Impact Fees: Third Rail of Vermont Politics  
By Martin Harris

People who want to be seen and admired as unusually bright, gifted, perceptive, and so on (lots of this particular breed in politics) are fond of the defensive quip "we really don’t know; it’s never really been tried in its true form" when challenged with, say, the starvation statistics for the communist governance model, or, say, the die-while-waiting statistics for the single-payer socialized medicine model. 

On the fund-raising side of governance, you’d think every conceivable profit-center model has been tried: income, sales, and property taxes; tariffs and excise levies; poll taxes and sumptuary taxes; labor levees and currency debasement; and so on. In the continual quest for more tangible money, some governments have resorted to taxation of intangible assets (the supposed value of real property anywhere is about as intangible as the supposed value of stocks and bonds in Florida, but that hasn’t prevented taxation of either category) and others have resorted to value-added, luxury, and "wheel" taxes. Latest tempting idea: congestion pricing for highways and other public services like rush-hour plane tickets. 

There’s only one potential revenue pocket which hasn’t yet felt the grasping hand of the tax collector very much: impact fees. You can argue about whether or impact fees have been tried in their "true form" (I’d say they have) but you have to concede that they haven’t been tried very widely. Even Vermont, at the very pinnacle of successful and frequently quite innovative citizen taxation (think back to the brief and unconstitutional adventure into the State level taxation of interest on Federal obligations) using a range of different measures, has, so far, eschewed impact fees except for a very few, very small, very local exceptions. 

They’re not even discussed in polite/political society, which explains why they’ve been studiously ignored by the folks in the paragraph above. Conversely, they’re the specific subject of this column. As used to be said about any mention of Social Security in politics –"touch it and you’re dead"—the same fear seems to pervade all those venues where all sorts of other governmental revenue-enhancers are so avidly fantasized. 

At first glance, impact fees –the concept of new development, residential or otherwise, paying at last some fraction of the new governmental infra-structure costs it creates simply by establishing residence and claiming "free" services—would seem to be a no-brainer; after all, the alternative is that the newcomers demand and receive subsidies from those already there, without benefit of vote, a sort of taxation without representation. Historically, though, it hasn’t worked that way. In Vermont, not that many decades back, there was the widespread opposite of an impact fee: new residents were attracted into town with the promise of a three- or five-year property tax forgiveness. Middlebury old-timers will recall how the now-departed Standard Register was attracted into town partly with the promise of a property-tax moratorium. 

And, indeed, there was little interest in impact fees when new development impact was relatively low: when annual per-pupil school costs, in the early ‘60’s, were in the $300 range, that number was just about balanced by the average $200 house-tax bill and the 0.7 of a student coming out of that house. Today the average tax bill is in the $3,000 range, and only 0.5 of a student comes out of the statistically average house, but per-pupil cost is north of $12 thousand. You can see where impact fees, now, are a lot more attractive than they used to be, for the old-timers not enthusiastic about subsidizing the newcomers under the new financial rules, and, conversely, a lot more unattractive for new development which now generates a lot more impact, in both scope-of-services and cost, than it used to, and is understandably a lot less enthusiastic about paying any more of the new costs it generates than it has to. 
 

Martin Harris is a former Chairman of Citizens for Property Rights