MISSISSIPPI LEGISLATURE

2001 Regular Session

To: Finance

By: Senator(s) Johnson (19th)

AN ACT TO PROVIDE FOR THE IMPOSITION OF A DEVELOPMENT IMPACT FEE BY A MUNICIPALITY BY ORDINANCE; TO PROVIDE FOR COMPUTATION OF THE PROPORTIONATE SHARE OF COSTS FOR NEW PUBLIC FACILITIES NEEDED TO SERVE NEW GROWTH AND DEVELOPMENT; AND TO LIMIT THE USES OF THE REVENUE COLLECTED FROM A DEVELOPMENT IMPACT FEE TO APPLICATION TOWARD THE COSTS OF SERVING NEW GROWTH AND DEVELOPMENT; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Short title.

This act shall be known and may be cited as the "Mississippi Development Impact Fee Act."

SECTION 2. Purpose.

The Legislature finds that an equitable program for planning and financing public facilities needed to serve new growth and development is necessary in order to promote and accommodate orderly growth and development and to protect the public health, safety and general welfare of the citizens of the State of Mississippi. It is the intent by enactment of this act to:

(a) Ensure that adequate public facilities are available to serve new growth and development;

(b) Promote orderly growth and development and require that those who benefit from new growth and development pay a proportionate share of the cost of Public facilities needed to serve new growth and development;

(c) Empower governmental entities which are authorized to adopt ordinances to impose development impact fees.

SECTION 3. Definitions.

As used in this act:

(a) "Affordable housing" means housing affordable to families whose incomes do not exceed eighty percent (80%) of the median income for the service area or areas within the jurisdiction of the governmental entity.

(b) "Appropriate" means to legally obligate by contract or otherwise commit to use by appropriation or other official act of a governmental entity.

(c) "Capital improvements" means improvements or equipment with a useful life of three (3) years or more.

(d) "Capital improvements plan" means a plan adopted pursuant to this act that identifies capital improvements for which development impact fees may be used as a funding source.

(e) "Developer" means any person or legal entity undertaking development.

(f) "Development" means any construction or installation of a building or structure, or any change in use of a building or structure, or any change in the use, character or appearance of land, which creates additional demand and need for public facilities.

(g) "Development approval" means any written authorization from a governmental entity which authorizes the commencement of a development.

(h) "Development impact fee" or "impact fee" means a charge or assessment, for the payment of money, imposed by a municipality or town, as a condition of development approval to fund/pay for the proportionate share of the costs of public infrastructure and equipment necessitated by and attributable to the new development. This term does not include:

(i) A charge or fee to pay the administrative, plan review, or inspection costs associated with permits required for development;

(ii) Connection or hookup charges;

(iii) Availability charges for drainage, sewer, water, or transportation charges for services provided directly to the development; or

(iv) Amounts collected from a developer in a transaction in which the governmental entity has incurred expenses in constructing capital improvements for the development if the owner or developer has agreed to be financially responsible for the construction or installation of the capital improvements, unless a written agreement is made pursuant to Section 10 of this act, for credit or reimbursement.

(i) "Development requirement" means a requirement attached to a developmental approval or other governmental action approving or authorizing a particular development project including, but not limited to, a rezoning, which requirement compels the payment, dedication or contribution of goods, services, land, or money as a condition of approval.

(j) "Fee payer" means that individual or legal entity that pays or is required to pay a development impact fee.

(k) "Governmental entity" means a town or city of local government that is empowered in this enabling legislation to adopt a development impact fee ordinance.

(l) "Impact fee." See "development impact fee."

(m) "Land use assumptions" means relevant land use projections of at least a five (5) years period and a description of the service area.

(n) "Level of service" means a measure of the relationship between service capacity and service demand for public facilities.

(o) "Manufactured home" means a structure, constructed according to HUD/FHA mobile home construction and safety standards, transportable in one or more sections, which, in the traveling mode, is eight (8) feet or more in width or is forty (40) body feet or more in length, or when erected on site, is three hundred twenty (320) or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein, except that such term shall include any structure which meets all the requirements of this subsection except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the secretary of housing and urban development and complies with the standards established under 42 USC 5401 et. seq.

