Increase Fees on New Residential Construction or No Reelection?

By Paul Gable

Two years ago, Horry County Council imposed impact fees on new construction for the first time in county history. Two years prior to the impact fee ordinance, 72% of county voters had said YES to impact fees in an advisory referendum.

During the first two readings of the impact fee ordinance, the maximum possible fee of $6,645 per single family home was passed with other types of construction also being charged the maximum fee allowed by state law formula.

On third reading, then council member Johnny Vaught amended the ordinance to reduce the fee by 81.4% to a rate of $1,236 per single family home. Seven other council members joined Vaught in bowing to pressure from the development lobby to make the fee nominal. Those same eight council members voted to increase property taxes that same year by 7.5 mills, the maximum allowed by state law formula. Five of those eight council members will be up for reelection next year. Two others have already been replaced on council.

The development lobby always pitches the same tune – impact fees will kill the development industry and cause a huge loss of jobs. The argument has always been pure BS. Three years ago, the median cost of a new home in Horry County was approximately $220,000. Today the median cost is approximately $330,000, a 50% increase. Construction of new homes is still booming, there has been no loss of jobs and the developers are taking away billions of dollars in profits from Horry County despite the huge increase in home costs. Another $6-8,000 on the cost of a new home as a fee to pay for new infrastructure needs is not going to affect this market at all.

The question today is the same as it was two years ago, who is going to pay for the new or improved roads, new stormwater infrastructure, new fire and police stations, new parks and so on, all infrastructure needs created by the new development? The answer voted by council two years ago was to spread the cost to every taxpaying citizen in the county.

Council added another 3.5 mills to property taxes in the current fiscal year. In a two-year period, property taxes have risen a total of 11 mills in Horry County while impact fees on new construction have remained nominal. County taxpayers, who are also voters, have taken to contacting council members to let council know that they are tired of being charged for new infrastructure from which they will receive little to no benefit. The calls for more fees on new construction have become much louder.

The current state law governing impact fees was effectively written to ensure impact fees would not be levied by county governments. One poison pill in that law is the excessive cost charged on new commercial construction by the state formula. A primary sponsor on that piece of legislation was Horry County’s own Sen. Luke Rankin.

However, in the intervening years, local governments have become creative in passing legislation to transfer some of the cost of new infrastructure back to the new development causing the problem. Most of the need for new infrastructure is caused by new homes, not new commercial structures. Finding a way to impose a reasonable cost on commercial structures while imposing new fees on new housing is currently being studied by county staff and council.

Council deferred second reading on an ordinance to raise impact fees at its regular July meeting. A workshop will be scheduled either in August or September, which will be open to all for input. After that workshop, council will consider how best to impose new fees to place the majority of the cost for new infrastructure where it belongs, namely on new residential construction.

The voters are making their voices heard to council members. Stop raising taxes for all to pay for new infrastructure that basically only serves new houses, or watch out at reelection time next year! Vaught’s poor showing in his bid for county council chairman last year was no doubt caused, in part, by his amendment to reduce impact fees while voting to raise taxes.

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