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Kalispell misses mark on impact fees

by Daily Inter Lake
| August 13, 2023 12:00 AM

Three years ago, the Kalispell City Council made a bet on the law of supply and demand. Councilors voted to lower impact fees by 50% — a one-time charge to install utilities for new developments — in anticipation that it would spur new home construction and ultimately bring down housing costs.

During that meeting in 2020, Mayor Mark Johnson called the impact fee assessment vote “a shot in the dark” that may need to be reevaluated.

Let’s shed some light on what has transpired since that decision was made.

Kalispell is one of the fastest growing communities in the U.S., while the cost of a home in the city has gone through the roof — unsurprising to anyone who received a property appraisal notice this summer. According to Zillow data, Kalispell’s average home cost currently sits at $525,000, an approximately 60% increase from 2019 levels.

Despite the building frenzy, the housing supply has not kept up with demand, even with the city’s slashed impact fees. The council’s “shot in the dark” missed the target.

While it’s not possible to quantify the effect the lower impact fees may have had on new home construction, it probably was an insignificant factor in incentivizing development. In hindsight, builders were going to capitalize on the population boom, impact fees be damned.

What we do know for sure is that the city took in significantly less money for infrastructure projects than it would have had the impact fees not been reduced.

All the while, critical water and sewer infrastructure projects remained on the horizon and the city needed to find a way to fund them. It’s the responsibility of the city to keep the water supply safe and infrastructure up to date.

This is why Kalispell residents will soon find an increase on their water bill. Kalispell City Council voted unanimously in favor of a new water fee schedule last week that bumps the bill for a typical household from $32 a month to nearly $48 a month by 2026.

The council painted itself into a corner and had no other recourse but to saddle these costs on residents. All the while, the developers getting rich off of the city’s growing pains are let off the hook.

It’s time for that to change. Unfortunately, prompts from Councilor Ryan Hunter to revisit the impact fee schedule have repeatedly been quashed by City Manager Doug Russell and the mayor.

Why not take a look at the report the city commissioned in 2019 that actually recommended increasing the impact fees to avoid this exact scenario?

“By establishing cost-based water and wastewater impact fees, the city attempts to have growth pay for growth by having new customers pay their share of the infrastructure in place which will serve them, while also paying back the existing utility customers for paying for the financial impacts of growth,” the study from HDR Engineering states.

Growth paying for growth. We like the sound of that.