Farragut Considers Impact Tax
On All Development

If developers who fought the impact tax passed by Loudon County last year thought our tax was high, wait till they find out how high the tax is proposed to be in Farragut. I hope this doesn't run them our way.

Proposed impact fee draws criticism
Dan Barile - farragutpress.com

“They must be nuts,” one developer said in regard to Farragut’s proposed impact fee.

“That will kill sales tax revenue for Farragut, it will just kill it,” he added while requesting anonymity for fear of retribution.

Following two Town meetings hosted by assistant Town administrator Gary Palmer — April 16, Aug. 1 — the Farragut Board of Mayor and Aldermen ordered an impact fee ordinance drafted.

The ordinance under review (see town of Farragut Web site) basically requires an upfront fee be paid in the amount of $3,670 per single-family dwelling (regardless of square footage) and $2,614 per 1,000 square feet of commercial space. At this commercial rate a 5,000 square foot convenience store (not including pump area), such as a Weigel’s Farm Store, would be levied about $14,000, a 100,000-square-foot JCPenney store would pay $261,000, a 140,000-square-foot Costco would front $365,400 and a 350,000-square-foot Kroger development would pay out nearly $1 million.

Alderman Tom Rosseel said via e-mail, “The fee was determined by Duncan and Associates — a firm contracted by the Town to compete an impact fee study — based on the existing level of service and the impact or cost that new commercial development will have on the Town’s roads, [that is], how much it would cost to maintain our existing level of service. The Board, if it so chooses, may change the fee, or pay a portion of the fee in a similar fashion to a cost share.

“I have not decided whether to support the ordinance as it is written. I do, however, believe that with some improvements, the Town will be able to develop an ordinance that creates a more fair approach to implementing impact fees on new development rather than how we currently implement them, which is in a negotiated and ad hoc basis. One of the intents, then, of this ordinance should be to provide the developer with the ability to calculate the full cost of the project before making a financial decision rather than negotiating the cost twice — once with the landowner and the second time with the Town and Board.”

Vice Mayor Michael “Mike” Haynes, also via e-mail, said in regard to his position on the ordinance, “At this point I still remain undecided, although I am pleased to say after several attempts to get some input and feedback over the past few months, I have finally started to hear from folks regarding the issue.”

Haynes added, “I don’t believe [the impact fee ordinance] will be on the [FBMA] agenda until our meeting on Sept. 27 at the earliest.”

Mayor W. Edward “Eddy” Ford III cautioned the Board about the ordinance at its Aug. 23 meeting, “Throughout the discussions we’ve had, the public discussions, no one has taken the time to reflect on the impact upon the family most directly involved, mainly the home buyer who will have to pay this impact fee. Not only that, in the case of a homebuyer, an individual family, who buys a home in the town of Farragut in the future, once this goes into effect, should it go into effect, if you’re carrying a 30-year note at some interest rate, you’re probably paying some multiple of impact fee. … So this is a deep concern that we would single out a segment of our community, that being the new-home buyer, and impose upon this new-home buyer this additional fee. When those of us who bought homes in Farragut in the past have enjoyed what the Town has presented to our community and to the citizens of the town of Farragut — roads, streets, parks — without them having to pay additional fees above and beyond. I am deeply concerned about the town of Farragut imposing an impact fee. I look forward to addressing that when any type of ordinance is presented to us.

“Let me go a step further. Those that are involved in development have seen that when a development takes place in an area where the infrastructure relating to the major and minor arterial roads are already in place that there is no justification for imposing an impact fee. … Those cases were: Farm at Willow Creek, Evans Road needed improvement. We worked with the developer, developed a program where we cost-shared in the improvements to Evans Road. It worked out. Where the development is taking place on Everett Road. We have worked with that developer. We have reached an agreement for a segment of improvement to Everett Road in a cost-sharing fashion. So where the need presents itself, the developer upfront knows and is able to participate, and in many cases with the Town, in improvements. Not only that, state law says, as I understand it, as it has been presented in these public hearings, impact fees that are imposed in a certain area must be used in that certain area. Right now we don’t have a program where we can say that within one year or two years or whatever to any community, that we can take the money that you might be paying in addition to your home and provide some type of improvement that would benefit you. Those are the type things I want to discuss when we have an ordinance presented to us for review.”

