Jan. 15--Anew elementary charter school in Albuquerque got a surprise last summer when it leased an existing 11,000-square-foot building in the North I-25 corridor.
North Albuquerque Cooperative Community School, which opened in August with 124 students, faced a bill for $41,000 in city impact fees.
"I thought it was a mistake," said Trudy Jones of Grubb & Ellis New Mexico, a veteran commercial real estate broker who represented the school.
Albuquerque's highly publicized impact fees are onetime charges on new construction to help pay for infrastructure improvements in some areas of the city.
Not everybody knows impact fees are also due on some changes of use in old buildings, depending on what part of the city they're in.
In the North Albuquerque Cooperative Community School's case, the city's bill for impact fees was triggered by an application for a building permit. The school needed $47,000 worth of remodeling to the former office building at 4261 Balloon Park NE.
"It's $47,000 for the improvements and $41,000 for the impact fees," said David Campbell, a former city attorney who now practices real estate law. "We were taken aback."
Of the 32 charter schools that have opened in Albuquerque in recent years, it is the first to face impact fees.
Location is one reason for the impact fee, according to city officials.
Albuquerque public schools on the West Side do not have to pay impact fees. But the charter school chose a location east of the river where impact fees on schools are alive and well.
"What's the real difference here?" Campbell asked.
In addition, the city planning staff's preliminary verdict was that operating a school at the site was more intensive than its previous use as an office.
A more intensive use has a bigger impact off the site, such as generating more traffic on surrounding roads. Thus impact fees are owed, according to the city.
Campbell has appealed the impact fees on behalf of North Albuquerque Cooperative Community School's landlord. The case is pending before the Environmental Planning Commission.
Developers: Changes are needed
Many in the development community believe there's a serious need to overhaul Albuquerque's impact fee ordinance.
"This is a law of unintended consequences," said Campbell, citing the charter school as a prime example.
"What I find today is we're still making up the rules as we go," he said. "We're still trying to figure out how this thing works."
The local chapter of the National Association of Industrial and Office Properties agreed.
Impact fees replaced a process called "exactions," in which the developer's share of infrastructure costs was negotiated. The idea was that a structured system of impact fees would be more predictable, something developers have wanted for decades.
"In reality, impact fees have just been added onto exactions, which are still negotiated with the city's planning staff," said Lynne Andersen, president of NAIOP's New Mexico chapter.
A typical example is that a developer might pay for or make improvements to an offsite public road, then turn around and pay the full impact fee for road improvements.
The added costs, Andersen said, "are passed on to end users such as home buyers, businesses that lease space or businesses who want to buy their own building."
Sponsors call fees a success
Criticism of fees by NAIOP and others in the development industry was no surprise to City Council President Debbie O'Malley.
"They've been complaining about them from day one," she said.
Impact fees were inevitable because the city wasn't collecting enough money from developers to pay for new infrastructure in growing areas, she said.
"We had a deficit building on the rehabilitation and maintenance of existing infrastructure," she said. "It was a matter of dollars, simple economics."
Both O'Malley and Councilor Michael Cadigan, who sponsored the ordinance when it passed in 2004, said impact fees have been a success.
"I think it's worked extraordinarily well," Cadigan said. "I'm sure there are developers who think the fees should be lower."
Cadigan said he has not heard of any formal request for a review of the ordinance, adding, "I don't know of any councilor who has been approached."
The ordinance has a built-in provision for City Council to review impact fees five years after the effective date of July 1, 2005.
As for situations like North Albuquerque Cooperative Community School, he said, "That's why we have the appeal process. If you can show your project does not have the offsite impact that has been calculated, then the fees can be waived or exempted."
From an administrative standpoint, Planning Director Richard Dineen said, "Everything is going pretty well.
"The biggest problem has been looking at subdivisions that had some kind of standing that exempted them from paying impact fees."
The planning staff has to review subdivision plans claiming an exemption, a process that takes time and research, Dineen said. A subdivision can be exempted if it was on file at City Hall when the impact fee ordinance was adopted.
The exemptions are the main reason why the city collected only a small sum in impact fees during the ordinance's first 12 months of enforcement, Dineen said.
Developers and builders paid only $3.8 million in impact fees on $1 billion of construction during fiscal year 2006, which ended June 30.
