What Are Impact Fees?
Impact fees are one-time charges assessed by a local government against a new development project to help pay for new or expanded public capital facilities that will directly address the increased demand for services created by that development.
What Can Impact Fees Be Used For?
RCW 82.02.050-.110 and WAC 365-196-850 authorize counties, cities, and towns planning under the Growth Management Act (GMA) to impose impact fees for:
- Public streets and roads,
- Publicly owned parks, open space, and recreation facilities,
- School facilities, and
- Fire protection facilities.
These impact fees may only be imposed for “system improvements” which are defined as public capital facilities in a local government’s capital facilities plan that provides service to the community at large (not private facilities), are reasonably related to the new development, and will benefit the new development (WAC 365-196-850).
Impact fee revenues cannot be used to help pay for a specific capital project if that project is not listed or referenced within a comprehensive plan’s capital facilities element, per RCW 82.02.050(5).
Impact fees also cannot exceed a proportionate share of the cost of the system improvements: Municipalities must have additional funding sources and may not rely solely on impact fees to fund the system improvements (RCW 82.02.050).
What Can Impact Fees Not Be Used For?
Impact fees may not be used to correct existing deficiencies. For instance, a school district may use the impact fees from a development to pay for construction of new classrooms at specific schools to accommodate the increased enrollment anticipated from that specific development. But the district may not use the impact fees to build new classrooms to reduce overcrowding caused by existing residents.
Per RCW 82.02.060(9), an impact fee ordinance may:
(P)rovide for the imposition of an impact fee for system improvement costs previously incurred by a county, city, or town to the extent that new growth and development will be served by the previously constructed improvements provided such fee shall not be imposed to make up for any system improvement deficiencies.
For example, if a public works maintenance facility was designed and constructed to address both existing deficiencies (e.g., 60%) and future growth needs (e.g., 40%), impact fees could be used to pay for up to 40% of the debt service on the bond issued for that facility.
Transportation Impact Fees
Transportation impact fees must be used for “public streets and roads” that are addressed by a capital facilities plan element of a comprehensive plan adopted under the Growth Management Act (GMA), per RCW 82.02.050(4) and RCW 82.02.090(7).
It is unclear whether state law allows these impact fees to be used to fund multimodal improvements, but such use is probably acceptable as long as the improvement is within the street right-of-way (e.g., bus lanes, sidewalks, or bike lanes) and there is a strong transportation-related justification. However, it is doubtful that impact fees could pay for buses, vanpool vehicles, recreational trails, or other projects outside the right-of-way.
Since impact fees are restricted to capital facilities, they cannot be used to fund transportation studies or operating and maintenance costs.
Bellingham has compiled a comparison of 2021-22 transportation impact fee base rates in Western Washington.
Park Impact Fees
Park impact fees must be used for “publicly owned parks, open space, and recreation facilities” that are addressed by a capital facilities plan element of a comprehensive plan adopted under the GMA. See RCW 82.02.050(4) and RCW 82.02.090(7).
Most cities and counties in Washington only charge park impact fees to residential construction or the residential portion of a mixed-use building or development, but a few (see Tukwila Municipal Code Ch. 16.28) also charge commercial or industrial developments, since employees (and not just residents) can directly benefit from nearby parks and recreational facilities.
School Impact Fees
School impact fees must be used for “school facilities” that are addressed by a capital facilities plan element of a comprehensive plan adopted under the GMA (RCW 82.02.050(4) and RCW 82.02.090(7)). Typically, school impact fees apply only to residential construction or the residential portion of a mixed-use building or development.
School districts are responsible for expending the impact fees but are not authorized to collect them. As a result, school impact fees require cooperation between school districts and the cities, towns, or counties administering the program. This cooperation should take the form of an interlocal agreement (ILA) that specifically identifies each party’s role.
Any exemption for school impact fees that would otherwise be distributed to a school district must first be approved by the school district, per RCW 82.02.060(4).
Fire Impact Fees
Fire impact fees must be used for “fire protection facilities” that are addressed by a capital facilities plan element of a comprehensive plan adopted under the GMA, per RCW 82.02.050(4) and RCW 82.02.090(7).
Since state law provides no further statutory or administrative definitions, some jurisdictions have taken it upon themselves to define “fire protection facilities” in their own municipal codes. For example, see Auburn Municipal Code Ch. 19.06, which defines this to include fire engines and equipment.
Determining Impact Fee Rates
Local governments must establish a rate schedule for each type of development activity that is subject to impact fees, specifying the fee to be imposed for each type of system improvement (RCW 82.02.060). The schedule must be based on a formula or other calculation that incorporates, among other things:
- The cost of public facilities necessitated by new development,
- The cost of existing public facilities improvements,
- Adjustments to the cost of the public facilities for past or future payments made or reasonably anticipated to be made by new development,
- The availability of other public funding sources, and
- The method by which public facilities improvements were financed.
These rate studies should be updated periodically to reflect changing facilities costs. While local governments are not required to hold a public hearing before adopting or increasing impact fees, it may be prudent to do so, especially if the decision might be controversial.
Impact Fee Exemptions, Waivers, or Reductions
Local governments may provide exemptions, waivers, or reductions for the following developments:
- Low-income housing as defined in RCW 82.02.060(2);
- Early learning facilities (as defined in RCW 43.31.565) with exempted fees being paid following RCW 82.02.060(2), fee amounts restricted by RCW 82.02.060(3), or partial exemptions based on standards outlined in RCW 82.02.060(4);
- Development activities with “broad public purposes” (RCW 82.02.060); and
- Construction or expansion of a building that is not defined as a “development activity,” such as buildings constructed by a regional transit authority (defined in RCW 81.112) or those constructed as emergency homeless or domestic violence shelters as defined in RCW 70.123.020 and RCW 82.02.090(1)(b).
