Hartford — The Selectboard has voted to suspend indefinitely the assessment of impact fees on construction projects, prompting sighs of relief and a pledge from at least one developer to invest more in White River Junction’s flurry of revitalization.
“It’s like anyone else’s business,” Mike Davidson said on Monday, referring to his $3 million project to transform a former dry cleaner’s building on South Main Street into 36 studio apartments. “Crack open my wallet and take 30 grand out — it’s a lot of money.”
While other area property owners, including Hotel Coolidge owner David Briggs, have petitioned the Selectboard to review the town’s impact fee structure, Davidson added pressure to the issue last August, when he threatened to cancel the South Main Street project if the town persisted in assessing him $37,000 in fees.
At the time, the Selectboard declined to waive the fees, and Davidson went forward with his project on a promise that town officials would reconsider the practice of charging impact fees, which are assessed to mitigate the effect that a new development will have on the town’s services.
“I went on good faith that the town was going to try to waive them,” said Davidson, who prefers to be described as a “redeveloper,” because he repurposes existing buildings rather than building on open land. “It’s a win-win.”
Because 90 percent of the fees aren’t paid until a certificate of occupancy is issued by the town, the Seelctboard’s unanimous decision last month to stop assessing the fees means that Davidson will not have to pay the bulk of the assessment for his project, which he said is nearing completion and already has 35 of 36 units rented.
Impact fees, which are placed into capital reserve funds to support town services like libraries, wastewater and recreation parks, were ultimately indefensible, according to Town Manager Leo Pullar, who researched the issue on behalf of the Selectboard and argued in favor of abolishing them.
“We chase the fees, which I would call the nickel, and we step over the dollar in potential tax revenue,” Pullar told the Selectboard minutes before it voted, according to CATV video of the June 20 meeting. “In my opinion, if the town was to take the long view … it shouldn’t have to depend on these types of fees.”
Pullar and developers argued that the fees discourage developers from siting projects in Hartford, which deprives the town of recurring tax dollars that far outweigh the one-time impact fee.
For example, in Davidson’s case, the one-time $37,000 assessment is roughly equal to a single year of property taxes on the property, which town records show is projected to increase in value from $189,000 to $1.6 million. Davidson will collect an estimated $346,000 in rent annually from his tenants.
During the fiscal year that ended on June 30, the town collected about $58,000 in impact fees, which went to purchase things like new shelving at the West Hartford Library and a new tractor-mower at the Maxfield Sports Complex.
During the meeting, resident Lannie Collins expressed concern that cutting off that revenue source would result in an added burden to residential property taxpayers.
“The departments are going to want to make up the money they were getting from impact fees, and the only way they’re going to get there is from taxpayers’ wallets,” he said.
But Pullar responded that, because the money is not anticipated during the municipal budgeting process, departments look to the revenue as “opportunity dollars” that, when lost, don’t leave a hole in town coffers.
Davidson said that, with impact fees a thing of the past, he will alter his plans to develop a vacant lot across the street from the American Legion Building on South Main Street.
“If there were impact fees, I would be turning it into a parking lot or something,” he said. Now, he said he’ll pursue a mixed-use project with a combination of commercial and residential space.
Town leaders hope that removing the impact fees will help maintain momentum in a building boom that a handful of developers — including Briggs, Davidson, Matt Bucy, Bill Bittinger and Byron Hathorn — have been building toward over the past 15 years.
“I’m a happy guy right now,” said Davidson. He said that he rented his new units effortlessly, because prospective residents see a value in living in White River Junction’s suddenly vibrant downtown area. “I’m seeing the end of a 14-year process and people like it. It’s very, very gratifying.”
Earlier this year, Hathorn broke ground on a $27 million assisted living and memory care facility on Gates Street with his business partner on the project, Brooke Ciardelli.
That single project is expected to bring in $145,000 annually in revenues.
Ciardelli said last week that, in addition to improving the financial picture, the abolition of the impact fees removes a headache for developers.
“You had to talk to like 10 different people,” Ciardelli said. “The process of even trying to figure it out as a developer, how to estimate what that impact on your budget was going to be, was tricky.”
The Selectboard made the move in a carefully worded motion that had been screened by the town’s attorney to ensure that the municipality asserted its right to assess and collect the fees that are already in its coffers.
It’s also reserving the right to reintroduce the fees in the future, should town leaders decide that it’s lost more than it’s gained in finances and goodwill.
“We’re going to do a study and see what impact it does have,” Selectboard Chairman Dick Grassi said during a phone interview on Friday. “The hardest thing for us is how to determine how many businesses would have come to town if it wasn’t for impact fees.”
Grassi said that he was also troubled by reports from developers and Pullar that the impact fee structure had grown in an ad hoc fashion over the years, with the end result that it wasn’t consistent.
“I personally had questions about the fairness of them,” Grassi said.
Those who have already paid their impact fees — even if they were paying in advance of the due date — will not get a refund, Pullar told the Selectboard. He said that businesses rarely pay in advance, but some residential homeowners do on small-scale renovation projects that typically have a total impact fee assessment of a few hundred dollars.
The Selectboard voted to amend its impact fee ordinance to read that “For the period commencing on June 21, 2017, and extending indefinitely, assessment and imposition of the impact fee … shall be suspended.”
Matt Hongoltz-Hetling can be reached at mhonghet@vnews.com or 603-727-3211.