Competitive Advantage Hindered by Fees (Jeff Koenig Commentary)

I and many employees of my company, Upchurch Electrical Supply, have been avid readers of the Business Journal. I have always felt the publication represented the business community’s perspective dealing with facts and setting aside emotion. However, I believe it strayed from its high standards in the April 23 commentary regarding impact fees.
First the question of the misleading “Citizens 4 Fayetteville” group name. This group formed in order to pull Fayetteville out of potentially great financial disaster with cost overruns on the sewage treatment project now estimated to be in excess of $63 million. We also supported a road proposal that was scaled back simply because the sewage treatment fiasco had consumed so many future tax dollars. With support of Citizens 4 Fayetteville, the sales tax proposal passed overwhelmingly. The same group took the stance against the proposed road impact fees because of their structure and the potential devastating economic impact.
The support came from many local individuals, including myself. The monies contributed by real estate associations is reflective of efforts that they would make anywhere in support of their dues-paying members, the majority of whom were supportive of our group. Consider this: Northwest Arkansas realtors would have only benefited with increased commissions if the road impact fees had passed, and yet they overwhelmingly opposed them with the support of their national association.
The question of “tax” versus “fee” was answered by the Fayetteville City Attorney who recommended a general election vote because in his own opinion it could be deemed a “tax.”
Fayetteville has an overabundance of “low tax yield” properties. Because of this we generate $14 per resident per mill of property tax while Bentonville generates $40 per resident and Rogers generates $28 per resident. Couple this with the fact that since we can only utilize about 65 percent of our land mass, we have great challenges in Fayetteville to expand our tax base.
More research would have revealed that developers are already required to make offsite road improvements and dedicate right of way at no cost to the city. The Planning Commission staff recommended no offset of these costs against road impact fees. These fees would be piled on top of the burden already placed. Any good business person knows all these costs will eventually be passed onto the consumer making “affordable” housing practically impossible.
If this “fee” passed, we would have been the only community in Arkansas that had road impact fees plus road improvement sales tax plus offsite road improvements and land dedication. If you don’t call that double taxation, then what is it? Other communities only have one or two of the above, but none have all three.
Sales tax revenues for the last four months have gone down and we desperately need to increase our “high tax yield” properties. A draft study (not completed because of insufficient data) done by the Center for Business Excellence and Research indicated that total development cost with Road Impact Fees, for single family housing (low tax yield) was 36 percent higher than Rogers. In this case higher may be good. It may discourage low tax yield development.
In the high tax yield category of Retail, Office, and Industrial the total cost of development in Fayetteville was roughly 80 percent more than in Springdale and Bentonville. This same type of high tax yield development in Rogers is about 87 percent lower.
The bottom line is this: the Citizens 4 Fayetteville believed that had the road impact fees passed, Fayetteville would have been at a competitive disadvantage at a time when our property tax base for our schools is already inadequate and sales tax revenues are down.

(Jeff Koenig is the former president and CEO of Upchurch Electrical Supply Company and past president of the Fayetteville School District Board of Education. He may be reached at: [email protected].)