(p) "Modular building" means any building or building component, other than a manufactured home, which is constructed according to standards contained in the Southern Standard Building Code, as adopted or any amendments thereto, which is of closed construction and is either entirely or substantially prefabricated or assembled at a place other than the building site.

(q) "Present value" means the total current monetary value of future payments.

(r) "Project" means a particular development on an identified parcel of land.

(s) "Project improvements" means site improvements and facilities that are planned and designed to provide service for a particular development project and that are necessary for the use and convenience of the occupants or users of the project.

(t) "Proportionate share" means that portion of the cost of system improvements determined pursuant to Section 7 of this act which are proportionate to the service demands and needs of the project.

(u) "Public facilities" means all capital items reflected in a capital improvements budget, except a landfill.

(v) "Service area" means any defined geographic area identified by a governmental entity or by intergovernmental agreement in which specific public facilities provide service to development within the area defined, on the basis of sound public policy, planning and/or engineering principals.

(w) "Service unit" means a standardized measure of consumption, use, generation or discharge attributable to an individual unit of development calculated in accordance with generally accepted engineering and/or planning standards for a particular category of capital improvements.

"Service unit" does not include alterations made to existing single family homes.

(x) "System improvements," in contrast to project improvements, means capital improvements to public facilities which are designed to provide service to a service area.

(y) "System improvement costs" means costs incurred for construction or reconstruction of system improvements, including design, acquisition, engineering and other costs directly attributable thereto. System improvements costs do not include:

(i) Repair, operation or maintenance of existing or new capital improvements;

(ii) Upgrading, updating, expanding or replacing existing capital improvements to serve existing development in order to meet stricter safety, efficiency, environmental or regulatory standards;

(iii) Upgrading, updating, expanding or replacing existing capital improvements to provide better service to existing development;

(iv) Administrative and operating costs of the governmental entity;

(v) Principal payments and interest or other finance charges on bonds or other indebtedness except financial obligations issued by or on behalf of the governmental entity to finance capital improvements included as part of the impact fee calculations.

SECTION 4. Minimum standards and requirements for development impact fees ordinances.

Governmental entities which comply with the requirements of this act may impose, by ordinance, development impact fees specifically recognized in this act as a condition of development approval on all developments.

(a) A development impact fee shall not exceed a proportionate share of the cost of system improvements determined in accordance with Section 7 of this act.

(b) A development impact fee shall be calculated on the basis of levels of service for public facilities adopted in the development impact fee ordinance technical report of the governmental entity that are applicable to existing development as well as new growth and development. The construction, improvements, expansion or enlargement of new or existing public facilities for which a development impact fee is imposed must be directly attributable to the capacity demands generated by the new development.

(c) A development impact fee ordinance shall specify the point in the development process at which the development impact fee shall be collected. The development impact fee may be collected no earlier than the final of a final plat, or the issuance of a building permit or a manufactured home installation permit, or as may be agreed by the developer and the governmental entity.

(d) A development impact fee ordinance shall be adopted in accordance with the procedural requirements of Section 6 of this act.

(e) A development impact fee ordinance shall provide a process whereby a governmental entity shall provide an impact fee schedule. The technical impact fee report shall include an explanation of the calculation of the impact fee including an explanation of factors considered under Section 7 of this act.

(f) A development impact fee ordinance shall include a provision for credits in accordance with the requirements of Section 9 of this act.

(g) A development impact fee ordinance shall include a provision prohibiting the expenditure of development impact fees except in accordance with the requirements of Section 10 of this act.

(h) A development impact fee ordinance may provide for the imposition of a development impact fee for system improvement costs incurred subsequent to adoption of the ordinance to the extent that new growth and development will be served by the system improvements.

(i) A development impact fee ordinance may exempt all or part of a particular development project from development impact fees provided that such project is determined to create affordable housing, provided that the public policy which supports the exemption is contained in a governmental public policy and provided that the exempt development's proportionate share of system improvements is funded through a revenue source other than development impact fees.

(j) A development impact fee ordinance shall provide that development impact fees shall only be spent for the category of system improvements for which the fees were collected and within the service area in which the project is located.

(k) A development impact fee ordinance shall provide for a refund of development impact fees in accordance with the requirements of Section 11 of this act.

