4/23/1996 - Laserfiche WebLink

Home Browse Search

ox PAGE8,94, 7 •Utility Impact Fee Financing Mechanism For several years, the County utilities department has provided for the financing of water and sewer impact fees. As structured, this process allows for ten year financing of utility impact fees associated with county built projects and existing homes. Utility impact fees associated with other types of projects may be financed over five years. For utility impact fee financing, the interest rate charged is currently 8%2%. This rate is adjusted annually by the Board of County Commissioners. The debt is amortized over the financed period, with monthly billing by the Utilities Departmem To secure the debt, a lien is recorded against the real property receiving the utility service, and this lien is subordinate to any bank lien on the property. To ensure that adequate revenue is available to make the capital improvements funded by water and sewer impact fees, the utilities department . has a three tier approach. First, interfund borrowing is used to fund capital improvements. Second, a bond issue backed by impact fee assessments is used if interfund borrowing is not sufficient. The third tier involves doing a larger bond issue, pledging impact fee revenue as well as some other revenue source. Since establishing its impact fee financing mechanism, the utilities department has financed $4,567,927 of impact fees. ANALYSIS For economic development purposes, allowing for the financing of traffic impact fees provides two benefits. First, it enhances the County's pro -economic development image. Second, it provides developers with another financing option for part of their project cost. Traffic impact fees, however, differ significantly from water and sewer impact fees. These differences not only affect how the financing is administered, but also affect the usefulness of financing these fees. Generally, TIF financing will be less beneficial to applicants than water and sewer impact fee financing. • Developer Issues Because traffic impact fees are almost always associated with new construction, TIF financing may have limited benefits for developers. Since new construction generally requires financing and since financial institutions consider financed impact fees as debt in calculating a maximum loan to value ratio, financing impact fees usually reduces the amount of money that a developer can borrow by the amount of the financed TIF. An exception where TIF financing would be beneficial is where a developer has no other debt on his project. Water and sewer impact fees, however, are different, since these fees are often financed for existing projects that are retrofitted with County water and sewer. In this case, County financing is beneficial because it provides a source of financing without affecting any other loans. • Counil Issues There are several County related issues that must be considered in financing traffic impact fees. These include TIF district requirements, cash flow, default, and exposure. • TIF District Limitation As structured, the County's traffic impact fee ordinance establishes nine TIF benefit districts. The ordinance requires that all revenues collected in a district be spent in that district. This contrasts with water and sewer impact fees which are countywide in scope. 40 April 23, 1996