The “Ins and Outs” of School Impact Fees

There has been a lot of buzz recently about the imposition of impact fees. For many jurisdictions, impact fees are a potential, but often unutilized, revenue source to help pay for sorely needed public facilities. For the development community, it is another expenditure to factor into their financial “go/no go” decisions.

Some of you may be asking yourself, “What is an impact fee?”

In short, impact fees are one-time charges assessed by a local government against a new development project to help pay for new or expanded public facilities that will directly address the increased demand created by that development. 

The State’s Growth Management Act, or GMA, authorizes counties, cities, and towns planning under the GMA to impose impact fees (RCW 82.02.050-.110) for the following types of public facilities:

• Public streets and roads
• Publicly-owned parks, open space, and recreation facilities
• School facilities
• Fire protection facilities

In Washington State, impact fee programs are most commonly used to collect revenues for transportation-related projects. Local governments, however, are increasingly looking into how impact fees can be applied to other types of capital projects. I frequently receive questions in regards to school impact fee programs, which is why I am writing about this issue.

It is interesting to note that while school districts are responsible for expending the impact fees, the GMA does not authorize them to collect the fees. Instead, it is a city, town, or county that collects the impact fee on behalf of a school district.

School Impact Fees – Do’s and Don’ts

Here are a few basic principles about impact fees, whether for school facilities or for the other categories authorized by GMA. 

For Capital Facilities Only. Impact fees may only be collected to pay for public capital facilities, and not for operational and maintenance costs. For example, impact fees could be used to help pay for a new school building, but not to fund teacher salaries or classroom supplies.

Impacts Must be Related to New Growth. Impact fees may only be used to pay for new facilities needed as a result of new development and may not be used to correct existing deficiencies. For example, a school district may use the impact fees from a development to only pay for construction of new classrooms at a specific school(s) to accommodate the increased enrollment expected from that specific development. 

More than One Funding Source. School districts must have additional funding sources and may not rely solely on impact fees to fund the improvements (RCW 82.02.050).

Connected to Comprehensive Plans. School impact fees may be used only for capital facilities that are addressed within a Comprehensive Plan’s capital facilities element that has been adopted by a local government under the GMA (RCW 82.02.050(4) and RCW 82.02.090(7)). 

A Deadline for Spending Funds. 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 (RCW 82.02.070).

Coordination and Cooperation Required. School impact fee programs/processes require a high level of cooperation/coordination between a school district and the local government administering the impact fee program. This cooperation should take the form of an Interlocal Agreement (ILA) that specifically identifies each party’s role (one example being the ILA between Issaquah and the Issaquah School District).

Calculating School Impact Fees

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 many factors, including: a total list of needed school facilities and associated costs, an assessment of which capital facilities are needed to correct existing deficiencies vs. addressing new growth, and the availability of other public funds (calculation formula examples include Arlington and Bellevue).

Most jurisdictions with this type of impact fee rely on the school district to conduct the school-related, capital facility project planning and cost estimating, but the jurisdictions will calculate the fee themselves. However, a local government should always understand and feel comfortable with the school district’s analysis and the underlying rationale for the new or expanded school facilities that are needed to accommodate new growth.

Several formulas reduce the impact fee amount by 50% right off the top, while some local governments actually set a maximum fee amount (Pierce County is an example of the latter approach). While it is a local policy decision in the end, I would caution against an automatic reduction or imposition of a cap. Instead, I would recommend that a local government evaluate several factors and local conditions when considering whether to reduce the calculated school impact fee amount.

What Amount is Too Much or Too Little?

Unfortunately, there is no set answer to that question. Instead, it is up to each local government to determine the actual impact fee amount to be assessed, based on the school district’s future capital needs, compliance with the GMA, and an assessment of local conditions. To give you a sense of dollar amounts, however, a recent MRSC search of school impact fees from 10 local governments (covering 34 schools districts) found the following distribution.

The highest school impact fee amount was $10,822/single-family dwelling unit (Sammamish and King County for the Lake Washington School District), while the lowest was $229/multi-family dwelling unit (Bellingham for the Bellingham School District).

School impact fees are a revenue source that is worthy of consideration, especially if your local school facilities are not keeping up with growth demands. But there are other factors to consider as well. Bottom line: whether or not a local government will impose school impact fees is a discretionary decision for that jurisdiction's elected officials to consider.

Questions? Comments?

For more details about impact fees, please visit MRSC's page on Impact Fees.

If you have had experience with school impact fees in your community, please leave a comment below or contact me directly at sbutler@mrsc.org. If you have questions about other local government issues, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772.