Supporters, opponents argue pros, cons of road impact fees
Posted on Sunday, April 8, 2007
There is no easy answer to how road impact fees could affect Fayetteville's economy if the issue is approved by voters.
"It is a very nuanced issue," said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas.
Consequences come with any decision, but it is not as clear cut as either side of the issue is purporting, Deck said. The question will be how much would the fees distort the market place, she said.
"For Fayetteville to be a business-friendly city, it can't have disproportional road blocks," Deck said.
While opponents of the fees argue the fear of the fees is enough to send businesses elsewhere, Deck is not ready to draw that conclusion.
However, Steve Rust, president and CEO of the Fayetteville Economic Development Council, is presenting the fees as pushing Fayetteville's economy past a tipping point. Rust put out a paper to members of the council urging them to vote against the fees Tuesday. His argument is that the city's economy can't withstand the additional fees.
"At some tipping point, the combination of taxes, impact fees and all other costs of doing business in Fayetteville exceeds the market's capability to absorb the costs that will be passed down to the consumer," Rust wrote. "If the customer can't pay for the increased costs that are always passed down, then the business will move to another place where the cost can be absorbed by the market.
"We are at that tipping point," he continued.
Deck said, while it is possible that the fee may be the marginal cost that makes the Fayetteville market too expensive to locate here, she's not ready to say that the fees will or will not be tipping that scale. It is also possible that the fees may result in lower land values, which adjust the cost of development, Deck said. It is important to note that any increase in development cost will be passed on to the consumer, she said.
"Impact fees are clearly not growth paying for growth, which is how they are often portrayed," Deck said. "They do affect how we grow and what businesses locate here."
Like the other cities in the metro area, Fayetteville is challenged to maintain the level of infrastructure so that it doesn't choke on the growth, Deck said.
Ward 4 Alderman Lioneld Jordan, an advocate of the fees, doesn't believe the fees will push business away.
"I don't believe in the doomsday scenario," Jordan said. "I believe the city is diverse enough it can handle anything - I don't fear the future."
Jordan said Bentonville and Rogers have comparable amounts of fees and their growth hasn't been hampered, while Springdale doesn't have any impact fees and has seen a reduction in sales tax growth.
Fayetteville is going to be a destination for businesses even with the fees, Jordan said. He cited the recent ranking as No. 8 in the nation on Forbe's magazine's Best Places for Business and Career Survey as proof the economy is not about to collapse.
Rust argues that now is the time to make sure the tax base doesn't erode because of increasing fees. If the sales tax revenue continues to decline, the city will have to look to the property tax, which will take away from the schools. If the school district starts to decline, Rust said, that will take away some of Fayetteville's appeal.
Mayor Dan Coody, who is opposed to the fee ordinance, says that he doesn't subscribe to either.
"I tend to stay away from either extreme: one, it will shut the world down as far as business goes; the other, that it's going to be free money and no impact on business community," Coody said. "I believe it will fall somewhere in the middle."
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