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Sept. 1 Deadline Looming for Adoption of Your Impact Fee Deferral System

April 21, 2016  by  Steve Butler
Category:  Impact Fees

Sept. 1 Deadline Looming for Adoption of Your Impact Fee Deferral System

During the 2015 legislative session, the Washington State Legislature enacted a new law (ESB 5923) that requires counties, cities, and towns collecting impact fees to adopt a deferral system for new single-family detached and attached residential construction. This law gave local governments until September 1, 2016 to develop a deferral system that best meets statutory requirements and local objectives. While that deadline seemed far off in the future when the law was first adopted, September 1 is now right around the corner.

Recap of Impact Fee Deferral System Requirements

Counties, cities, and towns must adopt a deferral system for the collection of impact fees that, upon developer request, delays payment until the time of:

  1. Final inspection;
  2. Issuance of the certificate of occupancy or equivalent certification; or
  3. The closing of the first sale of the property.

It is up to each community to decide on which one or more of the three options it wants to use. The new law allows local choices on other issues, such as: (a) whether to impose a reasonable administrative fee and (b) whether to limit the deferral to the first 20 building permits or to a greater number of building permits. No action is required for those counties, cities, and towns that don’t impose impact fees. Other highlights of this law may be found in my July 7, 2015 blog post.

Local Examples of Impact Fee Deferral Systems

Several local governments have already responded to the new law, either by developing a new impact fee deferral system or reviewing/amending their existing program. Here are some examples you may wish to review prior to preparing your own deferral system:

  • Mercer Island – New deferral system adopted after enactment of new state law. Deferrals are limited to first 20 single-family dwelling unit building permits per year. City will not approve final inspection until impact fees paid in full.
  • Olympia – Existing deferral system that is “grandfathered in,” as allowed by the new law. No limit on number of applications with deferred fees. Fees must be paid in full prior to conducting a final building inspection, although no deadline is given in terms of months.
  • Sequim – An ordinance adopting a new deferral system after enactment of new state law. Deferrals are limited to first 20 single-family dwelling unit building permits per year. No final inspection approval, certificate of occupancy, or hookups to water & sewer issued or made until full payment is received. Deferral expires at the earliest of:
    • Final inspection;
    • Issuance of certificate of occupancy;
    • Time of closing of the first transfer of property after issuance of the building permit; or
    • 18 months after the building permit is issued.

Tips and Suggested Actions

As I suggested in my earlier blog post on this topic, local governments would be wise to:

  • Deliberately think about and decide upon those local options that would be best for your community.
  • For municipalities that already have an impact fee deferral process, review it carefully for consistency with the new law’s requirements and amend your existing system if necessary.
  • If you are just beginning to focus on developing an impact fee deferral program, get organized and prepare a work plan/schedule for what needs to happen (and when) between now and September 1.
  • Don’t forget to send a draft version of your proposed deferral system to the Washington Department of Commerce for review at least 60 days before your adoption date.

If you have not yet begun working on your impact fee deferral program, there is still time left. But I would recommend you get started right away, in order to give yourself enough time to meet the September 1, 2016 deadline.

More information about this topic may be found on our Impact Fee Payment Deferral Programs webpage.

MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Steve Butler

Steve joined MRSC in February 2015. He has been involved in most aspects of community planning for over 30 years, both in the public and private sectors. He received a B.A. from St. Lawrence University (Canton, New York) and a M.S. in Urban and Regional Planning from the University of Wisconsin-Madison. Steve has served as president of statewide planning associations in both Washington and Maine, and was elected to the American Institute of Certified Planner’s College of Fellows in 2008.



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