Orland, CA- Sapphire Plaza in Orland has reportedly asked the Orland city council if they can pay their $124,000 extortion, er, we mean “impact fee” over a seven-year period. We won’t go into detail of whether this is a valid request or not, let’s strike the root of what impact fees are and why they are a bad idea for economic growth.
What is an impact fee? From Wikipedia:
An impact fee is a fee that is implemented by a local government on a new or proposed development to help assist or pay for a portion of the costs that the new development may cause with public services to the new development within the United States.[1] They are considered to be a charge on new development to help fund and pay for the construction or needed expansion of offsite capital improvements.[2] These fees are usually implemented to help reduce the economic burden on local jurisdictions that are trying to deal with population growth within the area.[1]
Basically they are fees paid by new development that are supposedly used to help fund capital expansion of local governmental services such as water and sewer systems, roads, schools, libraries, parks and recretion, etc. The argument is that a new development will add to these services so it the builders should pay the fee. What the fees pay for varies by locale, and Glenn County Liberty was not able to determine exaclty what these fees are used for in Orland. Regardless of what they are used for, the reasoning behind the fees is flawed and contributes to the stifiling of economic growth.
First, the cost of the fee will of course be shifted to the new tenants of the new development, in Orland’s case, the tenants of Saphhire Plaza. The cost of these fees, like any other tax, of course gets passed on by the businesses to their customers.
Second, the city already charges businesses and residents taxes that are supposedly used to fund said services. Like any other service provider, the city should have funds set aside for facility expansion. In addition, the taxes paid by the new business should pay its way for the use of city services. The more businesses there are , the larger the tax base, the more money collected to fund services.
Private companies such as satellite and Internet service providers charge “hook-up” fees (usually these can be waived to attract new customers). We at Glenn County Liberty of course believe that government is the least effective means of delivering services, but, since we are stuck with the current system, new developments should not be forced to pay for system-wide expansion of current systems, especially since there is no way to really know what these fees are being used for. Imagine if you as a consumer wanted to switch to Comcast cable, and Comcast told you that, since you are attempting to add to their current infrastructure, you would be assessed a $10,000 fee to pay for a new underground cable system and the money would be used to pay for the labor, and material outlay for the project. Comcast would not be around for long with such a business practice. But since the government has a monopoly privilege their services, they are able to extort money from businesses in such a manner.
In the free market companies have to find creative ways to pay for expansion. Cutting costs, finding ways to become more efficient, or finding new investment dollars are used before increasing prices or charging new fees to customers. The city of Orland should be attempting to attract new businesses by not charging outrageous fees to new developers.