Street Fee Coming for Developers in 2022 to Help Offset Growth Costs

A map of the new Street Impact Fee program service areas (Image via City of Austin)

At its Dec. 10 meeting, City Council gave its final approval to a new Street Impact Fee program. The new fee will be charged to developers, at varying rates depending on where a project is being built, to help "pay for growth." State law mandates that such fees can only be used on certain types of infrastructure needed to accommodate new development – such as wastewater improvements, drainage facilities, and increasing roadway capacity.

City staff, boards and commissions, and stakeholder groups have been working through the state-mandated process to create an SIF since 2015, so many decisions had already been made ahead of Council's final adoption. Discussion at the meeting centered on an amendment from Council Member Natasha Harper-Madison to extend the grace period being offered to developers before the new fee is collected, from one year to 18 months. The amendment ultimately passed on a 7-4 vote (with CMs Leslie Pool, Ann Kitchen, Kathie Tovo, and Alison Alter against). The ordinance will go into effect on Dec. 21, but fee collection will not begin until mid-2022.

Austin Transportation Department's Liane Miller, the lead city staffer working on the SIF, told Council that waiting an additional six months to collect the fee could cost the city $25 million in revenue over a 10-year period. She said this potential revenue shortfall would be more pronounced in the outer perimeter of Austin, where higher development activity translates into larger infrastructure impacts and thus higher fee levels. However, Harper-Madison and Mayor Steve Adler noted that even if the projection turns out to be accurate, it doesn't mean those needed infrastructure projects would be unfulfilled; the city could seek more funds through a bond election, for instance, and then use SIF revenues to pay down the bond debt.

As is the case with many Council debates about land use and housing, the debate over the grace period turned on who benefits from new growth and who should pay for the costs associated with it. Harper-Madison argued that a longer grace period was warranted because projects already in the works have based their budgeting on what, in Austin, is already a costly and challenging fee and approval structure; adding an SIF could simply serve to raise rents and sales prices. "If ensuring that we have enough housing that Aus­tin­ites at all income levels can afford is truly the goal of the city," Harper-Madison said, "then it's important that we are mindful of how we might unintentionally hinder that goal."

The counterargument from the four CMs on the losing side, generally speaking, is that policies like an SIF, or increasing the amount of income-restricted housing in market-rate developments, shift the burden to developers and away from existing taxpayers. "The whole point of SIF is to help fund growth and to help us manage growth responsibly," Alter said. "In my view, [Harper-Madison's amendment] is not a compromise that helps us move forward in funding a transportation system."