Housing affordability concerns are front and center in Fort Collins, and now it's time to update development fees.
Those housing concerns are influencing the conversations.
The median price of a market-rate, single-family home in Fort Collins is $616,000. And for a single-family home or duplex, current development fees might total around $60,000 for a 1,890-square-foot home.
For the past several months, the city has been working on reevaluating two types of fees:
- Impact fees, where developers pay to fund the impacts of growth on transportation, police and fire department services, parks and general government.
- Water supply requirement fees, which aim to make the water system sustainable amid growth, including water allotments and excess water use fees
At a Tuesday City Council work session, updates to both were up for discussion.
Council members looked at the fee increases through the lens of encouraging attainable and affordable housing, including more housing types, and what other cities are doing.
But the conversation revealed a clash: Some council members are uncomfortable with the methodology used to set the fees, but the Colorado Taxpayer's Bill of Rights is in play.
"I guess we just want it all: affordable housing, level of service and lower fees," council member Tricia Canonico said to city staff. "But something's going to have to give somewhere. ... None of us are really comfortable with moving forward, but you need an answer from us."
Council wants impact fees to help foster the housing Fort Collins wants
For the transportation fee, the city is proposing increases of 6% to 16%, depending on residential square footage. Commercial development increases would be 18%, with industrial up 62%.
For the fees to fund police, fire, parks and government, the increases would range from 1% to 28% for residential projects. Smaller units would have smaller rates of increase. For commercial development, a 32% increase is proposed. For industrial, it's 45%.
"It's just that it's such a big jump," said Mayor Jeni Arndt. "The schools right now are discussing closing schools because people can't afford to live here."
"Is there any other way to reduce costs and pay for the services?" she said. "We're closing schools, and we're seeing young families living across I-25. It's just really hard to increase the new fees this much."
"That's, I think, what you're hearing us try to work through."
Council member Kelly Ohlson warned that fee increases are needed to support infrastructure, and without them, it jeopardizes the city's general fund.
But some council members said the way the fees are structured is de-incentivizing the types of homes that Fort Collins needs now.
"I just don't think that methodology is serving us anymore," Mayor pro-tem Emily Francis said. "It is progressively more expensive to build smaller."
"If (we consider) what we're hearing from the community for our climate, for transportation and for housing, we need to focus more on building smaller," she said.
For example, she said, a 700-square-foot home's capital expansion fees would be $9.55 per square foot under the proposed change, compared with a 2,200-square-foot home's $6.32 per square foot.
She said that structure isn't reflective of the city's values because it makes it easier to build a larger home. Instead, she said fees should make it easier to build housing types the city wants to see.
"The way we're approaching this just isn't aligned with what our council priorities are, where we're seeing the community going," she said.
But Chief Financial Officer Travis Storin said state TABOR law impacts how fees can be set and the city is handcuffed when it comes to changing its methodology, which is based on levels of service needed.
"The methodology really starts with the level of service," he said. "When we build a unit of housing, (we look at) on average: Here's how many police calls it's going to create, here's how many fire calls it's going to create, the standard of parks that we like to build, water service, etc."
"Admittedly, TABOR does sort of put us in a corner in terms of the methodology and say we have to back it up by service," he said. "I'll concede to you feeling rather handcuffed."
Ohlson asked to see how all of Fort Collins' development fees compare with peer cities. Knowing how the city compares may influence council, he said.
"Right now, we look disproportionate, to me, on paper," council member Melanie Potyondy said, in reference to a study that showed Fort Collins' current impact fees far exceeding those of Boulder, Loveland, Greeley and Longmont.
What can the city do to reduce fees for affordable housing?
Part of this fee discussion is about what kind of fee credits or offsets the city could offer for income-restricted affordable housing development.
Right now in Fort Collins, any affordable housing project serving residents making 30% of the area median income can receive a fee credit of $14,000 per unit. That might amount to about half of the fee for one multi-family unit.
The focus has been on the lowest-income units, at 30%, because they are the hardest to get built, said Meaghan Overton, housing manager for the city.
