RICHMOND--
A controversial bill that would dramatically revamp the way localities get development to pay for itself won approval from a Senate committee yesterday, clearing the way for a vote from the full Senate.Sen. John Watkins' bill would replace the current proffer system with capped impact fees, something developers want but has local government leaders complaining.
Watkins told the Senate Finance Committee that the proffer system is "out of hand, it is out of control" because some localities charge proffers of up to $40,000 per new house. He said that raises housing prices, making homeownership less affordable, and artificially inflates real estate taxes.
"We need to make a move in this direction," Watkins said. "We have a broken system with cash proffers and if we let this continue, the price of housing and the very idea of affordability is gone."
Proffers are technically voluntary payments that developers pay to localities to cover the cost of services to those new houses, like water and schools. Impact fees do essentially the same thing, but are currently limited to road improvements.
Watkins' bill would eliminate proffers, but apply impact fees to emergency services and schools as well as roads. It would also allow localities to charge impact fees on "stale zoning"--i.e., development of lots that are already zoned.
Current law allows fees or proffers to be charged only on development that requires new zoning.
But it would cap impact fees at $5,000 per house in most of the state and $8,000 in Northern Virginia. Localities say that would severely limit their ability to pay for the new services required by new houses.
But Watkins thinks localities would recoup the money lost to huge proffers because of the provision allowing them to charge impact fees on lots that were previously zoned.
"It greatly broadens the base of the revenue stream which makes up for a lot of the difference," he said.
The Homebuilders Association of Virginia backs the bill, and worked with Watkins to write it.
"We're not here to ask you to do away with the proffer system," said Mike Toalson of the Homebuilders. "We're here to ask for an alternative lower the per unit cost and spread the base. This is an honest good faith attempt to create an alternative."
Localities, however, oppose the bill, saying it would drastically cut their income and force them to raise property taxes. They also said they haven't had enough time to review the bill, and asked the committee to carry it over until next year for more study.
"This bill has not been public long enough for us to do the careful analysis of its effects to really evaluate whether it's going to work or not," said Roger Wiley, of the Coalition of High Growth Communities.
"The dollar caps in the bill are arbitrarily and artificially low. They are, make no mistake about it, designed to reduce the contribution of the development community. Give us some time. We aren't rejecting the principle behind the bill. We're willing to talk, as we've been doing already, to see if we can come up with some solutions to this problem."
Some testimony from opponents suggested that localities won't be able to apply the impact fees as broadly as promised, because some previously zoned lots are already subdivided. Toalson said he doubts there are many lots like that.
Senators did express doubts about the bill.
"I support impact fees but this is a significant change that's going to involve a lot of give and take from the stakeholders," said Sen. Emmett Hanger, R-Augusta, urging a year's study of the bill. "It would be ill advised for us to advance this. I actually support the concept but we've got a lot of working out to do."
Sen. Yvonne Miller, D-Norfolk, said her local government officials have told her they haven't had time to review the bill and couldn't get to Richmond to testify, and she also asked that it be carried over until next year.
"They are very much concerned that we are just ramming it down their throats. If it's a good bill now, it will be even better in a year," Miller said.
But a motion to do that failed, and the bill passed on a vote of 12 to 2, with two abstentions.
Sen. Edd Houck, D-Spotsylvania, voted for it.
"I certainly had mixed feelings," Houck said afterward.
What persuaded him was the ability to apply impact fees to the by-right development, and the argument that the bill would make housing more affordable.
"Housing in the Fredericksburg area is out of reach for so many working people," Houck said.
Chelyen Davis: 804/782-9362