Impact and Other Fees – the Hidden Tax on Housing

Property taxes are not the only taxes that go along with home ownership but most of them are disguised as fees.

Palm Coast, FL – August 19, 2010A new Seagate-built home in Indian Trails was recently purchased for $146,000. That’s $93.41 per square foot for this 3 bedroom and 2 bath home constructed on a traditional 10,000 square foot Palm Coast lot. Certainly the new homeowner knows how much their monthly mortgage payment will be. It will likely include an escrow amount to cover estimated property taxes and insurance. But they probably do not know how much of the cost of their new home went towards hidden taxes.

Impact fees are based on the concept that “growth should pay its own way.” They grew out of the reduction in Federal and State grants to local governments and the growth of the tax revolution in the late 1970s. Originated as capital recovery fees to fund water and wastewater facilities, they quickly grew to include several non-utility facilities such as roads, schools, parks, fire and police.
The cost of the new Indian Trails home included thousands of dollars in impact fees, utility connection fees, and building department fees for plan review and inspections. Fees totaling $16,808.49 were included in the selling price. That’s 11.5% of the purchase price. They included:
  • Parks Impact Fee – $1,230.83
  • School Board Impact Fee – $3,600.00
  • Transportation Impact Fee – $3,565.34
  • Water and Sewer hookup – $7,770.00
If it walks like a duck
The distinction between a fee and a tax is lost on me. If it’s a lawful taking of funds by the government, it’s a tax; plain and simple. But this is one tax that keeps on taking. Documentary stamps are higher at closing. Property insurance based on replacement cost is higher, not just once but every year. Higher mortgage debt brings on higher mortgage payments – every month. Of course, the new homeowner will pay higher property taxes too.
And there’s more; storm water management fees and swale maintenance charges. If you live in a planned community, there are Property Owners Association assessments. If your planned community has a Community Development District, there are additional CDD assessments. In some cases, CDD assessments include debt retirement for loans the developer used to build the community’s infrastructure. You may even be charged for improvements outside your community. Grand Haven residents are assessed $30.40 annually to pay for the construction of Colbert Lane which is outside the CDD area.
A rising tide lifts all boats
In a growing area, the cost of new construction drives real estate values, including existing home sales prices, which, in turn, drive assessments. The “save our homes amendment” shields homesteaded owners (voters) from major assessment increases. But those who buy an existing home are, in effect, paying more for their purchase by the amount of imputed fees (fees included in the price of a comparable new home). The recipient of this benefit is the seller. Not surprisingly, that person is also a voter.
Regressive tax
Most fees are fixed, accounting for over 11% of a $146,000 home but only about 2% of an $850,000 home.
Note: A condensed version of this article appeared today in the Palm Coast Observer.
2 replies
  1. tom Foley
    tom Foley says:

    hidden taxes

    What, if any, is the impact of these disguised taxes, i.e. "FEES" ?
    Are they deductible on a Fed Tax Return/Report?
    Or on a State tax return?
    Are they reportable to "Tim Geitner’s
    Will "Timmeys" Dept allow a deduction on These "fees"?

  2. Jim Sheehan
    Jim Sheehan says:

    End the fees!

    I’m surprised the builders haven’t banded together to lobby the county and Palm Coast to end or at least cut back these fees. It’s hard enough to build a new home and compete against an existing home in price without an additional $16,000-$17,000 impact fees added on.

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