Crystal Lake amends impact fee ordinance

As the housing boom wore off, impact fees were hard to come by for schools.

Now, those fees – dollars paid by residents buying new construction, which then go to schools, police and fire departments, libraries and park districts to help pay for new facilities or programs needed as a result of new development -– also go to public works in places such as Crystal Lake.

With the new Woodlore Estates project on the northeast corner of Routes 31 and 176, near Crystal Lake, the school districts those students will attend have applied to the city for those funds.

Students in the new community will go to schools in Prairie Grove District 46 and Crystal Lake District 47 before going to Prairie Ridge High School in Community High School District 155.

The fees have been reformulated reflecting the increased fair market value of developable property, according to city officials, and, in some cases, the costs of impact fees to buyers of a newly built home have decreased.

A representative of Lennar, the developer at Woodlore Estates, said in a statement: “Lennar appreciates that the city of Crystal Lake was proactive in assessing the costs of development and made changes to reflect today’s market.”

Michelle Rentzsch, community development director, said the city made some changes to the impact fees “in an attempt to standardize it a little better.”

“We called the school districts in, and we had a pretty good discussion,” she said.

Impact fees are charges paid by developers to a municipality on new construction. The developer adds the fee to the cost of the new construction, which then is paid by the buyer.

Impact fees are collected from developers by the city “to address impacts upon the city, its services, and its facilities that are specifically and uniquely attributable to such development,” according to the amended unified development ordinance.

“New residential developments cause and impose increased and excessive demands up on public facilities and services,” according to the amended ordinance.  

According to the ordinance, “new residential development shall continue and shall place ever-increasing demands on the school districts, the city and other governmental bodies to provide necessary public facilities.”

Basically, impact fees ensure existing residents do not pay for the effects of new residents, City Planner Elizabeth Maxwell said.

The amended unified development ordinance, approved in December, shows an increase of fair market value from $135,000 to $163,276 of developable property, according to city officials.

Impact fee changes for each entity that receives the funds were calculated through formulas that considered, among other details, school’s enrollment and acreage of school sites as well as current operating budget and census population.

In some cases, such as Woodlore Estates, the impact fee collected on a four-bedroom home actually decreased from $16,835 to $13,565.

On the purchase of a new three-bedroom home, the fee decreased from $11,267 to $9,493. Three- and four-bedroom homes make up most of the development which will include 319
single family homes, 68 townhomes and 105 senior, ranch-style homes.

However, under the new formula, the impact fee for a two-bedroom single family home increased from $3,884 to $5,333, according to city officials.

Crystal Lake currently collects impact fees on behalf of all, or parts of, Community Consolidated School District 47, Community High School District 155 and Prairie Grove Consolidated School District 46 and small portion of Woodstock Community Unit School District 200, according to city officials.

Another new addition to the amended ordinance is the distribution of impact fees to public works, which will cover the costs associated with streets, fleet and facilities, health and the storm sewer system and infrastructure, according to city officials.

The revised ordinance also includes an “indemnification agreement” with the school districts, protecting the city should a resident sue the school district over the use of impact fees, Maxwell said.

Entities receiving impact fees from the city also are now required to fill out a detailed “needs assessment” that requires the entity to show exactly how they anticipate being impacted by the new residents, and exactly how the money would be used.

The assessment must be updated regularly and include, among other points, development occurring in prior years, public facilities actually constructed and changing public facility needs.

Illinois statute only allows for impact fees to be used for “bricks and mortar” type projects, Maxwell said.

Impact fees are only to be used on new “public facilities or operations” that have been or are anticipated to be needed or directly affected by new
residents, according to Illinois statutes.

Examples include acquiring land, buildings or the operations needed to provide new services, such as temporary classrooms, according to the ordinance.

“This is the developer’s way of not burdening taxpayers,” Maxwell said. “Developers pay the impact fee up-front before selling the lot [at same time they are applying for building permits]. Each time a developer sells a lot [they add on the impact fee] along with other developer fees. Then they go build the home.”

The ordinance also allows for land in lieu of impact fees related to any development. This request would require specific “reasons for requesting land in lieu of development impact fees.”

The request of land also is required to “be made specifically for the construction of public facilities or expansion of public facilities on adjacent parcels,” according to the ordinance.

How schools are using impact fees

Jeremy Davis, assistant superintendent of finance and operation at District 155, said the district has about $250,000 saved in impact fees collected during the past four years.

