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Item No. 18 memorandum TO: Mayor & Council FROM: John Godwin, City Manager SUBJECT: DEVELOPMENT FEES DATE: July 12, 2019 BACKGROUND: Cities collect fees for various development related services in order to recoup the costs of the municipality for providing those services. Fees should never be used to generate revenue for the sake of bringing in more money, or to make a "profit." However, most cities make an effort to break even when it comes to development costs, the notion being that development should pay for itself. When it fails to pay for itself, those services are subsidized by taxes paid by those not benefiting directly from the services rendered. Another issue that has arisen for us is a new state law that prohibits fees from being based on the value of the property or improvements. Like many cities, we have for very many years based many of our building fees on the estimated value of the improvements, so we must make changes to our fee structure. STATUS OF ISSUE: Paris has been reticent to raise fees for many years, and as a result current fees significantly lag behind actual costs. One concern is that such fees may drive development away. However, virtually every study on development fees shows that not to be the case, especially in a city like Paris which does not even collect many of the typical charges, like impact fees, assessed on new development. To test that theory here, a few years ago we placed a moratorium on the collection of all development fees for six months. There was no impact on the number of permits requested; however, there was a loss of revenue and a greater reliance on taxes paid by existing residents. Fees that have not been updated to reflect actual costs, in some cases since the 1970s, need to be changed; and we must come into compliance with new state statutes. BUDGET: Will generate additional revenues. RECOMMENDATION: Discussion only; ordinance of adoption scheduled for September 16 as part of the overall city budget.