Counties struggle to push impact fee legislation to cover growth

County government officials are trying to build an argument in the Legislature for impact fees, an extra tax on development to avert property tax increases.

Leaders from Maury and Rutherford counties have been chief among those lobbying lawmakers this session for legislation that would enable counties to set up the new fee to cover the cost of development, everything ranging from roads to schools.

Maury County Mayor Sheila Butt, a former House member, has been among the most visible county officials backing the bill, which is running into stiff opposition from the Tennessee Realtors Association.

Dubbed the Property Taxpayer Protection Act, HB1206 is necessary because of the number of mandates placed on county governments, many of which cities don’t face, according to Butt.

For instance, counties deal with emergency medical services and schools and a litany of other costs that city governments don’t pay, unless they have a special school district.

Maury is one of the fastest-growing counties in the state but still has a large segment of the populace that has lived there for decades and is being forced to pay higher property taxes as people move in and the cost of housing escalates, officials say.

“We have taxpayers who have lived there 50 years on fixed incomes. We raised property taxes 31 cents last year, which really hurt some of those … on fixed incomes, farmers, and they’re not using the new schools, and they’re not using the new services,” Butt says.

Cities already have the ability to charge a development or impact fee, which would be directly tied to the true impact of a new neighborhood, such as the cost of roads to handle traffic and schools for the children who move there.

“We’re just asking for parity and being co-equal with the cities in how we deal with growth and development,” Butt says.

The legislation, which still hasn’t been amended or debated in committee, would let county commissions decide how those fees would be set up and used to pay for growth. Butt contends the bill is a “conservative” measure because it would allow local governments to determine the fate of impact fees.

Negotiations on the legislation are ongoing, and the House bill is to be considered on the final calendar of the Property & Planning Subcommittee. Action was deferred in the Senate State and Local Government Committee until March 14.

The Tennessee Realtors Association is throwing up some of the biggest hurdles. But as Republican leaders continually refer to Tennessee as a low-tax state, the concept of putting a tax on development is often a non-starter for many lawmakers leery of having it come back to haunt them in a primary election.

Sher Powers, president of the Tennessee Realtors, says in a statement the proposed wording the group has seen is an “incredible expansion of taxes” on housing in the state and would hurt the “dream of homeownership.”

“Tennesseans are already experiencing hardships in finding affordable housing in today’s market between higher interest rates and the increased price of building supplies,” Powers says. “An addition of an impact fee or development tax will only compound the problem.”

While the association is advocating policies that help people own property, this bill “does the opposite,” she says.

The Tennessee Realtors PAC holds considerable sway among lawmakers, giving $2.2 million lawmakers of both parties and gubernatorial candidates in the last six years and $1 million during the last two years, the leading PAC donor in the nation, according to campaign finance records.

The Maury County and Rutherford County commissions signed a resolution urging the Legislature to pass the impact fee bill. Rutherford commissioners, who already have a $1,500 adequate facilities tax for schools, were told such legislation would run into difficulty.

Maury County Commissioner Aaron Miller says the goal isn’t to slow down growth but to keep the costs associated with development spread across the population, instead of “disproportionately burdening” longtime county residents. The fee could be about 2% of the price of a new house.

But while moving the measure through the Legislature won’t be easy, House sponsor Rep. Scott Cepicky, R-Culleoka, says he will continue to push it “as hard as we can.”

“We’re gonna work the committee and find out what their objections are, and then we’re gonna try to address their objections and move forward because we have to do something to give some property tax relief to the citizens of Tennessee,” Cepicky says.

Sen. Joey Hensley, R-Hohenwald, is carrying the Senate version of the bill.

House Speaker Cameron Sexton says he’s heard from several county mayors, including those who’ve served in the House, seeking the same authority as city governments to impose impact fees.

“I’m not opposed to allowing them to do the same thing cities can do,” Sexton said.