How much could a fee on new development cost home builders in Horry County?
Developers could soon face a $4,500 impact fee on any new single-family home built within Horry County.
An impact fee is essentially a one-time fee to offset the strain new construction places of public services like roads, public safety and parks. If ultimately approved by council, the fee would apply to construction in unincorporated Horry County, including residential, businesses and hotels.
On Thursday, county council was presented with a study that outlined what an impact fee might look like and what it could fund.
Elected leaders for years have pushed for the implementation of a fee on development, and this is the closest local leaders have come to approving a program. Still, concerns over stormwater improvements and proposed changes to state laws could slow down current progress.
South Carolina allows for local governments to choose if it wants an impact fee or not. It requires the government to complete a study on what fee will be implemented, how it will affect affordable housing and to review those plans every few years.
The study looked at the maximum Horry County could potentially set its impact fee at per unit built. New housing could pay up to $4,565 per home, retail stores could see a $7,439 fee per 1,000 square feet and hotels could pay $2,587 per room.
How it’s spent
An impact fee can’t be spent on just anything, according to South Carolina law, and it must be used in a timely manner.
Horry County Planning Director David Schwerd said the study treats the county as one service area, which means money collected in more urban areas can be used in rural areas and vice versa.
As it stands, Horry County must use the money to directly benefit the new residents who paid the fee within a three-year period from when they are scheduled in an improvement program. If the money isn’t used, it must be refunded.
Spending this money requires the county to adopt specific plans, highlighting what projects in which the county will spend the money. This includes a regional infrastructure improvement plan and capital improvement plans created by staff based off current priorities set and ultimately approved by council.
The bulk of the revenue will need to go toward transportation improvements, while the rest can be split between public safety, building a new emergency operations center and the parks department.
These amounts were determined based off what the consultants thought could be justified under law.
For example, when a developer builds a single-family home, $3,000 will go toward building roads.
In total, the impact fee could bring in nearly $14 million a year in total revenue for road construction in Fiscal Year 2021.
The consultants looked at the distance, frequency and time Horry County drivers are on the road to determine how much of the fee could be dedicated to infrastructure improvements.
Depending on the improvement plans, the fund could help widen parts of S.C. Highway 90, make a S.C. Highway 31 interchange in Carolina Forest and other projects in the county’s infrastructure improvement plan. In addition, a Loris and Aynor recreation center or a Little River waterfront park could be built with the money.
Stormwater
As it stands, the impact fee does not allocate any money toward improving and expanding flood mitigation infrastructure within the county.
An impact for stormwater wouldn’t be neighborhood-specific projects, like a retention pond within a development. The money would have to be used on projects that improve flood resilience for the whole region.
No money from the fee is designated to stormwater, Planning Director David Schwerd said, and that will probably change depending on how the study is implemented and revenue spent. Including stormwater into the impact fee could increase the overall cost of the fee.
Horry County has a capital improvement plan for stormwater, but a more detailed one could be implemented to expand what the fee could be used for. An initial fee could be based off current plans, and a more robust one approved later when a more comprehensive plan is made.
Council Member Al Allen, who also chairs the infrastructure committee, said he is going to make it a priority to make sure stormwater’s long-term plans will be included in the impact fees. He said it is the most important issue facing the county.
Council Member Harold Worley said he is worried if the council passes an impact fee without stormwater included, it might never get done. The county needs new infrastructure to deal with routine flooding, and he is willing to wait on approving a fee until stormwater is included.
“At the end of the day there is nothing in this study that addresses stormwater. And that’s why we’re here,” Worley said. “We’ve got to stop some of this flooding.”
Horry County has a stormwater fee and strict regulations, Council Member Gary Loftus said. He said the county needs to focus on complimenting the impact fee with the rules and regulations already on the books.
“We have to hold these developers feet to the fire,” he said.
Horry County Attorney Arrigo Carotti said staff will do its absolute best to get a stormwater impact fee included in the final plan ahead of the Fiscal Year 2021 budget vote next summer.
Still, Worley said he is willing to wait on approving the fee to make sure stormwater is done right.
Horry County Chairman Johnny Gardner said staff needs direction on how to move forward because the impact fees will greatly alter how much money is available in the budget. Council will revisit the issue Friday during the second day of the budget meeting.
“Stay tune for more tomorrow,” Gardner said. “I think we have all figured out impact fees aren’t the great savior some thought it was or the great devil.”
How it’s spent
Revenue from the fee cannot be used on recurring expenses because it is not guaranteed money.
“If growth is slow due to a recession or something, impact fees won’t come in as expected,” consultant Carson Bise said.
Schwerd said the county is working across departments to use a mixture of bonds and “pay-as-you-go” funding to avoid placing a strain on the general fund if the economy was to crash.
Council Member Tyler Servant said he is concerned about committing county money to bonds or any project when the funding could dry up in a recession.
At the end of the day, the projects the impact fee will go to are not a “pie in the sky” wishlist. They’re projects that need to be built, Worley said.
Getting the study back is a major first step toward getting an impact fee, but there are still a lot of boxes to be checked before the fee can be implemented. The capital improvement plans will also first need to be approved.
Then planning commission will make its recommendation on the plan, and county council will have the final word. The final budget for Fiscal Year 2021 must be approved by July.
Council can amend the plans as it desires as long as it stays in line with state law and it must be revisited every five years. Impact fee expert Tyson Smith recommended council keep a close eye on how the fee is working and ensure it isn’t being left on the shelf.
Smith said the difference between a tax and a fee is important to understanding state law. A tax doesn’t have to directly help benefit the payer, a fee has more requirements to benefit the group paying.
Changing the law
In November 2018, Horry County Council asked the state to change its impact fee laws. A year later, no major alterations have been made.
Counties across the state through the Association of Counties are looking to change the impact fee rules set by the State of South Carolina. Changes include clarifying the time the fees can be used and how they can be spent.
At this time, no bills have been prefiled for the upcoming legislative session in the statehouse pertaining to impact fee regulations.
Horry County Member Johnny Vaught asked what incentive there is for the state to change the law if Horry County moves forward under current laws. Horry County could take the lead in changing the law, he said.
“How would it feel if we push the envelope? Pointing out the problems, and say we’re going to do this until you tell us to stop?” Vaught said. “It’s also been like this. We’re the Independent Republic. If you don’t do it for us, we will damn well do it for ourselves.”
Worley said he’s talked with state officials who said Horry County needs to act first.
“They just don’t want to go first. If we move forward with this, I think they will come on board and help us,” Worley said.
Over 25 states have impact fee laws on the books, but South Carolina has one of the more complex regulations, Smith said, and Horry County is almost through the hardest part.
Getting the law changed could be a long process, Carotti said. He was told informally the county was asking for too many changes into the law, and he is working to make a more specific lists of alterations.
Rep. William Bailey, R-Little River, told The Sun News he is willing to help Horry County get a bill to change the laws to the House of Representatives. He believes development should pay for itself and not create strain on current residents.
He said he sent a bill to Horry County for review to make sure it aligned with their plans and is waiting to hear back from them on how to proceed. However, it could take a while for the law to change.
“That thing could get jammed up in a committee. There is no telling,” he said.
This story was originally published December 12, 2019 at 12:11 PM.
