic impact fee legislation requires the land-use plan to be developed first and the thoroughfare plan second to ensure that transportation demand and needs are coordinated. Under the traffic impact analysis procedure, there has been no requirement to ensure that sufficient transportation capacity will be provided for the anticipated demand based on the land-use plan. Land-use plans were often developed based on available land area and the city's development desires. Thoroughfare plans were often developed separately based on general spacing guidelines or limited by right-of-way constraints and citizen opposition to certain facilities. The result was usually an undersized thoroughfare system relative to the amount of development in the land-use plan. Traditional traffic impact analysis procedures generally required that developers determine their impact based on the thoroughfare plan and take into account only those developments already approved rather than the full land-use plan. This allowed developers who were first to seek approval of their developments to take advantage of any excess capacity in the thoroughfare plan and lower forecasted background traffic. In addition, many studies were being performed by engineers, planners, or others who were not sufficiently trained or experienced with transportation issues. Complaints about these and other issues from the real estate, development, and building community led to the consideration and adoption of the current legislation concerning impact fees discussed in this report. APPENDIX C Trip Generation TRIP GENERATION The purpose of developing a traffic impact fee process or performing a traffic impact fee analysis is to determine the impact a new development will have on the surrounding roadway network, or put simply, to determine how many additional trips will be generated due to the development. Trip rates are usually developed based on several factors: the location, type, and size of the development. The determination of these trip rates, however, is developed through expensive and lengthy surveys or counting procedures. Many municipalities do not have the time or budgets to go through this process, but rather use other readily-available average trip rates. The primary source for these average trip rates is the Institute of Transportation Engineers who publish, and periodically update, average trip rates for various types of land uses and developments in their publication, Trip Generation. These trip rates, however, are national averages for each specific type of development. In addition, many of the rates are based on only a few observations. Locally developed rates, however, take into account various local and regional variables and behavioral characteristics such as type of surrounding development, auto occupancy, mode choice, and economic conditions. In urban areas local or regional trip rates are usually maintained by large cities, counties, state agencies, or metropolitan planning organizations. Where reliable local or regional trip rates are available, they are generally preferred. When not available, ITE rates should be used as this is the nationally accepted standard. It is important, however, that when local rates are used, the differences between those rates and ITE rates should be investigated, understood, and documented to avoid any criticism or challenge to the traffic impact fee or analysis methodology. In addition, it is important to document every assumption used in developing the rates or any adjustments to the rates. Rates are often adjusted for pass-by trips or for internal satisfaction. For example, a proposed gas station located at a busy intersection may serve 1000 vehicles daily, but only as much as 50 percent may be totally new trips. The other 50 percent are currently on the surrounding roadway. The trip rate may be reduced by 50 percent if sufficient data is available to account for these pass-by trips. An example of adjusting for internal satisfaction would be a shopping center containing a grocery store and a dry cleaner. The shopping center may generate 500 vehicles in the P.M. peak-period. However, 10 percent of those vehicles may be going to both establishments. The peak-period trip rate for the entire shopping center may be reduced by 10 percent to account for this internal satisfaction after the trips have been totaled treating each establishment separately. APPENDIX D Survey Results STATUS OF TRAFFIC IMPACT FEES OR OTHER DEVELOPMENT FEES: RESULTS OF SURVEY In November 1990, NCTCOG conducted a survey to determine the Status of Impact Fees or Other Development Fees in the North Central Texas area. The survey was sent to 29 cities in the North Central Texas area with a minimum population of 20,000. The 20,000 population criterion was chosen because it was felt that cities of this size or greater would be more likely than smaller cities to have sufficient development activity and the staff necessary to implement an impact or development fee program. Of the 29 cities, 22 responded to the survey. The returned survey questionnaires were separated into three groups for analysis based on the level of developer participation for off-site roadway improvements and whether fees are charged. The first group requires developer participation and charges fees based on a formal fee schedule. The second group requires participation but does not collect fees. The third group does not require any form of participation from developers. For the purpose of this survey, developer participation is defined as any development activities specified by the city as a requirement for development, including donation of right- of-way facility construction on any form of fees. The survey had 15 questions which dealt with three areas of interest: whether cities require developers to participate with off-site roadway improvements or charge fees, fee structure for those cities who charge fees, and whether the cities' ordinances regarding financing capital D.1 improvements have been evaluated for conformity with the Texas Local Government Code, Chapter 395. The results are as follows: Group I - Requires Developer Participation/Charges Fees This group had five responses. Of the five, only two have actually developed a formal traffic impact fee structure based on the requirements of Chapter 395. The remaining three charge street assessments based on the development's linear feet of frontage on the periphery street. One of these three is currently developing a traffic impact fee procedure. The two which charge impact fees, charge fees which vary based on the location within the city and the type of development. Group 2 - Requires Participation/No Fees Ten responses were included in this group. Five said they had considered charging fees but, for various reasons, chose not to. Two of the five cited the complexity of their recommended fee structure as the main reason why no fee structure is used. While the remaining three cities cited separate reasons: one said the assessment of fees would hinder development and hurt economic growth, one city chose to require developers to provide traffic mitigation measures, and one city is currently evaluating the use of a fee structure. Group 3 - No Developer Participation Required This group included seven responses. Four said that they had considered charging fees. One of these four has developed a traffic impact fee ordinance but decided not to implement the procedures, and one is expecting to evaluate the issue in 1991. Of the 22 total responses, 14 indicated that they were familiar with Chapter 395 and its requirements. Ten said their current procedures have been reviewed for conformity with Chapter 395. It is interesting that four of the 15 which requires some form of developer participation indicated that they are not familiar with Chapter 395.