“We have lots of projects on the horizon as of right now,” Davis said, adding that the district is undergoing more than $14 million in construction projects. “We’ve got lots of projects that the money could be used for. We are waiting until it is built up a little more and we meet the projects consistent with the impact fees.”

The district deposits the impact fee contributions to its capital projects fund. Davis said future projects at Prairie Ridge, the school to be affected by the new development, include replacing deteriorating concrete around the school, transitioning all lighting to more energy efficient LED’s, updating heating and cooling systems nearing the end of their useful life, and updating classroom interiors.  

Each school district determines how it will use the impact fees.

He said, in past years, the district also had received impact fees from the county for new construction in unincorporated areas, however that has been suspended this year.

“We are grateful to [the city] for collecting [impact fees] on our behalf,” Davis said. “They do not have to do that.”

Cathy Nelson, assistant superintendent of business at District 47, echoed that gratitude.

In October of 2018, the district spent $381,150 in impact fees toward the purchase of Kent property, which is next to Hannah Beardsley Middle School. The lot was bought for a possible school expansion in the near future. The current impact fee balance is $31,000 and will be used to help fund capital projects, Nelson said.

“We feel fortunate that the city supports its schools and other vital community services and amenities through the impact fee ordinance,” she said.

However, Kevin Werner, chief school business official at District 46, said in an email, “The new ordinance, as written, will materially decrease impact fees assessed against any new development project[s] and curtail Prairie Grove CSD 46’s ability to help pay for new or expanded public facilities aimed at directly addressing the increased demand created by said developments.”

He continued that the new criteria used to determine school development impact fees will result in the district receiving less money from Woodlore Estates “by over 50 percent.”

He added that his district has a “minimal” amount of impact fees on hand.

“As a result of the downturn in the regional real estate market, Prairie Grove CSD 46 has received only $31,000 of such fees over the past five years,” Werner said.

Prairie Grove currently is making
$4 million in summer improvements to its school – which houses by an elementary and middle school – to do things such as upgrade its library, add a STEM space and add air conditioning to the elementary school this summer.

‘Totally unnecessary’

Tom Stephani, a custom home builder for 35 years, said impact fees are “totally unnecessary” in today’s market.

Stephani, who has built homes in Colorado as well as custom homes and neighborhoods in Crystal Lake, said the original purpose behind impact fees – created during the building boom in the 1980s and 1990s – was for schools and parks to buy new land to meet growing populations.

But today, he said, that growth has halted. And in many areas including Crystal Lake, the numbers actually are going down.

“Impact fees were incorporated many years ago when we had explosive growth in the northwest suburbs of Chicago,” Stephani said. “The schools were overwhelmed and did not have enough room for new students.”

Officials determined the overflow was because of new development and impact fees were created to make that new growth pay for its effects on the community.

“Impact fees have outlived their usefulness now,” he said. He also takes issue with schools using the fees to remodel or repair.

He further claimed that the growth in Crystal Lake is on such decline that District 155, which has four high schools, could theoretically consolidate its students into three buildings. In recent years, District 155 has seen a decline in enrollment from 6,730 students in 2014 to 6,113 in 2018, according to the Illinois Report Card website.

“Impact fees are no longer valid,” Stephani said. “You should’t have any impact fees at all.”

Still, Crystal Lake Mayor Aaron Shepley defends the collection of impact fees because they ensure the community will continue to have the “solid infrastructure” needed to “keep Crystal Lake thriving.”

For example, he said, impact fees were not used for the initial development of Three Oaks Recreation area, “however we fully expect to use impact fees for future development of the site consistent with what the law allows.”

Three Oaks originally was built using home rule sales tax dollars.

“The bottom line is that impact fees are good for the taxpayers who live here today and they are good for the community of tomorrow,” Shepley said. “Current taxpayers are absolutely not interested in paying for the impact of new developments.”

Shepley further claimed that impact fees are “universally accepted.”

“[Impact fees] ensure that new developments pay their own way and that existing taxpayers do not bear that burden,” he said. “The only ones who disfavor impact fees are developers and most developers recognize impact fees as a cost of doing business that is undoubtedly passed through to the purchasers of their products.”

He disagrees that impact fees might0 deter development.

“The entire southern portion of Crystal Lake [south of Barlina Road] was developed with impact fees in place and those impact fees helped to build at least three schools and countless parks,” Shepley said. “Presently, new developments such as the Woodlore development continue to see Crystal Lake as an ideal location notwithstanding that we have impact fees in place.”

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