Home Builders Executive Decries Impact Fees

Bobby Rayburn is a believer in rooftops.

The first vice president of the National Association of Home Builders, Rayburn has more than 30 years of experience in building and developing with the construction of more than 3,000 single-and multi-family homes on his resumé. On a recent visit to Northwest Arkansas, Rayburn talked about a growing concern among builders nationwide — impact fees.

The impact fee for a single-family dwelling averages $1,143 in Fayetteville and $3,600 for a single-family dwelling in Bentonville. They are the first local cities to inact what amounts to surcharges for new construction.

“If you are going to promote growth and promote working families coming into the community,” Rayburn said, “you are going to severely impact [the families] unless you think about a plan for that growth so that you don’t have a tremendous amount of tax tacked onto that 30-year mortgage.”

Rayburn toured the 2003 Premiere Parade of Homes put on by the Northwest Arkansas Home Builders Association in June and was able to see various developments in the area. He said the area’s prosperity was evident even from his airplane view while flying into the Northwest Arkansas Regional Airport.

Rayburn argues that the burden of impact fees falls on the consumer and that developers are forced to oust middle-income buyers out of housing markets because of the additional fees.

He suggests that alternatives such as creating special taxing districts and using government tools are better alternative solutions for meeting the cost of rising needs. Rayburn said new homes should be viewed more as an economic catalyst than a burden.

“There is a lot going on here,” Rayburn said. “Anytime you have as much job creation as you do in this area, you are going to have rooftops. Rooftops necessitate drugstores and grocery stores and on and on.”

Impact Alternatives

Jeff Hawkins, director of the Northwest Arkansas Regional Planning Commission, said Rayburn’s alternatives might not be feasible for Benton and Washington counties.

“Passing special taxing districts in a citywide area would be very difficult,” Hawkins said.” Improvement districts are next to impossible for a very large and citywide project because it takes a majority in value to establish and it gets really complicated because it is a property owner-initiated act.”

Improvement districts require the petition of the property owners in the district for establishment. Impact fees aren’t going to go away anytime soon. Hawkins said that the city of Conway is considering a fee.

“I think there will be more fees in the future because of the infrastructure and capital needs associated with the growth in our area,” Hawkins said.

Developer Dilemmas

John David Lindsey, a developer at Lindsey Development in Rogers, said impact fees really affect the home buyer in the houses marked under $150,000. The impact of the surcharge literally decreases as the value of a home increases.

“There is no prorated difference between a $100,000 house and a $1 million dollar house,” Lindsey said. “The fee becomes less than one percent for the million-dollar house and it is over 3 percent for the $100,000 house.”

Developers might choose to go elsewhere, according to Lindsey, but the issue lies in the overall cost of the home.

“I think it just depends on what size home you want to build. If you want to build $150,000 and up then the Bentonville impact fee, for example, isn’t as big,” Lindsey said. “It discourages developers to develop in those towns where the impact fees would directly affect first-time home buyers.”

Lindsey said he has studied the issue, but their is no clear solution. He proposed that cities could implement a citywide sewer and water tax to pay for increasing infrastructure needs.

“If the city feels like they need impact fees to pay for infrastructure then I am going to look at a real estate deal based on if the impact fee is included or not,” Lindsey said.

Truth In Numbers

Infrastructure needs will assuredly increase during the next 20 years considering that Northwest Arkansas is projected to grow at an increasing rate over that time.

According to the U.S. Bureau of the Census Population Division and a study released June 30 by the Center for Business and Economic research at the University of Arkansas, Benton County’s population will swell 12 percent from 2002 to 2005.

That climb is expected to reach 36.5 percent by 2010 and 142.7 percent by 2025.

Washington County is expected to grow 6.7 percent from 2002 to 2005, 19.2 percent by 2010 and by 48.8 percent by 2025.

Because of low interest rates, the number of homes built in 2003 will likely surpass the housing peak Northwest Arkansas experienced in 1994. First quarter numbers for 2003 indicated a two percent increase over numbers at the same time in 2002.

“At our last census, we ranked among the top in the nation for one of the fastest growing cities,” Paul Justus, regional planner with the Northwest Arkansas Regional Planning Commission said. “Impact fees are in growing use around the country. The idea being that suburban growth doesn’t make up for the need for infrastructure, roads, schools and fire protection.”

In 2002 alone, a total of 4,440 housing units were built in the region.

“Houses are where jobs go to sleep,” Rayburn said.

In fact, unemployment for the month of May was at 2.5 percent for Benton County and 2.8 percent for Washington County. Compared to the National Unemployment in May of 6.1 percent, Northwest Arkansas is well below the national average.

“For every 100 houses built, it will create $11.6 million in revenue for a city,” Rayburn said. “For every 100 houses built, it will create 250 construction-related jobs and generate 1.4 million in local government taxes.”