Loveland homebuilding fees lead NoCo
Building fees for a home in Loveland are $20,139, compared with $19,920 in Greeley and $9,102 in Fort Collins, according to a Business Report analysis. Developers and builders pay the fees when building permits are purchased.
Loveland was the first city in Northern Colorado to institute the fees in the early 1980s after its city council decided that new development should have to pay for services to support extra people, according to Don Marostica, a longtime Loveland developer.
Having lower fees is not necessarily the best thing, Marostica said, because the cities could be criticized for not making developers pay enough when they build in a community.
In the end, though, it is not the developers who pay the price but the consumers, because the added cost that comes along with paying development fees eventually is passed on to the home buyer, Marostica said.
Capital expansion fees go by a different name in every city, and cities charge different fees, depending on their policy objectives.
Loveland, for instance, charges $602 per home to help support its museums, but Greeley doesn't charge a museum fee. And fees for similar services vary dramatically. Greeley has the priciest water taps of the three cities, charging $10,100, while Loveland and Fort Collins charge $4,670 and $730 respectively.
This summer, as part of its re-examination of building fees, Fort Collins will decide whether to add a new trail fee to its development charges.
The idea behind the fees is to help cities and counties pay for new police and firefighters, as well as roads and parks that are required as new development takes place. The fees help keep cities safe and maintain quality of life, but also affect home-buying markets.
"In the months following a government's decision to implement fees on new homes, the prices on the existing for-sale housing stock increases," said Steve Spanjer, founding principal of Spanjer Homes, a Fort Collins-based home builder.
"This is a just a normal economic market cycle," Spanjer said. "The consequence is inflation of the housing stock and the result is more and more buyers cannot qualify for home loans."
Loveland's fees cover the widest range of services, from transportation and police to the museum and library. This, combined with the fact that Loveland's fees were first instituted in the early 1980s, is one reason fees are higher there, according to Alan Krcmarik, executive financial adviser for the city of Loveland. Most cities did not begin using capital expansion fees until the mid-1990s, Krcmarik said.
The way Loveland configures its capital expansion fees may soon change.
Loveland is moving from a fee system based on current costs to a system which sets fees based on how much the city will need over the long term. Loveland departments that collect capital expansion fees are completing 25-year master plans that will outline their needs for years to come. These plans are expected to be complete at the end of the year, according to Krcmarik.
Then, the city will spend 2014 determining how to adjust the fee schedule, and the fee changes will be implemented in 2015. Departments affected include parks and recreation, trails, open lands, police, fire and rescue, the library and museum, streets and general government.
The fee changes also will apply to commercial development, Krcmarik said. In Loveland, it costs $1.08 per square foot for commercial properties, slightly more than the $1.07 the city charged in 2011.
Loveland charges the same fee – $12,959 per home, regardless of home size. In 2012 the city charged slightly less, $12,529.
Add in fees for water and sewer taps – $7,180 – and the total per-dwelling capital expansion fee for a new house in Loveland in 2013 is $20,139.
Following Loveland closely in terms of cost is Greeley, where the bulk of fees come from water and sewer tap charges. Of the total $19,920 in fees, which are called "development impact fees" in Greeley, $15,000 comes from water and sewer fees, leaving $4,920 for other city services, including fire and rescue, police, trails, storm drainage, transportation and parks. The $15,000 includes $10,100 for water and $4,900 for sewer.
Greeley charges more for its water and sewer taps, in part, because it has to transport its water farther, according to Erik Dial, the city's water and sewer budget analyst. The city gets its water from the mouth of Poudre Canyon northwest of Fort Collins and Boyd Lake in Loveland – both far west of the Greeley city limits.
Greeley completed an assessment of its fees in 2011, said Bruce Biggi, economic development manager. The city uses a different formula than many cities to decide how much to charge developers, Biggi said. For three of its departments – transportation, storm drainage and trails – the city uses a methodology that takes into account factors such as the health of the overall market and unemployment.
In 2012, the first year Greeley used this method, the total development impact fees decreased slightly, before increasing by 1.2 percent in 2013 to $4,920, Biggi said.
Commercial development fees in Greeley are determined by the size and type of the building. Retail developments cost $7.85 to $8.15 per square foot, not including water and sewer plant investment fees.
In February, Fort Collins completed a re-evaluation of its fees for the first time in 16 years. Except for annual updates for inflation and sporadic updates to accommodate new requirements stemming from the Americans with Disabilities Act, no comprehensive study of the fees for parks, police, fire and general goverment had been done since they were adopted in June 1996, according to city documents.
The study outlines options that include slight increases in all existing fees and the possible addition of a trails fee.
Different types of development result in different demands on services, according to the report. For example, residential development typically results in higher use of parks services. For this reason, Fort Collins charges from $1,041 to $2,428 per dwelling unit for the "community parkland" fund, but does not charge a community parkland fee for commercial development.
Fort Collins' fees are based upon the size of the development. Residential properties are charged in 500-square-foot increments. Commercial properties are charged per square foot.
For residential properties in 2013, capital-expansion improvement fees totaled $4,932 for a home between 1,201 and 1,700 square feet.
In Fort Collins in 2013, commercial developers are required to pay 65 cents per square foot to the fire, general governmental services and police funds.
In 2012, commercial fees were 63 cents per square foot in Fort Collins.
The biggest potential change heading for Fort Collins' fee structure is the addition of a dedicated trail fee, according to Jessica Ping-Small, revenue and project manager for the city. The city council held a work session July 9 to discuss whether to establish a fee that would go toward expanding the trail system in Fort Collins, she said.
If the trail fee is imposed, it could mean an extra $672 for an average-sized residential dwelling, between 1,200 and 1,700 square feet. This would mean total fees per dwelling unit of that size adding up to about $4,727, compared with $4,055 without the trail fee. A final decision on the trail fee is expected in August.
The Fort Collins Board of Realtors has been monitoring the situation, according to its CEO and Director of Advocacy, Clint Skutchan, but has not yet taken an official position. Realtors are concerned about how the fees fit into other costs associated with development, Skutchan said.
For example, the city is considering instituting a new fee for affordable housing, and the green building standards imposed by the city in early 2012 also add costs, he said.
All of these costs ultimately are passed on to the consumer, Skutchan said, so it is important to determine how they fit together and what the bigger picture is.
If new fees are imposed, the FCBR would like the city to use a phased approach that does not shock builders and homebuyers, rather than imposing the full fee increase all at once.
Still, real estate agents understand the importance of keeping up the city's trail system, Skutchan said.
"Quality of life sells homes as much as the home itself sometimes," he said.
Clarification: An earlier version of this story stated that the City of Fort Collins performed a review of its development fees for the first time since 1996 at the beginning of 2013. To clarify, the City of Fort Collins performed a review of some of its building fees, such as building inspection, in 2011, but a review of other development fees, including parks, fire, police and general government was not performed until 2013.
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