The Springfield Board of Mayor and Alderman approved an ordinance by a vote of 6-1 on a second and final reading establishing new system development fees for the city.
The fees, which will be imposed on new developments being built within Springfield, aim to account for the expansion and improvement of essential services the city provides, to meet the growing demands coming from residential and commercial development.
After a study completed in April with the economic and planning consulting firm TischlerBise, it was determined the maximum amount for these fees allowable under law came at $15,158. After initially considering the full amount, the board ultimately decided that they would do 50% of the recommended fee for general government, fire, police, transportation, parks and water and 100% of the maximum fee for wastewater.
Combined, the total recommended fee is $9,968 per unit. This cost only pertains to residential developments, as a separate fee will be imposed for commercial developments as well.
The board also approved for these fees to be implemented on a gradual percentage basis. Starting Sept. 1 of this year, the city will adopt impact fees at 25% for the general government, fire, police, transportation, parks and water and 50% of the maximum allowable fee for wastewater. On Jan. 1, 2023, those fees will increase to 50% of the maximum allowable fees for general government, fire, police, transportation, parks and water and 100% of maximum allowable fee for wastewater.
Before voting on the ordinance, a public hearing was held where several members of the community voiced their concerns on the proposed fees.
George Dean, an attorney from Nashville representing the Homebuilders Association of Middle Tennessee, addressed the board first. He stressed that homebuilders’ main worries with the development fees are the increased costs, which could have an adverse impact on their ability to construct homes, and for average folks to be able to buy starter homes in Springfield, while making it more difficult for them to sell.
“Particularly, in this time we’ve got inflation that’s striking at new homebuyers basically from two fronts,” Dean said. “For one, financing is obviously going up rapidly because of the Federal Reserve’s changes in the interest rates. And in addition, inflation is hitting the materials the homebuilders use to construct the homes. So, it’s making things more difficult.”
Bill Sealy, a developer from Ashland City, also spoke to the board. He had previously met with City Manager Ryan Martin and Assistant City Manager Candice Tillman, who explained in detail the reason behind the fees and what the city was up against.
However, Sealy noted that he is currently in the process of a particular development in Springfield, where he has contracted for the land and is already into the design process. His biggest issue with the fees were how quickly they will be imposed on his development, and others like it, where costs have already been budgeted and the construction process has already begun.
“If you look at a development like we’re doing, which is three lots per acre, that puts us at about $27,000-30,000 more on an acre of land for the cost,” Sealy said. “Somewhere in that pro forma somebody’s got to take the hit on that. Going along with what Mr. Dean was talking about, it really does make it economically hard. So, I would like to request a fair way to spread that cost out to where it’s not immediate.”
Sealy offered several ideas to the board to defer these costs for developers, allowing them more time to better handle them where the impact is not felt immediately. Among those he mentioned spreading the new development fees over a five-year period, or at 20% of the proposed cost per year.
Alderman Lisa Arnold, who proposed the idea of graduated fees at last month’s meeting, agreed on the need for some type of fee for the city to move forward, but also sided with the developers in expressing concerns for the timeline its implementation.
She urged the rest of the board to consider postponing the start date for the development fees to take effect until Jan. 1, 2023. Arnold claimed this would give developers more time to get through the rest of the year and prepare them to budget the additional fees for projects currently in progress.
“This is something that is new information to them, and they’ve been planning a lot of these projects since last year or the beginning of this year. As generous as the city has been, these folks have been generous to us, to choose us to build in. So, I think there is a give and take between the developers and the city,” she said.
Despite the request to postpone, Martin noted that any delay to have a meaningful impact for developers would take much longer than the first of January.
Arnold would be the lone alderman to vote no on the ordinance.
In spite of these suggestions for changes from developers and Arnold, the rest of the board ultimately chose to enact the original proposal that was voted on a first reading from the previous meeting. Their main reasons for supporting it come from the ever increasing need to maintain services for the growing population within the city, especially to fund more police officers and additional fire stations.
City leaders also stated they wanted to avoid increasing the tax burden on its citizens already living in Springfield.
“Yes, we welcome development. In fact, we’ve got a lot coming our way. But the fact of the matter is, we have to service these developments. So, we have to make some hard choices, because the burden of the service for these new constructions are going to be on the city of Springfield. We’re not going to put that burden on our tax rates and burden our citizens down. That’s no way to govern,” Alderman James Hubbard said.
After going through the system development fee study, Alderman Emily Green pointed out that the income which funds all of the many services the city provides rarely comes from property taxes and sales taxes.
In fact, the development fees will not pay for the entirety of city services, and they are limited as to what the city can use the fees for. They are also only a partial contribution and will not fully fund the new developments.
Because of this direct accounting, Green says she feels better about the fees as being responsible to the city, to ensure that these funds are directly supporting and impacting those who are having to pay the fees.
“I don’t think it’s inappropriate to ask the new homes that are being built to help finance the services as to the rest of the community that is already paying high taxes elsewhere. It’s a tough decision but I think that’s where I’m coming from,” Green said. We understand that this is a really big change with a lot of money, and that’s part of why we reduced the fees from the maximum amount.”
“Not one penny of this system development fee will go to anything that already exists in the city of Springfield. It’s only towards new development,” Alderman Tim Harris said. “For instance, if we have a current 5,000 square foot police station and we need to build a 10,000 square foot police station, then only capacity fees for the new 5,000 square feet that is added on can be used for this. We cannot go back and address anything that already exists in the city.”
Once the ordinance takes effect in September, any person who applies for a building permit or a water or wastewater connection for an impact-generating development shall pay a development charge in accordance with the following fee schedule prior to the issuance of a building permit or a water system development charge if outside corporate boundaries and only to the water system. If connecting to the wastewater system outside the corporate boundaries, that charge would also be applicable.
These development fees will also be in addition to any fees that are already being paid.
“We’ve crossed a path where we’ve got to do something because every department is affected by this.” Mayor Ann Schneider said. “I don’t want to do this, but we’ve come to a crossroads of how we are going to fund certain things. It’s not a fun position to be in and we’ve got some tough decisions to make, as we have for the past several months, to deal with the growth in the city.”