Home building trends
There are some signs that Albuquerque's impact fees have helped to push residential construction outside Albuquerque city limits.
From 1999 to 2003, Albuquerque was the undisputed king of home construction with three out of every four single-family houses in the metro area built within the city limits.
Just two years later -- in 2005 when impact fees started -- Albuquerque's market share plunged to just more than half of all new houses in the metro. The city's market share will be about the same in 2006.
"One thing we know for sure is that impact fees have enhanced growth outside the city limits," said Paul Cauwels, a principal of Cauwels & Stuve Realty and Development.
Impact fees aren't the only reason for Albuquerque's drop in market share. Another factor is the city's limited supply of land for building on a major scale.
"There's a natural shift going on with the availability of large tracts of land for development in Valencia County and Rio Rancho," said Bob Murphy, president of Sandia Properties.
In addition, Albuquerque's present share of new houses could be a return to normal. A market share of 50 percent to 60 percent was typical for Albuquerque before 1999, according to historical data on metrowide permits for houses.
$10K-$12K per house
Impact fees have added nearly 5 percent to the price of a new house on the West Side, an additional cost far higher than found outside the city limits.
The fees range from $10,000 to $12,000 for each house, depending on location, said Jim Folkman of the Home Builders Association of Central New Mexico.
The median cost of a new single-family house in the metro area is about $215,000, according to estimates by Folkman and others. Median means half of all new houses cost more, and half cost less.
New houses within the Albuquerque city limits are likely to cost more than the median.
"We're only selling to about 50 percent of the market," said Jerry Wade, president of Artistic Homes. "In the social architecture of today, people have fixed it so only the upper echelon can afford a new house."
In the 1990s, Artistic Homes was the city's top home builder and led the way in construction priced for households that could be described as working class. That can also be described as "The demographic group between the people who can buy a house no matter what and the people who qualify for lowincome housing," Folkman said.
According to the Housing Opportunity Index, the metro in general is quickly getting too expensive for many households.
In the third quarter of 2004, a family of four making the median income of $54,200 a year could afford to buy 72 percent of the houses, both new and used, on the market.
In the third quarter of 2006, the same household making the median income of $53,200 a year could afford only 39 percent of all homes for sale.
The metro ranked 117th out of 203 cities in the country on affordability in that quarter, according to the index by the National Association of Home Builders and Wells Fargo Bank.
ABQ commercial development strong
Despite the impact fees, commercial development -- such as office buildings, warehouses, shopping centers -- has remained strong in Albuquerque.
"I think it's significant that we haven't seen any slowdown in commercial construction," Cadigan said, noting there were concerns that the fees might hurt the city's economic growth.
And Albuquerque will continue to see strong commercial construction because of its location as the geographic hub of the metro, Dineen said. "Unlike some home buyers who'll move to the fringe, businesses like to locate in the center of things," he said.
ABQ'S four impact fees
Lower fees are designed to encourage certain kinds of development, say more office space on the West Side, and higher fees are designed to discourage certain development, such as fast-food restaurants on the West Side.
ROADS: The city is divided into eight service areas, each of which has its own fee levels for a long list of commercial and residential uses.
The highest fee is $41,273 per 1,000 square feet for a fastfood restaurant, with drive-up window, in the West Mesa service area just north of Interstate 40.
There are virtually no fees for any use in Downtown and the Northeast Heights.
PUBLIC SAFETY: Two service areas are divided by the Rio Grande, with the fees used primarily to build police and fire stations and buy related equipment.
The highest fee is $455 per 1,000 square feet for retail on the east side of the river, while the lowest is $75 per 1,000 square feet for office on the West Side.
DRAINAGE: The city is divided into five service areas, with fees going toward improvements to the city's stormwater drainage system.
The highest fee is $14,052 for each impervious acre in the Northwest Mesa service area. There is no impact fee for drainage improvements in a huge service area called the Central City, which extends from the North Valley and Downtown east to the Foothills.
RECREATION: The city is divided into seven service areas, with fees going toward parks, trails and open space. The fees are only assessed on residential projects.
The highest fee is $1,630 per 1,000 square feet for residential projects in the North Valley and North I-25 service area. The lowest is $390 per 1,000 square feet in a service area encompassing Downtown, the university and airport.
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