(l) A development impact fee ordinance shall establish a procedure for timely processing of applications regarding development impact fees applicable to a project, and credits or reimbursements to be allowed or paid under Section 9 of this act.

(m) A development impact fee ordinance shall provide for appeals regarding development impact fees in accordance with the requirements of Section 12 of this act.

(n) A development impact fee ordinance technical report must provide a detailed description of the methodology by which costs per service unit are determined.

(o) A development impact fee shall include a description of acceptable levels of service for system improvements.

(p) A development impact fee ordinance shall include a schedule of development impact fees for various land uses per unit of development.

(q) After payment of the development impact fees or execution of an agreement for payment of development impact fees, additional development impact fees or increases in fees may not be assessed unless the number of service units increases or the scope or schedule of the development changes. In the event of an increase in the number of service units or schedule of the development changes, the additional development impact fees to be imposed are limited to the amount attributable to the additional service units or change in scope of the development.

(r) No system for the calculation of development impact fees shall be adopted which subjects any development to double payment of impact fees.

(s) A development impact fee ordinance shall exempt from development impact fees the following activities:

(i) Rebuilding the same amount of floor space of a structure which was destroyed by fire or other catastrophe, providing the structure is rebuilt and ready for the same type of occupancy within three (3) years of its destruction;

(ii) Remodeling or repairing a structure which does not increase the number of service units;

(iii) Replacing a residential unit, including a manufactured home, with another residential unit on the same lot, provided that the number of service units does not increase;

(iv) Placing a temporary construction trailer or office on a lot;

(v) Constructing an addition on a residential structure which does not increase the number of service units; and

(vi) Adding uses that are typically accessory to residential uses, such as tennis courts or clubhouse, unless it can be clearly demonstrated that the use creates a significant impact on the capacity of system improvements.

(t) A development impact fee will be assessed for installation of a modular building or manufactured home unless the fee payer can demonstrate by documentation such as utility bills and tax records, either:

(i) That a modular building or manufactured home was legally in place on the lot or space prior to the effective date of the development impact fee ordinance; or

(ii) That a development impact fee has been paid previously for the installation of a modular building, manufactured home or recreational vehicle on that same lot or space and the number of service units does not increase.

(u) A development impact fee ordinance shall provide for the calculation of a development impact fee in accordance with generally accepted accounting principles. A development impact fee shall not be deemed invalid because payment of the fee may result in an incidental benefit to owners or developers within the service area other than the person paying the fee.

SECTION 5. Intergovernmental agreements.

Governmental entities which are jointly affected by development are authorized to enter into intergovernmental agreements with each other for the purpose of developing joint plans for capital improvements or for the purpose of agreeing to collect and expend development impact fees for system improvements, or both, provided that such agreement complies with all applicable state laws. Governmental entities are also authorized to enter into agreements with the Mississippi Department of Transportation for the expenditure of development impact fees pursuant to a developer's agreement under Section 14 of this act.

SECTION 6. Procedure for the imposition of development impact fees.

(1) A development impact fee shall be imposed by a governmental entity in compliance with the provisions set forth in this section.

(2) At least one (1) public hearing shall be held to consider adoption, amendment, or repeal of the impact fee technical report and ordinance. Two (2) notices, at least one (1) week apart, of the time, place and purpose of the hearing shall be published not less than fifteen (15) nor more than thirty (30) days before the scheduled date of the hearing, in a newspaper of general circulation within the jurisdiction of the governmental entity. A second notice of the hearing on adoption of the impact fee technical report and ordinance, containing the same information, shall be published in the same manner at least seven (7) days before the scheduled date of the hearing. Such notices shall also include a statement that the governmental entity shall make available to the public, upon request, the impact fee technical report, and a statement that any member of the public affected by the impact fees shall have the right to appear at the public hearing and present evidence regarding the proposed impact fee ordinance. The governmental entity shall send notice of the intent to hold a public hearing by mail to any person who has requested in writing notification of the hearing date at least fifteen (15) days prior to the hearing date, provided that the governmental entity may require that any person making such request renew the request for notification, not more frequently than once each year, in accordance with a schedule determined by the governmental entity, in order to continue receiving such notices.