Several local developers also have concerns about the proposed ordinance and spoke directly with farragutpress.

Knick Myers, a principal owner of Myers Brothers Holdings, said, “From a commercial aspect, I’ve never heard of a community having an impact fee for commercial. In fact I’ve seen communities attract business with tax incentives, where they’ve actually waived taxes to have business come to their town. This one is unique. When I’ve seen other communities have an impact fee, their justification is, on the residential side, that they need funding for schools, need funding for more police force, need funding for the fire department, need funding for trash pickup and all the other services a lot of communities provide, all of which the town of Farragut provides none. So, my question has been and remains, what do I get as a resident of the town of Farragut that I don’t get if I live, say, in Montgomery Cove, which is not in the town of Farragut? Is there anything I get they don’t get?

“On a commercial side, I’m just blown away. If a material portion of the revenue that is generated to run the town of Farragut is derived from — I think it is three-quarters of a percent —sales tax … would you turn around and write an ordinance that would actually deter businesses from coming into the town to create a sales tax? I’m a proponent for a sales tax because I think it is a sustainable means to tax people based on spending habits and it fluctuates by the amount of spending. So, if the economy is good, people spend more, they collect more tax.

“The way I read the ordinance, if I want to build a 100,000-square-foot retail store as a developer I’m going to get charged $261,000 to bring in someone who is going to create more sales tax. It doesn’t make sense. It’s biting the hand that feeds you.

“Those are my fundamental problems with it. From a principles standpoint, why are we doing it? The town of Farragut doesn’t have any debt, it’s not in a budget crisis, what percentage of the Town is already built out? So, why is this being implemented today, why not 20 years ago? Why punish the last 20 or 30 percent who build out the Town?

“As a developer in a residential community, I’m already paying for roads, utilities, sewer lines, but then I turn around and pay a tax, which apparently goes toward roads. So, I’m paying a tax to maintain the roads that somebody else built in the past? If they are past roads, why are future people having to pay for them? Shouldn’t that be spread equally? Not that I’m a proponent of a property tax, I’m not, but wouldn’t it be a lot more just way to do it? Wouldn’t it be better to have a sales tax in the town of Farragut that would increase to raise the kind of funds they’re going to raise?”

Jim Nixon, a principal owner of Turkey Creek Land Partners, said, “This would cost JCPenney $270,000 to $300,000. I have two-to-three other projects that are going to be up before Farragut in the next three-to-six months that, I understand, would fall under the same category and I dare say that we will be hard-pressed to overcome that — we may lose some of these over this if it’s enacted.

“How could the Town enact this type of tax when the very thing they’re attempting to bring to the Town is what I’m trying to bring. The sales tax is their only sources of [major] income and now they’re giving a negative. They’re not inviting them to the Town, they’re trying to run them off.

“I don’t like any part of it. … What about the Farragut homeowner who wants to move down the street from a $300,000 house to a $400,000 house that has two kids, three kids and his house just won’t [work for the family]? They’re going to get caught in this.

“How about the guy who’s just retired who wants to go from a big house to a condo? He’s going to get caught in this. It’s unclear where the money is going to go. It’s for roads and parks, [Farragut] doesn’t build any roads by themselves. [Knox] County and the City [of Knoxville] build roads and Farragut just improves them. They do some roadwork. They’ve got a bunch of parks already. I don’t know where they could put another park.”

Alderwoman Dorothy “Dot” LaMarche declined to comment stating, “I would rather hold my comments until the meeting where the ordinance will be discussed again.”

Alderman John Williams did not respond to our query.