Towns Assess Impact Fees on Developers to Fund Infrastructure
If you are buying a home in a new development, your purchase price may reflect fees paid by the developer to fund the paving of the street in front of your house, and other municipal services. The developer may be able to contest such fees, saving you money. Many towns are assessing impact fees on developers to mitigate the additional costs associated with development, considering options for funding new roads, water and sewer facilities, street lighting, schools, and other support structures. Impact fees are typically imposed upon developers or builders at the time the municipality issues a building permit. The fees are then used to finance needed capital improvements and the expansion of existing facilities. In Massachusetts, Home Rule authority under the state constitution as well as state statutes provide the basis for cities and towns to assess fees in connection with the provision of municipal services. Impact fees to pay for such civic enhancements have been held constitutionally valid.
Courts Scrutinize Who Benefits from Impact Fees
Pursuant to Emerson College v. City of Boston, Massachusetts courts apply an impact fee analysis that limits the ability of municipalities to allocate the public infrastructure costs associated with new residential development. In that case, on appeal from a property owner’s protest at being charged a fee by the City of Boston for enhanced fire protection, the Supreme Judicial Court of Massachusetts struck down the impact fee, ruling that it was not voluntary and provided no particularized benefit to the payer of the fee. In the 20 years since Emerson College, Massachusetts courts have continued to strike down these fees.
In the case of Greater Franklin Developers Association v. Town of Franklin, the Appeals Court considered the developers’ challenge to a “school impact fee” charged to them when they applied for permits to start construction on a new residential project. The Town of Franklin asked the court to find that the need for additional classroom space was directly related to projected growth. The court declined to do so, finding instead that the Town’s argument failed the Emerson College test, since the “benefit of expanded school facilities is not particularized to the fee payers” but enhances “the entire community.”
The Superior Court in Dacey v. Town of Barnstable made a similar finding when it struck down an affordable housing impact fee. The town had tried to use an assessment to be charged to subdivision and building permit applicants to meet the Massachusetts mandate for inclusionary housing. The town had claimed the charge was a fee, but the court disagreed, finding that the charge conferred no private benefit on the payers but instead served the town itself by enabling it to fulfill its obligation to facilitate inclusionary housing.
Massachusetts May Adopt Other Jurisdictions’ Analysis on Fees
Many courts in jurisdictions outside Massachusetts apply the dual rational nexus analysis in evaluating the legitimacy of municipal impact fees. This examines the reasonableness of the relationship between public policy ends and means. Under this analysis, a court reviewing an assessment first determines whether there is a reasonable connection between the proposed development and the need for new, additional, or expanded capital facilities. If such a connection exists, the court next looks for a reasonable connection between how the fees collected are spent and the benefits to the proposed development.
This analysis gives municipalities greater latitude and defers to lawmakers’ decision-making about the reasonable allocation of the external costs of new development. As residential growth increases, Massachusetts courts will have opportunities to revisit the Emerson College test as more developments are built and developers challenge municipal impact fees, some of which may be designed to address needs even beyond roads and sewers. Courts in Massachusetts may decide that the dual rational nexus analysis better aligns with the authority reserved to Massachusetts municipalities under Home Rule.
As experienced Massachusetts real estate attorneys, Pulgini & Norton can help you with all of your real estate legal needs. If you have a question regarding buying or selling a home, give us a call today at 781-843-2200 or contact our office online, and we can help legally clear the way for you.