Res 1990-047 - Laserfiche WebLink

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2 INTRODUCTION Senate Bill 336 (SB336) was originally adopted June 20, 1987, and has been codified as Chapter 395, Texas Local Government Code. The law applies to fees for water, sewer, storm water, and drainage and flood control, and permanent local roads. San Marcos has changed such fees for water and wastewter since 1984. The state law requires compliance by June 20, 1990 in order to continue to assess and collect impact fees. Impact fees (previously known in San Marcos as capital recovery fees) are a method for cities to help fund major off-site facilities through fees assessed and collected from new development. Over a period of time fee revenues accumulate and can be used for cash funding of capital improvement expansions. Impact fees are popular with many cities and towns because they can be used to reduce the need for utility rate or tax increases necessitated by increased bond financing. Impact fees also diversify the sources of infrastructure financing and can help improve municipal bond ratings. Cities are required to develop planning information and a capital improvements program (CIP) on which the fees are based, and to hold public hearings prior to enacting a fee ordinance. The law also contains penalty provisions for non-compliance and for overcharges. Of critical concern now is the pending deadline for updating impact fees. If existing fee programs are not brought into compliance with by June 20, 1990, they may be subject to challenge as illegal fees, thus jeopardizing all impact fee revenues from that time forward. GENERAL GUIDELINES FOR IMPACT FEES The reasonableness of impact fees is usually determined by the "rational nexus test". The major tenets of the rational nexus test are as follows: 1. An impact fee is a valid exercise of municipal police power if the fee is primarily regulatory, i. e., there must be a reasonable connection between the need for additional facilities and the growth resulting from new development (impact fees cannot be used to improve existing facilities to a level which is necessary to support existing development, or for maintenance); 2. The fees charged must not exceed a pr~portionate share of the cost incurred or to be incurred in accommodating development paying the fee (it becomes an invalid tax when