Reductions or waivers in impact fees for low-income housing, early learning facilities, and developments with a “broad public purpose” are permitted “provided that the impact fees for such development activity shall be paid from public funds other than impact fee accounts,” per RCW 82.02.060(2).
RCW 82.02.060(4) allows local governments to grant a partial exemption without requiring that exempted fees be paid by another public source under certain circumstances, such as when a developer builds a certain percentage of affordable units or records a covenant that the property will be permanently used for low-income housing.
Some jurisdictions reduce or waive certain types of impact fees for certain types of development, such as Accessory Dwelling Units (ADU), because the development places no significant burden on existing facilities. Below are examples of when jurisdictions waive impact fees for ADUs, low-income housing, or early learning facilities:
Collecting Impact Fees
Impact fees generally must be paid before construction begins. However, developers of single-family residential construction may request a deferral. In this instance, the impact fee money collected must be earmarked and retained in a special interest-bearing account, with separate accounts for every type of facility for which impact fees are collected (schools, fire, etc.). Any agency that imposes impact fees must provide an annual report on each of the accounts showing the source and amount of revenues as well as any improvements financed with this revenue (RCW 82.02.070).
For information on accounting requirements, see the GAAP BARS Manual, section 3.6.7 (no equivalent section in the Cash Basis BARS Manual).
Impact Fee Deferrals
All jurisdictions imposing impact fees under RCW 82.02.050 must have adopted, by September 1, 2016, a deferral system for the collection of impact fees for new, single-family detached and attached residential construction.
Upon developer request, these jurisdictions must delay payment of impact fees until the time of:
- Final inspection;
- Issuance of the certificate of occupancy or equivalent certification; and/or
- The closing of the first sale of the property.
Other statutory provisions include:
- The term of deferral is 18 months from issuance of the building permit.
- The amount of impact fees that may be deferred is determined by the fees in effect at the time the applicant applies for a deferral.
- Deferral of impact fees can be limited to the first 20 single-family residential building permits, annually, per applicant.
- An applicant seeking a deferral must grant and record a lien against the property in favor of the municipality in the amount of the deferred impact fee.
- Municipalities may collect reasonable administrative fees from applicants seeking a deferral.
- To limit the “spin-off LLC” issue, “applicant” is defined to include “an entity that controls the applicant, is controlled by the applicant, or is under common control with the applicant.”
- Limited grandfathering is authorized for an existing deferral system (in effect on or before April 1, 2015), even if it does not fully match the new state requirements, as long as all impact fees are deferred.
- Municipalities and school districts are authorized to institute foreclosure proceedings if impact fees are not paid.
- The Department of Commerce must develop an annual report, beginning December 1, 2018, on the payment and collection of impact fees from school districts, counties, and cities for single-family residential construction (RCW 43.31.980).
Below are selected examples of code provisions and deferral forms:
- Cheney Municipal Code Sec. 23.115.150 — May be deferred until final inspection or certificate of occupancy, whichever comes first.
- Enumclaw Municipal Code Sec. 19.24.050 — May be deferred until final inspection. The Deferred Impact Fees Information and Application (2017) includes a description of the deferral process, a sample lien agreement, and sample release of lien.
- Mercer Island City Code Sec. 19.17.080 (schools), 19.18.060 (parks), and 19.19.060 (transportation) — May be deferred until final inspection. The Impact Fee Deferral Application Form (2016) includes a description of the deferral process, a sample lien agreement, and a lien release.
- Mountlake Terrace Municipal Code Sec. 18.30.130 — May be deferred to no later than request for final inspection or 18 months from date of building permit issuance, whichever comes first. The Impact Fee Deferral Application (2016) is brief and seeks basic contact and project information.
- Sammamish Unified Development Code Sec. 21.08.050 — May be deferred until final inspection or closing of the first property sale, whichever comes first. The Applicant Declaration for Assessment and Collection of Impact Fees (2016) allows applicants to select when they will pay impact fees for platted and non-platted development, including deferral if desired.
- Sequim Municipal Code Sec. 22.20.010 — Deferral expires upon final inspection, certificate of occupancy, closing of the first property transfer, or 18 months after building permit issuance, whichever is earliest.
- Vancouver Municipal Code Sec. 20.915.075 — May be deferred until scheduling of final building inspection. The Impact Fee Deferral (Single-Family) Supplemental Application (2017) includes a lien agreement and application considerations.
Deadline for Expending Impact Fees
Impact fees must be expended or encumbered within 10 years of receipt unless there is an “extraordinary and compelling reason” for fees to be held longer, which must be documented in writing by the governing body (RCW 82.02.070).
RCW 82.02.080 requires each jurisdiction to refund the impact fees (plus earned interest) to the developer if:
- The impact fee is not expended or encumbered within 10 years of collection;
- The jurisdiction ends its impact fee program and the funds have not yet been expended or encumbered; or
- The developer does not proceed with the proposed development activity and requests a refund.
Examples of Impact Fee Provisions
Below are selected examples of impact fee ordinances, codes, and rate studies from cities and counties in Washington State.
Rate Studies and Calculations
Impact Fees for Multiple Capital Facilities — Cities
Transportation Impact Fees — Cities
Park Impact Fees — Cities
School Impact Fees — Cities
Fire Impact Fees - Cities
County Impact Fees
The examples listed below contain most of the provisions covered in the city samples.
Court Decisions
For selected decisions affecting impact fees, see Impact Fee Court Decisions.
Recommended Resources