The local political lexicon that justifies extortion of development for impact fees, SEPA fees and other fees that create high housing costs is “Development should pay for development.” What a sound byte for a politician! The problem is, development already does pay for development, and much more.
Look at this quote from yesterday’s article in The World:
“Sales tax revenue is down which is surprising because it usually is above our projections,” said Brad Posenjak, the county’s financial services manager. “So many of our revenues depend on construction and real estate and when those industries plateau or decline it has a direct effect on our revenue.” – Wenatchee World
When discussing impact fees, sales tax revenue is never a part of the discussion. Nobody mentions real estate excise tax, property tax impacts and even business and occupation tax impacts of new construction. With construction being the largest industry in the state, you bet construction has a positive impact on all those taxes. In fact, 52% of the tax impact due to the Housing Industry is from sales tax.
Real estate is resold, on average, every 7 years or so. Each time it is sold, excise tax is charged on the property and all its improvements. If the improvements are not made, that excise tax is not collected every 7 years. Neither is the sales tax on all the materials collected. Nor is the business and occupation tax collected on every activity, from cutting the wood, transporting it, processing it, wholesaling it, etc.
There is also no payroll paid to the craftsmen who build the project, most if it rolled back into local businesses and economies.
You see, when governments look at a problem, like the cost of providing sewer, they look at the issue in a way that allows them the best viewpoint towards extorting more money from the citizenry. So, in a case like sewer, they like to isolate the problem. They will say the connection fee does not cover the cost of the system and that must be made up for in impact fees. Such extortion is even better politically if you can get the voters to think someone else is going to pay it, like that dirty developer or that family that hasn’t even moved into the area yet. Of course, the family that is looking for a home might be your child’s school teacher who is now priced out of the market.
Politicians get the added benefit of having a new problem (that they created), lack of affordable housing, to solve. What solutions do we have? Subsidized housing through housing authorities, hud or proposals for waiving all the fees that make housing expensive for “affordable” housing providers. Once again, government takes taxpayers money and sends it off to buy more votes.
When development slows, it doesn’t mean the county is cutting back on the planning department. Development pays for much more than that:
“It hasn’t been determined whether there will be cuts made across the board or something else … But there isn’t one thing that will get us to that $1 million mark.”
According to the Building Industry Association of Washington, every multi-family unit generates 1.3 full time jobs and generates $8,628 in local and state tax revenue. Further, when complaining about the cost of housing, take into account the cost of regulation. Costs of taxes and regulations average 45% of a home’s price in Seattle.
So why is this hitting local governments so hard? Of the top ten economic industries in Washington, Housing is number two at $54.5 billion per year in output and is 10.7% of economic output. Non-residential construction is another $25.8 billion for an additional 5.1% of state economic output. These two sectors provide nearly 400,000 jobs! By the way, Agriculture & Food Processing is a $15.9 billion industry in Washington with 114,536 employees for comparison.
So, next time someone grouses about those nasty developers costing them money, please explain to them that development not only pays for development, but carries a huge tax burden beyond its costs and remember it wasn’t the developers who created sub-prime mortgages for folks who couldn’t afford them.
