Proposed fee on Austin developers needs to find ‘sweet spot’ to earn City Council vote

City Council tentatively approved the new fee but said city staff need to ensure the program generates revenue without limiting housing construction or affordability. (Chris Neely/Community Impact Newspaper)
City Council tentatively approved the new fee but said city staff need to ensure the program generates revenue without limiting housing construction or affordability. (Chris Neely/Community Impact Newspaper)

City Council tentatively approved the new fee but said city staff need to ensure the program generates revenue without limiting housing construction or affordability. (Chris Neely/Community Impact Newspaper)

Austin’s affordability and housing accessibility continue to be top issues for the city, even through a crisis like the pandemic. That is why City Council members said Nov. 12 that a proposed fee on developers needs to strike a delicate balance of generating revenue for the city while not forcing an increase in the cost of housing or limiting its construction.

Officials from the city’s transportation department said the proposed street impact fee, which has been in the works since 2016, could go into effect by the end of December or early January, depending on when and how City Council takes its final vote. City Council tentatively approved the program Nov. 12, but council members said city staff needs to fine-tune the program before coming back for second and third approvals. The proposed program aims to charge a fee on new development to cover the cost of the development’s impact on transportation. The fee would finance road construction, improvements and expansions.

City staff acknowledged that terms such as “road construction” and “road expansion” sound counter to the city’s stated mobility goals, which center on getting people out of cars and into alternative forms of transportation. State law limits the reach of street impact fees, allowing them to only fund road projects; however, staff said the fee could also work as an incentive. The program would offer discounts on developments that move the city closer to its mobility goals, such as building near a transit stop or including less parking. Staff also proposed a full reimbursement of the fee for affordable housing projects.

Currently, road projects are financed using general obligation bonds that are repaid with property taxes. The street impact fee would cover some of that cost, which would free up property tax revenue for the city to spend elsewhere, transportation officials said.

Although it has long been under development, the proposed program gave pause to some City Council members, such as District 1’s Natasha Harper-Madison, who said she was worried that the city’s fee structure on development was already notoriously high and that more fees being passed onto homeowners or future tenants would only add pressure to the city’s affordability woes.

However, if the developers are not paying for the inescapable impact of their development on the city’s street infrastructure, that burden falls on the community to pick up the tab, District 5 Council Member Ann Kitchen said.

Kitchen supports a fee on new development but said the city staff, City Council and stakeholders need to work together to figure out the right fee level—what District 4’s Greg Casar called “the sweet spot.”

The conversation was reminiscent of the city’s debate over its density bonus program, in which the city would offer enhanced building entitlements, such as added building height allowance, in exchange for the developer building or financing subsidized housing units. That conversation, which has since been tabled, was all about finding the formula that would make the exchange of building entitlements for affordable housing attractive enough that developers would want to participate and that the city would get its fair and maximum share of affordable units. If the subsidized housing requirements were too high, developers would not play and the city would not get any affordable housing. If the housing requirements were too low, developers would participate at a high rate, but the city could miss out on maximizing its fair share of subsidized units gained through the program.

Just as with the density bonus program, finding the right balance in the street impact fee will be a delicate process.

“No one here disagrees that we should have fees on new developments,” Casar said. “If we add up [all of the city’s development fees] and miss a sweet spot, we could miss out on money for the community and limit housing [development]. We need to think about this holistically with all the other fees. They don’t work without the others.”

Although transportation officials said the program could go live by the end of December or in January, the city would only start charging the fees on developers who obtain a building permit 12 months after City Council approves the program.
By Christopher Neely
Christopher Neely is Community Impact's Austin City Hall reporter. A New Jersey native, Christopher moved to Austin in 2016 following years of community reporting along the Jersey Shore. His bylines have appeared in the Los Angeles Times, Baltimore Sun, USA Today and several other local outlets along the east coast.


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