An eight-month study by Community Board 1 (CB1) indicates that New York’s failure to implement development impact fees — levies based on the policy that new building projects should directly pay at least a portion of the cost of providing additional public services, the need for which would not arise without the development — has cost Lower Manhattan $240 million in the last 18 years.
The report, “Developmental Impact Fees,” was prepared by Rajiv Kumar Myana and Sarita Rupan, CB1’s planning fellows, under the direction of Michael Levine and Diana Switaj, the Board’s planning consultant and its director of planning and land use, respectively.
“In the face of very rapid residential development that is happening in our district,” Ms. Switaj explained during CB1’s April 24 monthly meeting, “we get bits and pieces that come along when they are not as of right, and they have to come to us. And one of the things that has always come up in that conversation is the subject of impact funds. Is that something that’s feasible for us? And how do we get something like that implemented?”
Impact fees are prevalent in almost every other fast-growing area of the United States, urban or suburban. Some form of these assessments (which are also used for services such as new schools, water and sewage infrastructure, police and fire protection, and new roads) is levied in about 60 percent of all U.S. cities with more than 25,000 residents. They are also required in almost 40 percent of all metropolitan counties, according to Duncan Associates, a Chicago-based consulting firm that advises local governments around the United States on how to formulate impact fees. In California and Florida, the two states that utilize impact fees most extensively, they are assessed by 90 and 83 percent of all cities and counties, respectively.
CB1’s research notes that 29 U.S. states have authorized municipalities to collect such fees, with neighbors such as Pennsylvania, New Jersey, Vermont, New Hampshire, and Rhode Island having enacted them decades ago.
But there are no impact fees in the largest city in America. For New York, where real estate interests are particularly influential, such fees are not applied to building projects. The closest New York City comes to anything resembling an impact fee is “inclusionary zoning,” which encourages developers to create affordable housing, in exchange for bonuses like zoning variances, tax abatements, and preferential financing. But these are generally optional in New York City. Outside of New York, planners call these “linkage fees,” and they are usually mandatory.
“CB1 is delighted with this work on several levels,” noted Board chair Anthony Notaro noted afterward. “First, the research is solid and fact-based, which helps inform better decisions, rather than anecdotal assumptions. It also validates observations and experiences of residents, versus workers and even those who visit our communities. And finally, it starts the conversation about how we value both the public realm and the quality of urban life, not just impact fees. There will be great debate about money, but it is how we plan and how we allocate resources for the future that matters.”
CB1’s planning fellows worked in conjunction since last autumn, with Mr. Myana creating a database of new residential development in Lower Manhattan since the year 2000, while Ms. Rupan studies the use of impact fees in selected cities around the United States, and modeled what the results would have been if a similar policy had been in effect for New York during this period.
“When a new development is built, the population of that neighborhood increases,” Ms. Rupan explained, “and to sustain that increased population, the fees help the local government fund the increased infrastructure. During the research, we came across various pros and cons of the fees. Obviously, it’s an effective tool to ensure that adequate infrastructure is provided and that planned growth happens in a community. But a lot of cities have been hesitant to implement it, because many times it has been seen to increase the rent in new developments, and it is also seen as a detriment to affordable housing.”
“But New York State, in spite of being such a large state, and experiencing such a huge growth in population, has still not implemented any form of the fee,” she continued.
“To understand what would have happened if a similar fee that is right now being used in San Francisco would have been used in New York,” Ms. Rupan noted, she and Mr. Myana used San Francisco’s fee structure (which is in effect for a cluster of fast-growing neighborhoods around Balboa Park) of $10.70 per square foot of development. For comparison, they applied this fee schedule to the number and size of residential units constructed in Lower Manhattan since 2000.
Mr. Myana noted that a single large apartment tower, at Two Gold Street (which created 650 new units encompassing 598,366 square feet, in 2003), “would have generated an impact fee of $6.5 million.”
Ms. Rupan then extrapolated these numbers to residential construction in Lower Manhattan as a whole. Focusing initially on new construction of apartments Downtown during this time period (consisting of 8,647 units, spread over 10.4 million square feet), she noted, “the total fee that generated would have been $111,540,000.” The CB1 report also notes that the additional 10,971 apartments (encompassing 12,040,784 square feet) created during the same interval by converting old office buildings to residential use would have netted the community a further $128,836,389, for a grand total of $240 million in unrealized revenue.
This may prove to be a crucial missed opportunity, because Lower Manhattan is struggling mightily to provide services to a population that has more than doubled since the terrorist attacks of September 11, 2001. With schools, parks, hospitals, roads, and subway stations all operating well in excess of their design capacity, development of such civic infrastructure has lagged for lack of the funds needed to pay for such upgrades.
For several years, State Assembly member Deborah Glick has sponsored legislation in Albany that would create a form of impact fee, dedicated to funding local schools. Although it passed her chamber of the legislature for two successive years, Ms. Glick’s proposed law was blocked by the Republican-controlled State Senate. CB1 has enacted a resolution supporting it, however, and she has reintroduced the measure this year.
At the April 24 meeting, Mr. Levine advised that, “in order for any of this to happen, whether for schools or any other form of infrastructure, we need State enabling legislation, which our Assembly member is working on for schools. But for any other kind of infrastructure, highways, roads, public buildings, State enabling legislation would have to be adopted. The City Council would then have to follow up with some sort of legislation that would assign specific City agencies to determine how the money would be spent.”
“If we had an opportunity to support any legislation of this kind,” Mr. Levine continued “we would want to make sure that it says that the money would be spent on infrastructure projects within the community that is receiving the greatest impact. So there is a very long row to hoe, if in fact we ever get there.”
To this CB1 co-chair Paul Hovitz replied, “we’ve been hoeing for a long time.”
Mr. Levine concluded, “we’ll need the State legislature, we’ll need the City Council, and we’ll need the support of all of our elected officials.”
In the interim, the cluster of San Francisco neighborhoods surrounding Balboa Park plans (according to a municipal website) to collect from developers an additional $219 million in impact fees over the next ten years to fund schools, parks, roads, and other forms of infrastructure, all of which will be concentrated within an area of a few square miles, immediately surrounding the new developments. But as things stand now, Lower Manhattan (and New York City as whole) will collect not a penny.
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