The Spokane City Council has a matter of days to decide whether to adjust transportation impact fees before a moratorium on new construction in the Latah Valley area expires.

The Council could raise the fee to 600% or more of the current level. It also could go back to the drawing board and come up with a new citywide fee to spread out the burden.

Impact fees are one-time charges imposed by a local government to help pay for new or improved public infrastructure, paid by real estate developers on a per-project basis. 

Some developers say that while they support improving transportation infrastructure, they’re unhappy about the proportion of improvement costs the city could ask them to bear under four options for changes to impact fees presented to the Spokane Plan Commission at its Feb. 22 meeting.

The commission declined to make a recommendation to City Council based on the options presented. However, the concept of a uniform citywide impact fee was introduced at the meeting, and commission members expressed support for bringing the citywide option to the attention of Council in its findings.

In September, the city implemented a six-month construction moratorium along the busy U.S. 195 corridor, in the Latah and Grandview neighborhoods in west and southwest Spokane. The intent was to give itself time to reevaluate transportation impact fees. By then, the Council had determined that the current impact fee rates were insufficient to help pay for needed improvements in the area. Unless extended, that moratorium expires March 12.

Under Washington state’s Growth Management Act, transportation impact fees can be imposed on developers by municipalities to help finance infrastructure, which can include streets, curbs, sidewalks, fire hydrants, and sewer lines. Developers typically pass the fee on to residential homebuyers and commercial project buyers in a new development as part of the total price of the structure. 

Scott Krajack, land development director at Spokane-based RYN Built Homes LLC, says developers are generally supportive of transportation impact fees.

“It doesn’t help us sell homes when it’s difficult to get around and the intersections are dangerous,” Krajack says. “We all want to fix the existing problems. It’s just, who should pay for what share?”

Krajack says RYN Built started construction in mid-2022 on a new 20-acre development just west of the Eagle Ridge development, called The Summit. The development company constructed streets and sidewalks, sewer and water lines, and installed fire hydrants for the first of three phases of creating The Summit development. RYN Built also built a water booster station about a mile away, per city requirements for the development site. The temporary moratorium was passed shortly thereafter, before the company could start marketing lots for sale.

“We did that and paid for all that, and then they put a moratorium. To us, it’s completely unfair,” Krajack says.

He says it’s frustrating to have a development that’s ready for homes to start being built and be prevented from working on construction due to the moratorium. 

“It’s going to get more difficult if they extend the moratorium,” Krajack says. 

He hopes that if the city chooses to increase impact fees, The Summit will be grandfathered in at the current rate. 

Jim Frank is founder and CEO of Greenstone Corp., a Liberty Lake-based real estate development company known for developments such as Kendall Yards, just north of downtown Spokane, and the River District, in Liberty Lake. He asserts that a lack of planning and action on the part of the city led to insufficient infrastructure in many parts of Spokane, including the South Hill and Latah Valley areas.

“The city has a lot of existing deficiencies that have to be dealt with,” Frank says. “You can go through major portions of the South Hill, and you’ll find ... a significant number of neighborhoods that have no sidewalks. That’s because the city road standards at that time didn’t require sidewalks. An existing road that doesn’t have a sidewalk is substandard now. That substandard road is essentially a city problem. It’s not a new development problem.”

When the moratorium was enacted, Councilwoman Lori Kinnear, whose district encompasses Latah Valley and much of the South Hill, acknowledged that the city hadn’t done enough in the past.

“Councils and administrations from the 1990s-2000s knew that inadequate infrastructure in the area was a problem and did not act,” Kinnear said in a statement at the time the moratorium was enacted. “It will take years to complete all the work that needs to be done in the area.”

Harley Douglass, owner of Spokane-based real estate development company Harley C. Douglass Inc., says homebuyers ultimately absorb the cost of higher impact fee rates.

“How come those people should carry the burden?” Douglass asks. “Why should the new homebuyer carry the burden of the sins of the past?”

Douglass says the average lot price in a Harley C. Douglass Inc. development is currently more than $120,000. Under the impact fee increases in some options presented to the plan commission, he expects the development company will increase lot prices to an average of nearly $200,000 to recoup the cost of the fee increase.

Douglass says he offered an unorthodox solution to the city. He proposed creating a $5 million fund for improvements for 102-acre development he proposed near the Eagle Ridge development.

“I wanted to put it into an account that I wouldn’t have access to, that only would pay for projects in Latah Valley, because I didn’t trust them,” Douglass says.

Douglass says the city declined his proposal.

The impetus for changes to how the city assesses impact fees comes from the Washington state Department of Transportation. In a February 2020 letter to the city, WSDOT Eastern Region administrator Mike Gribner requested that the city pause residential development along the U.S. 195 corridor until it could address a “crisis in management safety within the corridor.”

The state has said it could restrict local access to U.S. 195 if the city doesn’t come up with a plan to address traffic safety issues in that part of town.

At its Feb. 22 meeting, the Spokane City Plan Commission discussed four options for making changes to traffic impact fees and associated service district boundaries.

Inga Note, senior traffic planning engineer for the city, says there are currently five districts in Spokane in which developers must pay transportation impact fees. Those fees vary depending upon the number and cost of transportation-related projects needed in the district.

One option Note presented to the plan commission would split off the U.S. 195 corridor to create a sixth district. Another option would expand the downtown city core district to include more of the South Hill, while the South Hill district would include the U.S. 195 corridor. Note says the remaining options are similar in that they both expand the city core district and create a sixth district for the U.S. 195 corridor.

In the south district, which includes the Latah Valley area, developers currently pay $1,051 per vehicle trip generated, a figure calculated through a formula that accounts for increased traffic due to increased population of an area, as well as eligible costs of all projects in the district. Under the proposed options, developers would pay at least six times that much. If the city decides to include improvements to two tunnels connecting West Thorpe Road to U.S. 195 among projects in that district, developers in the area could pay up to $11,425 fee per trip generated. 

The city could change the impact fee structure so that developers and homebuyers across Spokane pay equal amounts.

At the Feb. 22 meeting, Spokane Plan Commissioner Todd Beyreuther proposed that the commission urge City Council to consider such a uniform citywide impact fee.

The commission voted not to recommend that Council consider the proposed options, but noted in its findings that the council should kick the issue back to the transportation impact fee advisory committee so that the committee could consider a uniform citywide impact fee model.

Krajack says he believes most developers would be in favor of a citywide impact fee system.

“It benefits us, because it would keep a lower overall impact fee,” Krajack says.

A homogenous citywide impact fee isn’t unheard of in the state. Krajack says Olympia has a citywide model for its impact fees in which developers pay a flat fee regardless of the location of a new development within city limits.

“Let’s make it even for everyone, where there’s no competitive disadvantage,” Krajack says. “Everybody would put money into the same bucket, and it would be up to city staff, who would look at the list and decide where our greatest need is, which projects we want to do first.”

Greenstone’s Frank describes himself as a strong supporter of traffic impact fees in general.

“We started a traffic mitigation fee program (for River District) in Liberty Lake in 1994,” Frank says. “That’s part of the reason you see so many wonderful traffic improvements being built in the little city of Liberty Lake. They started it early, and everyone paid.”

Current and proposed impact fee district boundaries in Spokane are too small, Frank contends.

“You have to have districts large enough that they accommodate both the origin and destination of trips,” Frank says. “People drive from Latah Valley to Kendall Yards to go to work or have dinner. Why is Kendall Yards not partially responsible for that traffic impact? Why is only the homeowner in Latah Creek responsible for that?”