State and Local Reporter - 04/29/2003 (Plain Text Version)Debora Trimpe, Chair View Graphical Version | Subscribe
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Editor... In this issue: Washington City Claims Fee Is a "Tax"Impact fee or tax? That is the question in a recent case in Washington, which reflects the ongoing efforts of cities and municipalities to avoid the stringent requirements of nexus and proportionality by categorizing regulatory impact fees as “taxes.” In Drebick v. City of Olympia, No. 71722-2 (Wash. 2003), the Supreme Court of Washington will soon decide the issue of whether an impact fee assessment is to be judged by standards governing regulatory fees, with constraints of nexus and proportionality, or as an excise tax, with an assessment subject to much broader general constraints. The more rigorous standard often cannot be met in communities with a one-zone impact fee system. Upon seeking land use approval from the City of Olympia in 1998 for the construction of a four-story office complex, petitioners, Drebick Investments, were assessed a flat-rate citywide transportation impact fee in excess of $130,000 as a condition of approval. Drebick maintained that the fee was excessive in relation to the project’s potential impacts, and that its project would have much less impact on the city’s streets than would a typical project in the middle of the city. Drebick argued that because its proposed building would be ocated on the edge of town, any traffic associated with the development would exit to a nearby local freeway and could not be traced back into the city of Olympia. A hearing examiner held in part that the impact fees assessed to Drebick’s project were not proportionate to or reasonably related to the service demands or needs created by the project. The hearing examiner also found that the fees paid could potentially be allocated by the city to individual transportation facilities that did not reasonably benefit the Drebick proposal, which violates state statute. However, a trial court later ruled that the impact fees were a “tax” and as such, the city’s fees need not meet regulatory standards for nexus and proportionality. On review, Drebick argues that if the assessment is a tax, then the review and deference due to the assessing agency in tax cases is appropriate, but that the burden would be on Olympia to prove that this particular tax was authorized. If the assessment is a regulatory fee, then the authority to impose the fee, while authorized under the police powers, would have with it additional constraints of a regulatory assessment, including nexus and proportionality, as well as a showing of how the fees would be attributed to “reasonably benefit” the new project. Olympia has chosen to categorize the fees as a “tax” from which monies collected need not be earmarked, nor must they relate specifically to the needs created or benefits accruing from a particular project. Proceeds collected under a “tax” would also not be subject to geographic or temporal nexus requirements. Olympia maintains that such taxing authority exists under separate state statute, and that it is authorized to raise revenue for transportation infrastructure needed to support new development generally. A decision in the case is expected in late spring 2003. For more information or to contact us directly, please visit www.NAHB.org | ©2003, National Association of Home Builders |