Local News Spotlight

Cities are waiving fees to entice developers

Officials believe temporary cuts will lead to long-term growth, so they will forgo utility hookup, road costs.

Updated: 2013-01-27T06:53:34Z

By MATT CAMPBELL

The Kansas City Star

In an attempt to spur growth, at least two area cities are waiving fees to lure developers to their turf instead of their neighbors’.

Unlike the so-called border war between Kansas and Missouri that entices existing entities to move, this pits city against city for new investment.

Harrisonville is hoping to boost housing starts by forgiving utility hookup costs.

Independence is targeting commercial ventures by waiving road fees.

And Shawnee leaders will soon vote on suspending excise taxes to encourage both new houses and businesses on its west end.

Officials say they are not backing away from the long-accepted idea that developers should contribute to the costs of growth. They say they are just looking for a little bit of an edge.

It’s not exactly a stampede. Neither the League of Kansas Municipalities nor the Missouri Municipal League is aware of other cities following that path. But several counties in north-central Florida temporarily suspended some development fees. Lake County near Orlando reports it has since seen growth, but it’s not clear whether it was because of the fee suspension.

In this area, results have been mixed.

Harrisonville has snagged just one residential building permit application since adopting its policy in September.

But Independence can credit its waiver, also initiated in September, with helping to attract a new family restaurant.

The owner of a Culver’s restaurant, which is opening this spring at Interstate 70 and Little Blue Parkway, saved $75,000 to $90,000 because Independence waived the fee it normally charges to help pay for new roads.

“That is a big deal when you’re putting together a deal that can cost you more than $2 million,” said Culver’s franchisee Matt Mitchell. “It could make you choose between cities.”

Mitchell already had been negotiating for a site in Independence, but he was also looking in other cities, and the fee waiver was a bonus that helped him commit to Independence.

Many cities charge developers impact fees to recoup some of the cost of providing roads or utility connections needed to accommodate growth.

Several cities in Johnson County charge an excise tax. In Shawnee, it’s 21.5 cents per square foot, which can add several hundred thousand dollars to a development. That money goes toward paying the city’s debt.

But Shawnee City Councilman Jeff Vaught, a commercial real estate broker, wants to end the tax, at least for three years. He believes that will give developers a powerful incentive to choose Shawnee. Then the city can negotiate how much the developer will contribute to roads and other infrastructure.

It helps, Vaught acknowledges, that Shawnee is building a significant economic development fund through a deal negotiated with Deffenbaugh Industries, a major business in the city.

Independence and Harrisonville are willing to temporarily absorb more of the costs of growth.

“Given the competitive environment within a metropolitan market and a limited number of commercial real estate deals, it is important to create economic advantages for developers and businesses,” Independence City Manager Robert Heacock said in announcing his city’s policy.

The 13-month moratorium, to run through October, is on the city’s license surcharge fee for new commercial, office, industrial or warehouse developments. It applies only to the portion of the city east of Missouri 291. Heacock said the city believes a specific end date for the moratorium “will create an urgency for economic development projects to move forward.”

Officials are not worried about the temporary loss of the money.

“We think the long-term benefits will outweigh the short-term temporary moratorium and should not undermine our future roadway system,” said Tom Scannell, community development assistant director for planning.

Scannell said the city has had several inquiries from developers since establishing the moratorium, but it is too early to tell how effective a tool it will turn out to be.

Harrisonville agreed to waive that city’s impact fees for residential development, limited to the first 25 applications for a housing unit permit. The fee is used to cover about 45 percent of the cost of new connections to city water, sewer and electric services.

The fee normally is $2,623 for a single-family unit, so the waiver is a potential loss to the city of more than $65,000.

City Administrator Keith Moody said city leaders believe the experiment is worth it if it can boost housing starts in the county seat.

“There are parts of Cass County that have seen substantial growth in population in the last decade,” Moody said. “Harrisonville has seen consistent growth of about 1.5 percent a year. We attribute that to the fact that we’re far enough out from the job base, the concentration of jobs to the north.”

Moody said the city will continue its experiment with the fee waiver.

To reach Matt Campbell, call 816-234-4902 or send email to mcampbell@kcstar.com.

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