Council will delay collecting higher impact fees until Jan. 1

Public testimony centers on future of $100M Averill Hospitality hotel development

By Zach Hagadone
Reader Staff

Sandpoint’s development impact fees haven’t been updated since 2011, and that’s about to change — but not until Jan. 1, 2026, after City Council members voted 4-2 on Sept. 3 to delay their implementation in order to give staff time to perform the necessary administrative updates.

The fees are collected on new development to help defray costs associated with increased use of infrastructure such as streets, police, fire, parks and pathways, and are by state law supposed to be updated every five years to keep pace with growth and inflation.

The city approved a 35% across-the-board increase last year based on the 2011 fees, and the new fees will use that as a benchmark for increases in Fiscal Year 2026.

“[T]hat was basically to catch up on 13 years of no increases. So that reflected 13 years of inflation; which, if we’re being honest, it was probably greater than 35% with the inflation we had in 2021, 2022,” said Planning and Community Development Director Jason Welker.

Debate over how and when to roll out the new fees has been ongoing over several council meetings, with an initial proposal to phase the rise over a number of years rejected in favor of a one-time increase. State law stipulates that impact fees go into effect 30 days from their adoption, which would have been Oct. 3 if the council hadn’t voted to amend the ordinance to an effective date of Jan. 1, 2026.

Meanwhile, Averill Hospitality has stated that under the recently adopted fee schedule, it would need to pay $1.3 million, rather than $300,000 under the prior structure, making its $100 million resort hotel redevelopment adjacent to City Beach “unviable.”

Representing Averill, Ben McGrann asked the council on Sept. 3 to push back the fee hike to August 2026 in order to give the company time to secure its financing prior to obtaining a building permit.

“With the uncertainty of permit approval timeline from the city combined with the sudden fee increase creates a moving target that makes it impossible to finalize financing and keep the project viable,” he said. “At its core, this is about priorities. The city may gain a one-time impact fee of $1.3 million, which is a million dollars more than the current impact fee. But once this hotel opens and is operating, Sandpoint will collect $12 million to $17 million in occupancy tax revenue over seven years of operation. …

“This is not about avoiding responsibility. It’s about striking a balance between short-term fees and long-term prosperity,” McGrann added.

Though the council and staff were clear to point out that their consideration of the fee timeline wasn’t predicated on a single project, members of the public who testified all keyed in on the Averill project as a critical component of the discussion.

Citing his 40-year background as a land use economist who has conducted economic benefit studies for companies such as Boeing, David Eacret said there’s a “quid pro quo” between developers and cities.

“I think that somehow you’re going to have to figure out how to grandfather the situation for [Averill’s] conditional use permit whereby that million dollars is not imputed on this project,” he added. “There has to be a way for this project to proceed and mitigate this front-end impact cost because you’re going to get a perpetual annuity forever in property taxes and resort city fees. … This is a golden opportunity for this community.”

Arguing that the fees should be adopted without special consideration, Jayce Bordenave asked, “how many concessions [are] we are going to give to a hotel developer? I also pose the question: Are we a city council that is planning a community for the future, or are we rubber-stamping big development with little thought on how it impacts the community, infrastructure and city itself?”

Paul Vogel pointed to the city’s long history of leasing the waterfront at the Edgewater location going back to the 1960s for bargain prices — until trading it with Averill for the RV park site across Bridge Street.

“[T]he city has a long history of accommodating development on this site and I think that should change. It is not a good look. Not at all,” he said, later adding, “It’s time to say ‘no.’ The impact fees exist for a reason.”

Finally, Vogel said, “If this is a $100 million project, $1 million is 1% — 1% — of their outlay. If they can’t afford that, let them sell off the property to someone who will pay the development fees.”

Councilors Justin Dick and Rick Howarth both advocated for considering a delay to August 2026 — or even further — given uncertainties in the market.

“I think it’s too much, too quickly right now, and I think it has the ability for some very drastic problems and a very slippery slope that we may incur coming down the pipeline in the next 10 to 20 years with these impact fees,” said Dick.

Noting that the fees haven’t been updated since 2011, Howarth said that he didn’t see “an urgency or a rush to go implement these impact fees.”

“I look at 15 years of no urgency to improve or to go implement higher impact fees and now we’re trying to go rush into it and say it’s got to be Oct. 3,” Howarth said. “I think that’s a fictitious argument, and I would be very willing to go delay it to a 2026 time, TBD, by this council.”

Council President Deb Ruehle disagreed, countering that city taxpayers have “been subsidizing for 15 years people who are large developers that can build very large subdivisions or other developments, commercial developments.”

Councilors Joel Aispuro, Pam Duquette and Kyle Schreiber agreed that delaying until Jan. 1, 2026 would be reasonable, with Schreiber adding, “every minute that we postpone it longer is another minute that all these costs fall on the backs of our current residents and our taxpaying constituents.”

The motion from Ruehle, and seconded by Schreiber, passed with Dick and Howarth dissenting.