Department of Finance
Reference: Impact Fee Proposal and Municipal Code Updates
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Director of Finance
Scott Olsen, Director of Utilities
Date Prepared: July 23, 2024
PURPOSE
To propose updates to Impact Fees for 2025 and 2026, and to propose changes to the Brighton Municipal Code related to Impact and Utility Fees and Rates. Updates have also been proposed to the Utility portions of Brighton Municipal Code as described in this staff report.
BACKGROUND
Impact Fee Proposal
On April 23, 2024, staff presented City Council with the results of an impact fee study performed by third party consultant Economic & Planning Systems (EPS). Those results as well as background on the purpose and scope of an impact fee study can be found in the Study Session packet for that date.
For context and background, impact fees and their uses and restrictions are defined as follows:
Impact fees are fees charged on new development to fund capital investment needed for a City to maintain a consistent level of service for the residents and businesses as the population grows. Impact fees are charged to builders and developers based on the type and size of the development (e.g. residential, retail, industrial, etc.). Fees may be charged for various service categories, including (but not limited to) parks and open space, general facilities, fleet and transportation. Only new development is subject to impact fees.
The use of impact fees is governed by the Colorado Revised Statutes (C.R.S.) and fees must be used on projects that expand service capacity. This may include expanding the vehicle or equipment fleet (e.g. additional snowplows to plow the additional roads created by development) or adding square footage to City facilities (e.g. additional office space to house additional Police staff needed to manage a growing community). Impact fees may not be used for operational costs, including repairs and maintenance or personnel costs.
Impact Fee Financial Results and History
Impact fees make up a small but important component of the City’s general revenues. The purpose of impact fees is to ensure that the City has necessary funding for capital improvements needed to maintain service levels as the City grows. The following schedule shows impact fee revenues compared to other general government operating revenues over the past five years.
At the April 2024 discussion, staff heard feedback from City Council, including a desire to ensure that fees on nonresidential development are supportive of new business development and that fees related to residential development are phased in over time. Additionally, there was support for applying an annual inflationary increase to impact fee amounts, and that has been factored into staff’s proposals.
Based on this feedback, staff makes the following proposals:
Residential Impact Fees
Impact fees from residential development, including both single family and multifamily development, account for 98% of impact fee revenue for the first half of 2024 (259 paid permits providing $1.7M in revenue).
The impact fee study calculated full cost recovery for residential development and considered impacts for single vs. multifamily development. The recommendation from the study was to both increase and redefine fees, creating a fee for general services, including fleet expansion.
Based on City Council’s feedback, the fees proposed are phased in over two years, with 50% being applied in January 2025 and 50% being applied in January 2026. Inflation will be applied annually as well based on Denver Area CPI as of August of each year. When applying this proposal, the fees for residential development per dwelling unit would be as follows (inflationary component has been estimated):
2024 2025 2026
Current Proposed Proposed
Single Family Unit $6,342 $8,573 $11,041
Multiple (Multifamily) Dwelling Unit $6,342 $7,845 $9,542
Based on permit issuances for the first half of 2024, this fee update is estimated to provide an additional $1.1M in funding in 2025 if development levels remain consistent.
Nonresidential Impact Fees
Nonresidential development includes various categories of building, including retail/commercial, office, industrial and warehouse. Impact fees from nonresidential development account for 2% of impact fee revenue for the first half of 2024 (5 paid permits providing $17K in revenue).
Nonresidential impact fees have been at their current level for many years and fees only apply to transportation related impacts. The impact fee study calculated full cost recovery for nonresidential development and determined the increase needed to achieve cost recovery through fees would be substantial. The original recommendation was to apply a reduction to the impact fee study results to keep the City’s fees in close proximity to neighboring communities. This would still result in a large increase to the current fee levels.
Council expressed a desire to keep fees low to encourage business development. Staff’s proposal is to keep fees at their current level and to apply an inflationary increase annually based on the Denver Area CPI in August of each year. This approach acknowledges that the City is growing and wants to encourage business development, and that lower fees act as an incentive. While this approach does not achieve cost recovery through impact fees as we see with the residential fee proposal, development would pay its way through future growth in jobs and tax revenues.
Based on this proposal, the rates per square foot for various types of residential development are as follows (inflationary component has been estimated):
2024 2025 2026
Current Proposed Proposed
Retail/Commercial $0.65 $0.66 $0.68
Office $0.98 $0.99 $1.02
Industrial/Warehouse $0.41 $0.42 $0.43
These fee updates are nominal and not expected to have a notable effect on impact fee revenue.
Proposed fee summary
The following table summarizes the proposed fees and factors in an estimated inflationary increase each year. Actual fees proposed in the annual fee resolution will be calculated using the Denver Area CPI for August of each year.
Municipal Code Updates
As staff reviewed impact fee levels and definitions, it was noted that the City’s Municipal Code included inconsistent or outdated definitions. While reviewing and updating impact fees, staff took the opportunity to update the code as needed. The substantive changes proposed are summarized below:
• Impact Fee related updates
o Updated fee definitions and added fee for General Services (as would be applied to residential development under this proposal).
o Added language regarding City developed properties to require that utility fund impact fees are paid by the City unless the development is funded by the utility (in this circumstance, the fund would be paying itself). This requires that development for general City purposes pay impact fees to utility funds.
o Change of language from Plant Investment Fee to impact fee
• Other Fee related updates
o Update the definitions of single family and multi-family to be consistent across all three utilities. Single family is one meter serving up to 2 dwelling units. More than two dwelling units is considered multifamily.
o All impact and utility related fees would be removed from Municipal Code and moved to the annual fee resolution (this would be effective January 2025).
• Utility related updates
o Addition of definitions for curb stop, fee-in-lieu of water dedication, water dedication and water tap.
o Removal of definition of water tap fee.
o A requirement for the property owner to be responsible for all costs associated with utility service abandonment has been added.
o Updated Section 13-4-60 related to the curb stop valve to remove outdated language and match current utility practices.
o Remove several portions of City Code which are addressed in the City’s Standards and Specifications.
o Added clarifying language to Section 13-4-220 related to ownership of service lines. The language does not substantially change ownership responsibilities as previously outlined in Code.
o Removed Section 13-4-230 related to “stop box” maintenance as it is repetitive.
o Added Section 13-12-55 to clarify that existing sewer services outside City Limits are approved, that monthly rates for existing service shall be double those for service within the City and that no new wastewater service outside of City limits shall be approved. This is the same language as the water section of Code.
o Removed exemption for private streets from the storm drainage impact fee and monthly maintenance fees.
o Added language to Section 14-9-82 related to storm drainage monthly charge credit. The additional language allows City Staff to administratively continue the credit a property is receiving at the discretion of the Director.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
Impact fees charged must be substantiated by an impact fee study, and fees may not exceed those calculated in the study. The fees proposed fall within these parameters.
The fees proposed consider City Council’s input and feedback from prior study sessions. If supported, the new fees would be adopted as part of the annual fee resolution in October and would go into effect in January. This provides time for developers to be made aware of the updates and for them to factor changes into their planning processes.
FINANCIAL IMPACT
It is estimated that implementing the proposed impact fees will provide an additional $1.1M in revenue in 2025, assuming development levels remain consistent.
NEXT STEPS
If supported, staff plans to bring forward an Ordinance for the Municipal Code updates for consideration on August 20th with final reading on September 3rd. Fees would be adopted as proposed in October as part of the 2025 Fee Resolution.
Attachments:
Presentation