(3) If the governmental entity makes a material change in the impact fee schedule, further notice and hearing shall be provided before the governmental entity adopts the revision and notice of the proposed change given as set forth in subsection (2) of this section.

(4) Nothing contained in this section shall be construed to alter the procedures for adoption of an ordinance by the governmental entity. Provided, however, a development impact fee ordinance shall not be adopted as an emergency measure.

SECTION 7. Proportionate share of determination.

All development impact fees shall be based on a reasonable and equitable formula or method under which the development impact fee imposed does not exceed a proportionate share of the costs incurred or to be incurred by the governmental entity in providing new or expanded public facilities to serve the new development.

SECTION 8. Development impact fee technical report.

(1) Each governmental entity intending to impose a development impact fee shall prepare a capital improvements plan as appropriate for the specific impact fee categories.

The development impact fee report shall contain all of the following:

(a) As appropriate, an analysis of the total capacity, the level of current usage, and commitments for usage of capacity of existing capital improvements benefiting new growth, which shall be prepared by a qualified professional planner or by a qualified engineer licensed to perform engineering services in this state;

(b) A description of relevant land use assumptions affecting the governmental entity;

(c) A definitive table establishing the specific level or quantity of use, consumption, generation or discharge of a service unit for each category of system improvements and an equivalency or conversion table establishing the ratio of a service unit to various types of land uses, including residential, commercial or industrial as appropriate;

(d) A description of all system improvements and their costs necessitated by and attributable to new development in each service to provide a level of service not to exceed the level of service adopted in the development impact fee ordinance.

(e) The total number of service units necessitated by and attributable to new development within each service area based on projected growth and calculated in accordance with generally accepted engineering or planning criteria;

(f) The projected demand for system improvements required by new service units projected over a reasonable period of time not to exceed twenty (20) years, but no less than five (5) years; and

(g) If the proposed system improvements include the improvement of public facilities under the jurisdiction of the State of Mississippi or another governmental entity, then an agreement between governmental entities shall specify the reasonable share of funding by each unit, provided the governmental entity authorized to impose development impact fees shall not assume more than its reasonable share of funding joint improvements, nor shall the agreement permit expenditure of development impact fees by a governmental entity which is not authorized to impose development impact fees unless such expenditure is pursuant to a developer agreement under Section 15 of this act.

(2) The governmental entity imposing a development impact fee shall update the development impact fee report at least once every five (5) years. The five-year period shall commence from the date of the original adoption of the capital improvements plan. The updating of the capital improvements plan shall be made in accordance with procedures set forth in this section.

(3) The governmental entity must annually adopt a capital improvements budget.

SECTION 9. Credits.

(1) Credit or reimbursement shall be given for the present value of any construction of system improvements or contribution or dedication of land or money required by a governmental entity from a developer for system improvements identified in the development impact fee report. Credit or reimbursement shall not be given for project improvements.

(2) If a developer is required to construct, or contribute system improvements identified in the development impact fee report, the developer shall receive a credit on the project's impact fees. If additional credit is due, he will be reimbursed by the jurisdiction or from development impact fees paid by future development which impacts the system improvements constructed.

(3) If credit or reimbursement is due to the developer pursuant to this section, the governmental entity shall enter into a written agreement with the fee payer, negotiated in good faith, prior to the construction, funding or contribution. The agreement shall provide for the amount of credit or the amount, time and form of reimbursement.

SECTION 10. Earmarking and expenditure of collected development impact fees.

(1) An ordinance imposing development impact fees shall provide that all development impact fee funds shall be maintained in interest-bearing accounts, within the capital projects fund, for each category of system improvements. Accounting records shall be maintained for each category of system improvements and the service area in which the fees are collected. Interest earned on development impact fees shall be considered funds of the account on which it is earned, and shall be subject to all restrictions placed on the use of development impact fees under the provisions of this act.

(2) Expenditures of development impact fees shall be made only for the category of system improvements and within or for the benefit of the service area for which the development impact fee was imposed and as authorized in this act. Development impact fees shall not be used for any purpose other than system improvement costs to create improvements to serve new growth.

(3) As part of its annual audit process, a governmental entity shall prepare an annual report describing the amount of all development impact fees collected, appropriated, and spent during the preceding year by category of public facility and service area.