"We know the cost to build housing has increased dramatically, more than 65% in the last five years alone," Overton said, explaining the philosophy behind fee credits for affordable housing. "The city can't control the price of lumber, we can't control the cost of land. There are very few places where any municipality can make it less expensive to build housing, and the fees we charge are one thing we do control."
Storin said TABOR fee law and the level-of-service methodology means the city can't increase fees for larger homes to offset lower fees for smaller homes or affordable housing. That's why cities offer fee credits.
Council member Julie Pignataro asked where other cities are seeing the most success increasing affordable and attainable housing through their fee credits. For example, some Colorado cities give credits to projects serving residents at 80% of AMI or have point systems that dictate rebates.
A future work session might be put on the slate before council is scheduled to vote on impact fees late this year to go into effect in January 2025.
City backs off drastically increasing water supply fee
City staff has scaled back a recommended water fee increase for developers, which would have amounted to a jump of 160% for the one-time water service requirement fee.
At the time, council members questioned whether government should be charging a market-based fee when it already has a robust water portfolio and isn't spending money to acquire water rights.
Since then, city staff said they changed their approach.
So instead of proposing a market-based fee of $179,500 per acre foot, staff now recommends a cost-based fee estimated at $71,800 for now. The exact number could change.
That compares with today's fee of $68,200 per acre foot. It's risen rapidly in recent years. The cost was $22,000 in 2021 and $6,500 until 2018.
For a typical single-family home, the fee would increase from $18,376 to $19,346, an analysis by Fort Collins Utilities staff shows.
For a 30,500-square-foot multifamily development with 64 units, it could cost $4,790, according to a staff presentation to council.
The fee would include an additional 20% for contingencies due to uncertainties with costs and 30% to address uncertainties due to climate change and development patterns.
It also applies to nonresidential development, like office space, retail businesses and restaurants.
If approved, a multi-family development within Fort Collins Utilities' service area would have the second-lowest fee compared with the two adjacent water districts, Fort Collins-Loveland and East Larimer County, and the cities of Loveland, Greeley and Westminster.
Compared to other water providers, Fort Collins doesn't require as much water to be dedicated to a multi-family project, and that contributes to the lower fee.
But a typical 2,800-square-foot restaurant development would have a higher fee than in those cities, about $89,000, compared with a range around $40,000 to $80,000 in other districts. That's because business category comes into play in the calculation, and restaurants use more water.
The $308 million Halligan Reservoir expansion will be paid for both by development fees and by current Utilities customers through their monthly bills.
Another change: The city wants to require water allotments for all nonresidential properties that currently don't have any because they were developed prior to 1984, when allotments were created. If a customer went over their allotment, they'd face an excess water fee.
Staff says the change would create consistency and fairness across the system and would help increase water conservation through programs available to customers.
This would affect about 1,000 customers, which is about one-third of all nonresidential customers. Some of those would be homeowners associations.
The city's surcharge is around $17 per 1,000 gallons of overuse. A city-provided "worst-case scenario" analysis shows that the change could amount to more than $900,000 in additional surcharges annually, with 18% of customers going over their allotments, seven customers facing surcharges above $20,000 and the average surcharge costing around $5,000.
Surcharges wouldn't go into effect right away so customers could have time to begin shifting their water use if they're in danger of going over their allotment, staff said.
What kinds of development fees are there?
Below are current development fees, estimated for a 1,890-square-foot single-family home or duplex:
Impact fees: These include the Transportation Capital Expansion Fee ($8,185), which funds transportation infrastructure, and five other capital expansion fees that fund police service, fire department service, community parks, neighborhood parks and general government ($10,310).
Plant investment fees: There are three fees supporting Fort Collins Utilities' infrastructure: water ($5,162), wastewater ($4,476) and stormwater ($1,402).
Electric capacity fee: This is another fee supporting Fort Collins Utilities infrastructure ($4,716).
Water supply requirement fee: A fee to cover the cost of buying in to Fort Collins Utilities and paying for future infrastructure. ($22,813)
Development review permit fees: Increases to these fees are not being considered at this time. ($2,792)
Total fee: $59,856
Source: City of Fort Collins
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