With the U.S. Census reporting South Carolina as the fastest-growing state in the nation in 2023, some experts predict its population will grow by as much as 19% over the next 20 years.
While this population growth is a significant sign of prosperity, it comes with plenty of infrastructure challenges, adding pressure to systems that are already overburdened. Costly improvements and expansions to roads, water or sewer systems are frequently necessary to keep pace with growth and maintain the standard of service that existing residents expect.
Development impact fees, or impact fees, are one-time charges imposed by municipalities as a condition of development approval. Impact fees are designed to ensure new growth proportionately contributes to the costs of public infrastructure improvements necessitated by their construction. This arrangement promotes equitable growth by preventing existing residents from bearing the financial burden of infrastructure expansion required by new developments. They also encourage responsible urban planning by ensuring that infrastructure keeps pace with development.
Impact fees necessarily increase the cost of new development, and litigation can sometimes arise. For city and town councils, ensuring that their municipalities have imposed impact fees using proper methodology can help protect them from litigation.
A local government imposing impact fees must follow the steps set forth by the Development Impact Fee Act, found in SC Code Section 6-1-9. Here’s a general summary of the process:
Direct the planning commission
Before imposing impact fees, municipalities should have a comprehensive plan in place or a capital improvements plan which complies with SC Code Section 6-1-960(B.)
The council can adopt a resolution directing the local planning commission to conduct the requisite studies and to recommend an impact fee ordinance. The resolution is to generally contain direction on the type of public facilities to be supported by the impact fee.
Prepare the necessary documents and ordinances
The planning commission must develop
- a capital improvements plan;
- impact fees based on service units and sound engineering studies; and
- an ordinance imposing the impact fees drafted to include the various elements required by SC Code Section 6-1-940.
The Development Impact Fee Act also requires a report on the effect of impact fees on affordable housing prior to the imposition of impact fees. This report is typically undertaken at this stage in the process.
Once the planning commission has developed the required items, it should adopt a resolution making its recommendations to council.
The process is technical and cumbersome, and most planning commissions decide to hire professionals to assist. If professionals are engaged, all procurement policies must be followed.
Enact the ordinance
The city or town council may determine to amend or alter the recommendations of the local planning commission. Following at least 30 days of newspaper notice, the council shall hold a public hearing on the question of adopting the impact fee ordinance and approving the capital improvement plan. The ordinance must be approved by a positive majority.
Once in place, the municipality must be sure to administer its impact fee program in accordance with the ordinance. There will also be ongoing accounting and reporting requirements.
The enactment process for development impact fees is undeniably rigorous, but these steps help ensure compliance with both federal and state legal concepts. The benefits derived from impact fees are typically well worth these initial hurdles.