Impact fees on new homes and businesses hit another speed bump on way to final vote

Impact fees hit a speed bump Tuesday as Horry County Council members continued to debate the measure en route to enacting them for the first time.

Still, the fees — a one-time charge on new homes, hotels, apartment buildings and businesses to help pay for infrastructure — cleared an important hurdle. They face one more vote in July before they are finally enacted.

Supporters see impact fees as a crucial tool to addressing the county’s rapid growth in recent years, a way to help pay for new roads, fire stations and other needs.

On Tuesday, impact fees passed by an 11-0 vote, with one council member, Tyler Servant, absent from the meeting.

But that vote only came after a heated debate in which members discussed lowering the fees, or even delaying them longer. While council members voted unanimously to pass the measure onto a third and final vote in July, members disagreed sharply on how much the fees should be.

County staff and outside attorneys gave council members two options: Vote to approve the maximum impact fees, collecting from all spending categories, or vote to approve a smaller impact fee, collecting only from the transportation and roads category.

With the full impact fees for all categories, the county would collect about $22 million annually and about $209 million over a decade. Collecting fees for transportation and road projects only would yield significantly less.

The impact fees Horry County is likely to implement would charge:

  • $4,838 for a new single-family home, or $3,113 if transportation-only fees were collected;

  • $3,274 for a unit in multi-residential housing, or $1,836 if transportation-only fees were collected;

  • $2,587 per new hotel room, or $1,645 if transportation-only fees were collected;

  • $7,439 per 1,000 square feet of a new retail business, or $5,034 if transportation-only fees were collected;

  • $2,857 per 1,000 square feet of a new office building, or $1,918 if transportation-only fees were collected;

  • $1,155 per 1,000 square feet of a new industrial business, or $774 if transportation-only fees were collected;

  • $5,728 per 1,000 square feet of a new institutional building, or $3,845 if transportation-only fees were collected.

Additional impact fees for stormwater infrastructure could be added to all of those totals, but vary depending on which watershed a project falls in. In the Waccamaw watershed, which encompasses a highly populated portion of eastern Horry County, for example, impact fees on a new single family home could be as high as $6,000 and as high as $8,400 per 1,000 square feet of new retail space.

Those total fees are then broken down into categories for what kinds of projects they can be used on. An impact fee charged on a new single-family home, for example, may be split up among transportation, stormwater, public safety and recreation projects, with differing amounts going to each bucket.

In addition, Horry County leaders will have to follow a number of specific rules in order to use the impact fees it will begin collecting in the near future. South Carolina limits impact fee spending to infrastructure projects, and mandates the fees be spent in the area they were collected within three years. That means that if a developer builds a new subdivision of homes outside of Conway, for example, county officials will have to spend the revenue collected from that project in the same area on one of the specified infrastructure projects outlined in the 2019 study within a three-year window.

A heated debate

Even with the transportation-only impact fees, some council members were concerned the fees on new retail businesses were too high.

“I appreciate you all working on this, it just doesn’t sound very friendly to entrepreneurs,” said Council member Cam Crawford, who represents the Socastee area.

Crawford also raised a concern that impact fees can’t pay for things that residents complain about, including resurfacing roads and hiring additional public safety officers.

“The public should know we’re not resurfacing roads, we’re not cleaning ditches, you’re not going to get a lot of extra police and fire service,” he said. “It is ancillary at best.”

Council member Danny Hardee, who represents a large portion of western Horry County, asked why the county couldn’t implement impact fees in all spending categories at a low level and raise them later.

“Can’t we visit it every quarter? Phase this one out, add this one in?” Hardee asked. “Let’s put it in place and we’ll revisit every three months. I don’t see why it has to be etched in stone.”

Both County Attorney Arrigo Carotti and other attorneys who advised the county said it’s harder legally to collect from all spending categories at a lower fee level, than to only collect from one category or another. That’s due to how state law is written, Carotti said.

Crawford then noted that builders would likely pass impact fees on to buyers, which could make a purchasing a new home or building a new business prohibitively expensive.

“The developers are just going to raise the prices,” Crawford said.

“So be it,” retorted Harold Worley, who represents the North Myrtle Beach area.

That discussion, and other comments by council members trying to follow along, then sparked fears that the council would once again delay enacting the fees.

“If you have questions, talk to staff, we don’t need another committee,” Worley warned at one point. “That’s a kill pill, a kill pill.”

Council Chairman Johnny Gardner, who last week said he believed impact fees would pass, said after Tuesday’s meeting that the debate “was wild” but that the council did manage to send the measure on to a third and final vote. He also said the council may have to be open to adopting a lower fee at first and raising it later.

“We accomplished what we wanted to do, which was get second reading done,” he said. “I think there may be a reduction in it and that’s OK.”

How we got here

Horry County leaders have debated impact fees for decades.

Then, in 2018, county leaders put the matter to a public referendum, and 72% of voters supported the fees. Afterward, county leaders hired a consultant to determine how large the fees could be and to prepare a list of projects the money could be spent on. The firm completed that work in December 2019, and County Council members moved toward enacting the fees in the spring of 2020.

But then the COVID-19 pandemic struck, and leaders opted to put impact fees off until the virus was less of an immediate threat. Fast forward to the county’s budget discussions this spring, and leaders moved to tie impact fees to the budget they have to pass by June 30, all but assuring a vote on the matter.

After a formal hearing on impact fees last week, Gardner sounded a confident tone.

“This is going to happen,” he said.

On Tuesday, it did happen, but not before hitting a significant speed bump.

At a hearing last week, developers and homebuilders also raised concerns about impact fees. Jason Repak, president of Hudson Homes and head of the Horry Georgetown Home Builders Association, said impact fees would drive up the cost of housing in the county.

“Adding additional impact fees to these current costs could diminish the demand for new homes in our area. Doing so would be extremely detrimental to the long term revenue of this county,” he said.

The council will have another public hearing on the measure in mid-July.

“We zigged, and we zagged,” Gardner said about the meeting. Still, he said, he’s looking to push impact fees into existence: “This puts the burden on the people causing the impact.”