We welcome Jeremy Holder as a guest writer to the MacRo Report Blog.
This is the first of a two part series regarding recent increases fees placed upon the construction and development industry.
As we bake in the extreme summer heat of late June and here in early July, I can’t help but recall this past winter and the near record breaking back to back snowfalls we just experienced. In both events, even after applying extreme resources the slowly accumulating snowfall and the howling winds overtook resources and mounted to neutralizing depths.
The last four years of regulatory onslaught combined with the housing downturn have culminated with similar stormy impacts on the building and development community. As if the swift market downturn wasn’t enough the continued evolution of fees and regulation has accumulated to staggering depths no matter how fast we work to dig our way out. With all this regulatory change comes changes in the fees to the beleaguered community. While real estate values continue to fall, the regulatory fees to deliver any kind of new construction are on the rise. What is the cause of this inverse relationship?
But before I get to that, allow me to just mention a few:
- subdivision application
- water and sewer review
- roads and storm drain review
- plat review
- easement review
- grading permits
- sewer/water inspection
- road inspection
- Public Works Agreement processing fees
- easement review
- plan renewal
- as-built site improvements review
- plat recordation
- transfer tax
- recordation tax
….oh wait a minute! I said a few.
Sorry, please bear with me, this just gets back to the point where the lot is sold to the builder. Then he is faced with:
- sewer/water connection charges
- building permit
- electrical permits
- another grading permit
- roads excise tax
- recordation and transfer tax yet again
I can”t end this part without mentioning the granddaddy of them all, my very favorite: the Schools and Library Impact Fee.
Yes, Impact Fees (reported by government to be representative of the cost reimbursement to the County for the impacts that our industry creates) were just a month ago increased by the Board of County Commissioners by 7% (totaling 11% over the past two years).
The Commissioners” primary justification was that the construction costs associated with building schools have increased considerably. This is a bit confusing since it is common knowledge that with the slumping commercial construction industry, raw construction materials are cheaper to buy. It is even more intriguing when one considers that buried in an early Staff report for the Impact Fee Increase the County’s Staff recommended a reduction noting that the State’s School Construction Cost Index was reduced by 10.7% this year alone. Does this mean that here in Frederick County the construction industry is busy enough that there is a 17% premium on our work?
While this discrepancy might seem a little extreme I will leave this subject with the fact that it has been a decade since the last time the County Commissioners authorized a professionally updated Impact Fee Study verses going the quick route with their own staff.
There is so much more to cover here, so stay tuned for part two of the this summer”s STORMY topic for the building and development community. I have to ask why all this is justifiable and while the building industry struggles, is county government really doing its part to keep costs in check? This unstable weather system continues to be discussed on Thursday, July 15th!
About the author: Jeremy Holder is the current president of the , and is the Vice President of Development with Ausherman Development Corporation II, located in Frederick County, Maryland.