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Missoula Impact Fees

Construction continues Tuesday on a hotel being built at the corner of Main and Pattee streets in downtown Missoula. Impact fees for commercial and residential developments could go up by 10% under a proposal by the City of Missoula to help pay for expanding services like fire, police, transportation and parks.

Amid record-setting growth, the City of Missoula is looking at raising impact fees on all new residential and commercial developments for the first time in 15 years to help pay for expanding fire, police, transportation, parks and other services.

Dale Bickell, the city’s chief administrative officer, said he and his staff have decided to ask the City Council to raise impact fees by 10%, which would add roughly an extra $100,000 per year to city coffers. For a typical single-family new home with between 2,000 and 2,250 square feet, the current impact fee is $2,123. Under the new proposal, the fee would be $2,335. Impact fees on subdivisions and commercial projects such as offices, hotels and banks would also be raised by 10% under the new proposal.

“It’s not a big, huge increase,” Bickell explained. “It’s an inflationary-style increase, and we hope to update these more often.”

In fact, consultants hired by the city found that the council could approve increasing the fee for the aforementioned single-family home to over $8,000 if the city wanted impact fees to pay for all the costs associated with new development. Impact fees are used to fund public facility construction, acquisition or expansion required as a result of new development.

“The impact fee is a one-time charge on new development to try to help with the costs of the impacts on government services that new development charges,” Bickell explained. “Think of a new subdivision going in, the direct infrastructure the developer is required to put in, like local streets and everything that serves the new subdivision. But because of all the new impacts on other services, there are other costs. The city will have to build a new fire station eventually, build new police facilities, improve an intersection on a collector network that’s outside of the subdivision.”

Essentially, Bickell said, taxpayers throughout the city shoulder most of the burden of paying for roads, fire and police expansions to keep up with new developments.

“Impact fees allow us to put a little bit of that on new development rather than existing taxpayers,” he said. “Impact fees aren’t enough to cover all the costs associated with new development, but it’s another tool we can use.”

Bickell said he and his staff decided to ask for an increase of only 10% because they’re aware that developers pass the costs on to homebuyers. In Missoula, the median home sales price hit a record high of $315,000 last year, which is 57.1% more than it was in 2010.

Developers are facing high land costs and rising materials costs, which force the price of housing to rise. It’s a balancing act, Bickell explained, because the city is very aware of the rising costs of development.

“One thing we have to do is ensure that our underlying data to support the fees continues to make sense,” he said. “The study itself said we could actually triple fees, because the need is there. But we have to strike a balance because we don’t really want to have a huge impact on housing and development costs.”

Bickell will go before the City Council’s Administrative and Finance Committee on Wednesday at 10:25 a.m. to request a public hearing. He will also make a more in-depth presentation with the consultants on Jan. 29, and the City Council will likely have a public hearing on the issue on Feb. 3. All hearings take place at the City Council chambers at 140 W. Pine and can be streamed online.

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