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The Honolulu Advertiser

Posted on: Friday, July 12, 2002

Developers' fees may ease growth

By Scott Ishikawa
Advertiser Staff Writer

The city's plan to charge developers fees for regional roads in 'Ewa, less than a month after a state land board ordered a developer to have schools built near its new Mililani project, is an effort by government to guarantee improvements are made before more growth is permitted, officials said yesterday.

It also indicates that government officials are desperate to come up with new ways of getting such necessities as roads and schools in place at a time when city and state tax revenues are down.

The proposed impact fee on 15,000 'Ewa housing units, plus new retail, industrial, office and hotel space, comes after the state Land Use Commission last month placed stricter conditions on Castle & Cooke Homes' planned Koa Ridge/Waiawa development to have schools built in a more timely manner.

City Council Zoning Committee chairman Duke Bainum, who helped introduce a measure to implement an impact fee system for 'Ewa, said government is keeping a closer eye on development than it did in the 1990s, when people began moving to Central and Leeward O'ahu.

"Back then, you had the state and city in a competition on who could build more houses; people were giddy and making big deals, but not looking at the details," Bainum said. "Even the developers realize now that its difficult to sell a house when it takes two hours to drive into town in the morning."

City Council chairman John De-Soto, who co-wrote the measure with Bainum, said the proposed impact fee system could set a precedent in future developments, but that it would more likely be determined on a case-by-case basis.

"If a community's traffic and education system is working, I don't see a need for it," DeSoto said. "But if you have traffic problems such as those in 'Ewa, maybe this is the way to go."

A group made up of nine 'Ewa developers and landowners on Wednesday said they support the Council bill to place a standard fee on each of the residential units to be built in the 'Ewa area, as well as fees for new retail, industrial or office space and hotel rooms.

The 'Ewa developers have agreed to pay 20 percent of the costs — what would have been the state's share — of six badly needed road projects in an area where the population is estimated to reach 100,000 within the next decade.

The agreement, contained in a City Council bill that is supposed to be finalized in the fall, could also do away with behind-the-scenes dealing and haggling in which developers previously made concessions with government to get homes built.

"We like it because it's a rational formula that all parties have been working on for a long time," said Dan Davidson of Land Use Research Foundation and coordinator for the 'Ewa developers group. "The bill clearly states what the impact fee numbers are, and which road projects would be funded through the process."

An impact fee system would also hopefully lead to faster construction of area roads and highways needed to deal with growth, officials said.

"We hope this will lead to the timely development of these highway projects," said state transportation director Brian Minaai.

Under the plan, the developers would pay $38 million of $194 million in road construction costs. Federal money would pay for the rest.

The road projects include new H-1 Freeway interchanges in Kapolei and Makakilo, construction of a north-south road from Kapolei to H-1, completing Kapolei Parkway from 'Ewa Beach to Ko Olina and widening Fort Barrette Road to four lanes and Fort Weaver Road to six lanes.

The goal of the 'Ewa Highway Master Plan is to complete all six projects by 2010 to deal with the projected population. The planned 15,000 housing units on the 'Ewa development map that would be affected by the impact fee run from Royal Kunia/Village Park to Ko Olina.

State transportation officials have worked with area developers in paying for or building individual freeway off-ramps and interchanges but never involving multiple road projects in one region designed to ease major traffic congestion.

Under the City Council measure, developers would be charged $1,836 per new single-family dwelling unit and $1,245 per multi-family unit. New hotel rooms, should they be built, would be charged $1,003 per unit, and retail and office space would be charged $4,053 and $3,403 respectively per 1,000 square feet. Industrial-use land would be charged $2,019 per 1,000 square foot.

Although the projects involve a mixture of city and state roads, the City Council has taken control of the proposal so it can collect the impact fees through the issuance of building permits. The money collected would be placed in a trust fund that would allow those six road projects to be built, most likely by the state.

But others in the construction industry are worried that the agreement could set a precedent by government to charge impact fees for schools and other infrastructure in other areas, which means passing the costs on to the homebuyers.

"With interest rates being low, I think the developers are confident that adding another $1,000 to $2,000 to each home through an impact fee will be OK," said Craig Watase, president of the Building Industry Association of Hawai'i. "But the downside is during a slow market, will homebuyers be willing to bear the extra costs?

"In addition to collecting property taxes and income taxes, is it fair for a cash-strapped government during a bad economy to place another 'tax' for roads and possibly schools?"

Davidson said impact fees are a fair compromise.

"There has been an effort for quite some time to come up with a formula ... that could be reduced to a clean dollar amount per new development unit," Davidson said. "It's fair for everyone, because the revenue would be based on the current climate of the housing market.

"For developers, it's never been a question of whether they would pay their fair share, but how. And doing it this way might be better for both sides in the long term."

During Wednesday's council hearing on the matter, DeSoto half-jokingly described previous development agreements between past city administrations and developers as "extortion fees."

"Whether you want to believe it or not, there has always been an impact fee placed by the developer on a new home to cover costs," DeSoto said. "The problem was the negotiations were done behind the scenes, and maybe they were too informal."

One time, DeSoto said, a developer paid an enormous fee to the city so it could build a new golf course.

"The problem is the money would get lost in the general fund rather than pay for what it was intended: build infrastructure," he said. "Now there is a set formula."

Davidson said the impact fee proposal had nothing to do with the state Land Use Commission's decision on Castle & Cooke's Koa Ridge project, which called on new schools to be built before homeowners could move into the developer's 3,600 home development.

"This impact fee is something we've been working on for several years, particularly hard over the last two, three years," Davidson said.

City Council Transportation Committee chair Darrlyn Bunda said everyone involved knew that impact fees were the way to go.