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Low School Impact Fees are a Market Distortion that Line Developer Pockets


Low School Impact Fees are a Market Distortion that Line Developer Pockets

Hiruy Hadgu

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One of the reasons local issues are difficult to understand is due to lack of information.

The available information is also difficult to piece together to make reasonable conclusions.

This effort requires time and the hustle and bustle of daily life compounds this difficulty.

Special interests rely on these forces to confuse us and reach their objectives. Their advantage is paid experts whose job it is to understand these issues.

This is why we need public servants who understand these forces.

Over the last few days, I heard the plea of parents' for help in comparing school impact fees across Maryland counties and how Howard County's schools stack up by state standards.

The following tables compare the impact fees charged by other counties in Maryland and indicate in clear and certain terms that tax payers in Howard County are subsidizing the profits of developers.

The first "Historical" tab shows data for 2014. It shows that Howard County charges the LOWEST school impact fees among the four counties with the highest population densities.

Population density is important because it factors into the distortion of market forces that the county is experiencing, which will be explained later.

Also, in 2014, the 10-year annual growth-rate was the HIGHEST. Considering the low impact fees, this is also another indicator of a distorted market.

How about state-rated capacity (SRC) and adequate public facilities ordinance (APFO)? This also shows a large disconnect. Out of the 75 Howard County schools, 51% were over SRC while only 7% were over the APFO capacity.

The second "2016-2017" tab (click on the tab to display) shows the 2016 school impact fees and the 2017 enrollment growth.

This again shows the strikingly low school impact fees being charged by Howard County. The cost per-pupil of an average school is almost $65,000 and the impact fee per new home is $2,500.

In 2017 alone, the enrollment increased by the size of one WHOLE school!

Here is the bottom line:

Impact fees should be tied to the size of the land available for development, the cost of developing public facilities, and demand. They CANNOT be fixed.

Currently, there is a market distortion that is created because of the low impact fees. This does not necessarily mean that higher impact fees mean higher home prices.

The low impact fees are just creating opportunities for the developer to pocket more of the profits that it would have paid to mitigate overcrowding.

Proponents of more development will say that the rate of approval of allocations has actually decreased.

This is a false argument. In a market, as resources decline, and demand increases or remains the same (we are currently in a seller's market), the impact fees should change proportional to these other changes.

This is a market and there is a finite amount of space available that is always decreasing. Not only should the rate of approval decrease, the school impact fees for the remaining allocations should increase as well.

Howard County is at a cross-roads, will we continue to accept the status quo and watch as our quality of life and the quality of our coveted schools decline, or will we demand change and elect candidates that will UNEQUIVOCALLY stand up to special interests?