The Bonney Lake City Council has voted down an impact fee deferral program that was mandated by the state for the city to enact.
The ordinance for the deferral program, Ordinance D16-28, was originally on the council’s Aug. 23 consent agenda, but was pulled off by Councilman Dan Swatman to be discussed later in the meeting.
“I do have a question about this,” Swatman said when the ordinance came back up for discussion. “I believe that this particular piece of legislation written by the state Legislature that requires cities to do an action… is unconstitutional under the Washington Sate Constitution.”
In April 2015, the state legislature approved Senate Bill 5923 to promote economic recovery in the construction industry, the bill reads.
“Counties, cities, and towns collecting impact fees must, by September 1, 2016, adopt and maintain a system for the deferred collection of impact fees for single-family detached and attached residential construction,” section 1.3 of the bill reads.
SB 5923 allows single-family home developers to apply for an impact fee deferral.
This is the second time a bill of this sort has been approved by the state. The first, passed in 2013, was vetoed by Gov. Jay Inslee.
In Bonney Lake, if the ordinance was approved, developers could apply to have the impact fees deferred for 18 months or until the development is ready for a final inspection, whichever comes first. The fees must be paid before the city conducts its final inspection and issues a certificate of occupancy.
The issue Swatman, and other council members, had with the legislation is that it seems to conflict with Article 8, Section 7 of the state Constitution.
“‘No county, city, town or other municipal corporation shall hereafter give any money, property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm,'” Swatman read from the document. “I don’t see how this particular piece of legislation could possibly be legal.”
Kathleen Haggard, the city’s attorney, disagreed, saying this bill and the city’s ordinance is not an unconstitutional lending of credit.
“Case law since this provision came into being in 1965 has repeatedly failed to find lending of credit or an unconstitutional gift of public funds in all sorts of scenarios, the highest profile being the baseball stadium that King County built for the benefit of a private club,” she said. “It’s an extremely high bar to find a gift of public funds or an unconstitutional lending of credit. The first hurdle that you have to get over is to show there is an illegal intent to give away or donate public property.”
On the other hand, not adopting this ordinance could mean the city is out of compliance with the state, Haggard continued, and the city will most likely be challenged by developers that want to defer their impact fees.
“I just don’t think it’s feasible that you’ll get any movement from the state Legislature just by refusing to comply,” she said. “I think all that’s going to get you is a lot of staff time and a lot of money accordingly spent fighting with developers. They’ll have an argument that you’re not in compliance with state law.”
Another option that Haggard suggested is the city could try to argue that a deferment loses the city money.
“There’s potentially a slight element of loss of time value of money if you’re deferring an impact fee for a few months. Not dissimilar to what we do when we allow installment payment plans, for example, an SDC (system development charge) or a large utility bill. We do charge interest,” she said. “If you think you could be losing money on this, you can recapture it in your administrative fee.”
Councilman James Rackley said his issue with the ordinance is he sees the state requiring cities to enact a deferral program for SDC payments next. Haggard said there’s no indication that the state is moving in that direction.
Councilwoman Katrina Minton-Davis said she was unsure how the state could control how cities collect these fees while the bill doesn’t effect the state in any way and asked whether or not developers would even use the deferment program, since it costs $200 and takes time to apply.
“There’s not very much we have control over, but we have control over the cost associated with the doing the deferral,” she said. “We may be able to review that at a certain time.”
When the vote came, Minton-Davis and Deputy Mayor Randy McKibbin voted for the ordinance, while Swatman, Rackley and council members Justin Evans and Tom Watson voted against it. Councilman Don Lewis was absent from the meeting.