The Kyle Report is an opinion column written by Kyle resident, Pete Oppel, that covers city leadership issues. You can follow The Kyle Report here on the Kyle Life or by subscribing to Mr. Oppel’s blog, The Kyle TX Report.
The above video tries to explain in wildly esoteric terms exactly what it is the company calling itself HDR, Inc., does. I’m not sure that I get it, but I also must admit subjects like engineering consulting are way above my head. My Hero will get it. She’s both an engineer and a consultant. Me? Not so much.
What I do know is that a representative from HDR is scheduled to make a presentation to a Planning & Zoning Commission workshop Tuesday evening on the subject of impact fees, which are the fees Kyle imposes on new or proposed developments to pay for, in this case, the costs of providing water and wastewater service infrastructure to that development.
Behind this presentation is the desire by the City Council to have the Planning & Zoning Commission double as a Impact Fee Advisory Committee. This committee will be assigned to verify that the maximum possible fee has been properly determined and to recommend to the council the actual impact fee to be levied against the developer. At least, that’s what I’m reading into this presentation.
It’s worth it to examine the actual impact of impact fees. The most important thing to note about these fees is that they are not paid by the developer of a new subdivision or even the individual homebuilders creating product within a subdivision. This from a National Association of Home Builders’ Handbook on Impact Fees: “Similar to any tax or other costs imposed on businesses, the ultimate burden of payment will, to varying degrees, be passed to new home buyers in the form of higher house prices (or, equivalently, smaller houses with fewer amenities), or come from suppliers of products and services utilized to build and deliver the home in the form of lower prices paid for those products and services.”
Not only that, the Handbook goes on to say “NAHB research shows that, on average, regulations imposed by government at all levels account for 25 percent of the final price of a new single family home built for sale. Every time a local or regional government raises construction costs by, for example, increasing the price of construction permits or impact fees, the cost of building a house rises. In fact, the final price of the home to the buyers will usually go up by more than the increase in the government fee. This is because each time construction costs increase other costs such as commissions and financing charges automatically rise as well. As a result, most cost increases are passed on to the buyers with additional charges. … The bottom line is that a $1,000 impact fee imposed at the time of development approval will typically increase the costs to builders and developers to at least $1,390.” According to this presentation, Kyle is looking at a maximum fee of $6,391 which, according to this formula would add, on the average, $8,883.49, to the purchase price of a new home in Kyle. According to a study conducted two years, a $1,000 impact fee that increased the price of a home $1,390 priced 282,588 potential households out of the market nationwide. That same study, found in Exhibit A of the NAHB Handbook, showed a $1,000 increase priced out 1,285 potential households in the Austin-Round Rock-San Marcos market. Imagine how many potential home buyers in Kyle would be adversely effected by an $8,800 hike!
“To the extent that impact fees raise the price of all homes in a given community, the affordability of housing in that area is reduced,” the NAHB Handbook states. “A reduction in housing affordability will have a negative effect on attracting and retaining workers and will have a direct impact on local governments as police officers, firefighters, teachers, and other public sector workers are heavily impacted when home prices rise. In addition, the shortage of affordable housing will make it difficult for the community to retain its own sons and daughters as they leave their parents’ homes and look for affordable first homes of their own.”
It appears from this presentation, Kyle is raising its maximum allowable impact fees a whopping 47.56 percent to $6,391, as compared to Buda’s, our neighbors to the north, of $4,718, and San Marcos’s, our neighbors to the south, of $5,791. Of course, there could be another motive at work here. Kyle has earned the reputation as the affordable home market for those priced out of living in Austin. Maybe the city is deliberately trying to rid itself of this reputation.
There’s something else to consider here. What if the council has approved one of its nefarious PIDs for the developer that’s also being charged impact fees? These PIDs allow developers to sell interest bearing ponds, the proceeds of which are also supposed to pay for required infrastructure improvements. The developers then charge homeowners monthly PID fees to recoup these costs. So now it appears homeowners are being stuck paying for these infrastructure improvements both through the increased costs they impose on the price of their home as well as via the monthly PID fees. I hope I’m wrong about this and I hope to learn whether this form of double payment is possible during Tuesday’s workshop. In fact, I’m hoping one of the commissioners raise the question, but I don’t hold out much hope for that.
Now consider this as well: All those priced out of the Kyle homeowners market obviously aren’t going to be around here to spend money in local stores, which results in a depression of sales tax receipts. What is the city going to be forced to do to compensate for that? Raise property taxes? The new home buyers in Kyle are now paying for the cost of their infrastructure through higher home prices, PID assessments and increased property taxes.
Other items the Planning & Zoning Commission are expected to hash out during its workshop, scheduled to begin at 6:30 p.m., are design and construction standards for single family homes and how the city should regulate food trucks. You can find the complete agenda here.