(4) Collected development impact fees must be expended within six (6) years from the date they were collected, on a first-in-first-out (FIFO) basis unless due to extenuating circumstances which would be noted. Any funds not expended within the prescribed time(s) shall be refunded pursuant to Section 11 of this act.

SECTION 11. Refunds.

(1) Any governmental entity which adopts a development impact fee ordinance shall provide for refunds upon the request of an owner of property on which a development impact fee has been paid as shown by transaction receipt if:

(a) Service is available but not provided;

(b) A building permit or permit for installation of a manufactured home is denied or abandoned; or

(c) The governmental entity, after collecting the fee when service is not available, has failed to appropriate and expend the collected development impact fees pursuant to Section 10 of this act.

(2) When the right to a refund exists, the governmental entity shall send a refund to the fee payer within ninety (90) days after it is determined by the governmental entity that a refund is due.

(3) Any person entitled to a refund shall have standing to bring suit in chancery court for a refund under the provisions of this act if there has not been a timely payment of a refund pursuant to subsection (2) of this section, and if successful shall be entitled to recover attorney fees and costs expended in bringing suit.

SECTION 12. Appeals.

(1) A governmental entity which adopts a development impact fee ordinance shall provide for administrative appeals by the developer or fee payer from any discretionary action or inaction by or on behalf of the governmental entity.

(2) A fee payer may pay a development impact fee under protest in order to obtain a development approval or building permit. A fee payer making such payment shall not be estopped from exercising the right of appeal provided in this act, nor shall such fee payer be estopped from receiving a refund of any amount deemed to have been illegally collected.

SECTION 13. Collection.

A governmental entity may provide in a development impact fee ordinance the means for collection of development impact fees, including, but not limited to:

(a) Additions to the fee for reasonable interest for non-payment or late payment;

(b) Withholding of the building permit or other governmental approval until the development impact fee is paid; and

(c) Withholding of utility services until the development impact fee is paid.

SECTION 14. Other powers and rights not affected.

(1) Nothing in this act shall prevent a town or city from requiring a developer to construct reasonable project improvements in conjunction with a development project, otherwise lawfully authorized by municipal ordinance and state law.

(2) Nothing in this act shall be construed to prevent or prohibit private agreements between property owners or developers, the Mississippi Department of Transportation or governmental entities in regard to the construction or installation of system improvements included in the development impact fee technical report or providing for credits or reimbursements for system improvement costs incurred by a developer, including interproject transfers of credits, or providing for reimbursement for project improvements which are used or shared by more than one (1) development project.

(3) If it can be shown that a proposed development will have a direct impact on a public facility under the jurisdiction of a public body or political subdivision of the State of Mississippi, then any such agreement as provided for in subsection (2) of this section, shall include a provision for the allocation of impact fees collected from the developer for the improvement of the public facility by the political subdivision affected.

(4) Nothing in this act shall be construed to create any additional right to develop real property or diminish the power of towns or cities to regulate the orderly development of real property within their boundaries.

(5) Nothing in this act shall work to limit the use by governmental entities of the power of eminent domain or supersede or conflict with requirements or procedures as specified by law for local improvement districts or general obligation bond issues.

SECTION 15. Transition.

(1) The provisions of this act shall not be construed to repeal any existing laws authorizing a governmental entity to impose fees or require contributions or property dedications for capital improvements.

(2) All existing ordinances imposing development impact fees shall be brought into conformance with the provisions of this act within one (1) year after the effective date of this act. Impact fees collected and developer agreements entered into prior to the expiration of the one-year period shall not be invalid by reason of this act.

(3) After adoption of a development impact fee ordinance, in accordance with the provisions of this act, notwithstanding any other provision of law, development requirements for system improvements shall be imposed by governmental entities only by way of development impact fees imposed pursuant to and in accordance with the provisions of this act.

(4) Notwithstanding any other provisions of this act, that portion of a project for which a valid building permit has been issued or construction has commended, prior to the effective date of a development impact fee ordinance, shall not be subject to additional development impact fees so long as the building permit remains valid or construction is commenced and is pursued according to the terms of the permit or development approval.

SECTION 16. This act shall take effect and be in force from and after July 1, 2001.