Sandpoint adopts increased development impact fees

Higher fees intended to make ‘growth pay for growth’

By Zach Hagadone
Reader Staff

The cost of both residential and non-residential development in Sandpoint is going to get more expensive, after the Sandpoint City Council voted July 16 to increase development impact fees over a one-year period in a tie broken by Mayor Jeremy Grimm.

Based on the city’s 10-year capital improvement plan, forecasted growth and the cost of maintaining services at their existing levels over that period, the council approved raising residential development impact fees by 75%, 32% for retail, 90% for industrial and 153% for office space in Fiscal Year 2026.

City staff recommended phasing those increases over three years — raising the fees by 75% of the “maximum supportable” level in the first year, then to 90% of the maximum in the second year and to 100% in the third.

According to the staff report, the phased implementation proposal was meant to “moderate the impact of these increases on the development community,” while remaining adequate to support infrastructure funding and “development continuity.”

However, the council was split on whether to incrementally raise the fees or go to the full amount all at once.

Council President Deb Ruehle moved to pursue a one-step, maximum increase, which Councilor Kyle Schreiber seconded. Councilor Pam Duquette also voted in favor of that approach, while Councilors Joel Aispuro, Justin Dick and Rick Howarth opposed. Grimm cast the deciding “yes” vote.

During deliberation, Schreiber said that he’d initially been in favor of phasing the implementation, “because it’s a drastic increase.”

However, he added, “if we can all agree that this is the correct amount where growth pays for growth, it seems to me that going directly to the full amount is the correct conclusion. Otherwise, we are going to be subsidizing new growth with the existing residents.”

Howarth argued that the capital improvement projects outlined in the 10-year master plan were identified based on what the public wants, though without any established costs.

“Once the rubber meets the road and there’s a cost impact to citizens, I believe that list [of projects] would shrink,” he said. “I think what’s in that master plan is a little bit over-inflated.”

The capital improvement plan anticipates $58 million in projects, including:

• $23.5 million for parkland acquisition, improving existing parks and developing recreation facilities in order to keep current levels of service amid expected growth;

• $4 million for expanding the city’s network of non-motorized pathways;

• $25.7 million for improvements to intersections and roads to keep pace with a projected 20% increase in vehicle miles traveled;

• $1.2 million for a police station expansion to meet expected increases in service from population growth;

• $3.6 million to expand the fire station to accommodate more personnel and apparatus.

Of those projects, $7.4 million would go to parks and recreation from the increased development impact fees, $1.4 million would go to pathways, $5 million would go to roads, $551,000 would go to police and $908,000 would go to fire.

As an example of how the total increase would affect residential development, the city’s staff report indicated that the cost attributable to development impact fees for a 1,400-square-foot home would rise from $5,441 to $9,521. Based on the previous structure, Planning and Community Development Director Jason Welker said that at $250 per square foot, a 2,000-square-foot house would pay a development impact fee equal to 1.06% of the total construction cost. Under the maximum supportable fee — as approved on July 16 — that would increase to 2.5%.

“So you’re talking a difference of 1% to 1.5% margin of change in the total cost of construction by the updated impact fee,” he said.

“When we talk in Sandpoint about growth needing to pay for itself, that’s really what we’re talking about,” Welker added. “That’s reflecting the impact of that single-family home on our system, our streets, our pathways, our parks, and police and fire.”

In addition, the approved impact fee methodology shifts the assessment on residential construction from the previous per-bedroom calculation to square footage, which “closes loopholes in the previous structure, such as developers avoiding fees by labeling bedrooms as ‘bonus rooms’ or ‘studies,’” according to the staff report.

Idaho law requires that  “development impact fees shall be calculated on the basis of levels of service for public facilities … applicable to existing development as well as new growth and development.”

At the July 16 meeting, Howarth asked whether development impact fees had ever increased so dramatically in Sandpoint’s history. Welker responded that the city hadn’t raised those fees at all from 2011 to 2021 — not even to account for inflation during that time — until they were raised across the board.

Howarth worried that the one-year implementation of the increases would slow development. For his part, Grimm, who works as a regional development consultant, said that some builders prefer to pay a lump sum in impact fees rather than parsing through a slate of fees intended to support individual things like fire, police, roads and others. In addition, he added, compared to the overall cost of building a “fairly modern home” with all its amenities, impact fees are, “in general … a relatively small number on a total build. I’m not insensitive to it, but [in] an overall housing package, it’s a pretty small percentage.”

Howarth was also concerned about what would happen if the city later needed to scale back its capital improvement plan, resulting in fees being paid to support projects that aren’t happening.

“If we collect fees and don’t do some of these projects, especially if they’re plan-based projects, then we would potentially have to return those fees, which is a bit of an accounting nightmare,” Grimm said, though added that all the projects in the capital improvement plan are already incremental — other than those related to roads — and will go before the City Council one by one over time.

Duquette and Schreiber also raised concerns about the capital improvement plan constituting a “mandate” for the city to undertake identified projects. Grimm responded that the plan can be changed and fees adjusted annually. Meanwhile, consultant Nick Huff, with TischlerBise, which helped develop the impact fee study, said that funds collected can “generally” be held for up to eight years before they must be used, and in some cases up to 11 years.

In addition, Huff said that setting the fees at the maximum supportable level establishes a rate of collection that matches what it would cost to maintain current levels of service with projected growth. If it’s lower, then the city must pay for keeping pace with growth in some other way, such as drawing from the general fund or securing grants.

Grimm said the phased approach would acknowledge “that we know we’re going to need the next thousand homes, we know we’re going to need another X amount of park acres, but we’re going to adopt fees that won’t get us there. So our park crowding will be greater or we know we need X miles of pathway or X portion of police equipment or fire. We’re intentionally saying we know we need it, but we’re not going to put it on the new folks.”