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Paying for Columbia's growth

New developments in Columbia mean more city services and roads to meet the growing needs.
But who should pay for the cost
of expansion?
Developers?
New residents?
Columbians?
Sunday, March 6, 2005 | 12:00 a.m. CST; updated 3:16 a.m. CDT, Tuesday, July 22, 2008

The crowds are creeping in. They stack up in longer lines at Schnuck’s and every other supermarket in town. They pack the trailers that orbit the city’s public schools. They jam Stadium Boulevard near Interstate 70 late on weekday evenings, adding five or 10 minutes to Columbians’ commutes from work.

Their presence transforms the landscape, fueling demand for the hundreds of condominiums and single-family homes that have cropped up east and west of Range Line Street and on both sides of Scott Boulevard over the past five years, erasing pastures and woodlands at a near-record pace.

Columbia is growing faster than Kansas City or St. Louis. The northern, northeastern and southern parts of the city are exploding with new residential and commercial development, and officials’ vision for the next 25 years shows expansion in all directions.

In a city where lengthy lines at the post office spark petitions and where annexation requests have begun to encompass hundreds of acres, the growth is both a blessing and a challenge. Growth creates jobs and tax revenue. It also clogs roads and heaps new demands upon sewer, water and electric utilities.

As officials envision and plan for new road networks, water mains and sewer lines, a central question emerges regarding growth and infrastructure: Who should pay for it?

The answer varies depending on whom you ask: Developers. Consumers. Commuters. Property owners. Despite their disparate views, most agree that growth at the current pace will force city officials to decide once and for all who will pay — or risk losing the qualities that propel the expansion in the first place.

Steady growth

Growth in Columbia and Boone County is not a new phenomenon, nor is it astronomical. The city and county have grown steadily for the past several decades.

From 1970 to 2002, the population of Boone County rose from 81,000 to 139,000, putting Boone County fifth in growth among the state’s 15 largest counties, according to a report from Kansas City-based Stinson, Morrison and Hecker LLC to the city’s Transportation Finance Advisory Committee. Columbia’s central city, however, grew faster than all other Missouri cities in the 1990s, at a rate of 22 percent, according to a 2002 report by the Brookings Institution, a non-partisan think tank based in Washington, D.C. With fringe areas factored in, Columbia’s growth ranked below Springfield’s during the same period.

City officials recognize Columbia’s growth is strong but unexceptional.

“We’re not as fast as, say, St. Charles, or some of the Branson area or even some of the Lake of the Ozarks area,” Assistant City Manager Bill Watkins said. “On the other hand, there are parts of the state that are shrinking, so everything is relative.”

In his 2004 State of the City report, City Manager Ray Beck pegged the city’s population at 90,000 and rattled off several growth statistics. The Columbia City Council approved 21 voluntary annexations in 2003, adding 0.56 square miles to the city. Officials also issued building permits for 1,682 new homes.

The council last year approved at least 16 voluntary annexations comprising more than 1,000 acres, including the 489-acre Philips farm. These figures lead some to say Columbia is growing too quickly. Beck disagrees.

“I feel Columbia must maintain a moderate growth to sustain our quality of life,” he wrote in his report.

But as the Boone County Smart Growth Coalition and other critics of the city’s growth management contend, economic development represents only one side of the growth equation. New jobs and homes precipitate costs as well as opportunities.

Roads must be maintained and expanded. Sewer lines and water lines must be extended. Storm-water systems must be improved. Additional schools must be built and other resources managed to ensure consistent quality in public education.

As anybody who pays a utility bill or votes on a bond issue knows, meeting those needs is expensive.

“The city’s and the county’s history had been one of slow growth for many years,” the Kansas City consultants said. “But that rate slowly increased such that keeping up with the pace of population increases became progressively more difficult.”

City eyes pricey projects

Ben Londeree entered civic life via a concrete ditch. In 1996, the city wanted to cut down trees on his property to facilitate the controversial plan to pave County House Branch. Londeree and opponents from other neighborhoods protested.

The experience introduced Londeree to the Boone County Smart Growth Coalition, a group that formed to fight urban sprawl and advocate new growth strategies. Today, he is co-chair of the group’s steering committee.In 2001, Londeree began to wonder how much a new home on the city’s outskirts costs the community in terms of new infrastructure.

Using census data, estimated project costs and national survey figures, the group found that providing streets, sewers, water, electricity, schools and other infrastructure to one new single-family home in Columbia costs about $30,000.

That’s a high price to pay. But who should cover the bill? The developer who built the home? The family that buys it? The people who already live here? Or maybe those who shop in town?

It’s a vexing question, so challenging that city officials hired the Kansas City consultants and appointed the transportation committee to sort through the options for financing street projects.

The preliminary findings are overwhelming. To meet existing and future transportation needs, officials have mapped out a dream network of $428 million worth of new and improved roads. Attacking these projects over the next 25 to 30 years would require that the city add $10 million per year to its transportation budget. The advisory committee over the past several months has been reviewing options, ranging from an excise tax on developers to a new sales tax to a higher property tax.

Although critics and the consultants say certain road projects and other infrastructure are long overdue, city officials say they’ve stayed on top of this responsibility.

“For the most part, I think we do a pretty good job of looking out five to 10 years and dealing with infrastructure needs,” Watkins said. “I guess some people would say roads are a little behind, and we do have some catching up to do.”

Columbia residents are already picking up the tab for major infrastructure. Voters in November 2003 approved a $18.5 million bond issue to pay for sewer projects, including a large sewer line that will run north and east along the south fork of Grindstone Creek. The extension will cost about $6 million and could serve, among other developments, Billy Sapp’s proposed golf course community along Route WW.

The need to keep pace with growth was a major factor in the Water and Light Department’s successful pursuit of a $28 million bond issue, also approved by voters in November 2003, that will pay for upgrades in the city’s water system. The department’s director, Dan Dasho, said the upgrades should meet the city’s needs through 2020. Meanwhile, the department is studying alternatives for meeting increased demand for electricity.

Columbia Public Schools are not immune. The district has added five elementary and middle schools in the past 10 years, and each has been at or over capacity since the day it opened. The district also doubled the capacity of Rock Bridge High School between 1998 and 2000.

Still, growth continues to overflow elementary schools, and talk of a third major high school continues among school officials. School board member Don Ludwig said the price of a new high school would be $50 million to $75 million.

Such demands and expense, to some degree, are routine in a steadily growing city. But uncertainty remains as to who rightfully should cover the cost.

The city as it stands uses a mix of fees, taxes and bond sales to pay for infrastructure. Bond issues like those approved for the water and sewer systems provide money up front, but the revenue to pay off those bonds comes from utility customers. Columbia Public Schools also uses bond issues to finance building projects and upgrades. Those bonds are repaid through the taxes paid on property within school district boundaries. School administrators typically float a bond issue every other year; voters for the most part have been happy to oblige.

Roads force the debate

Ticking off a list of the city’s infrastructure needs, Columbia Planning and Zoning Commission Chairman Jerry Wade dwells a little longer on roads.

“Clearly we have a huge deficit in roads,” he said. “We’ve had many years of high growth without the additional road resources.”

Wade advocates coordinated growth management, and his ideas for addressing road needs is consistent with that outlook.

“One of the issues we need to address is how do we make a level playing field, or fairness, for every development, knowing what its cost and off-site infrastructure will be and everyone having the same kind of responsibility,” he said. “Right now it’s done much more on a proposal-by-proposal basis.”

Members of the Transportation Finance Advisory Committee have been pondering this same question since October. Based on committee discussions, the Kansas City consultants suggested a three-pronged approach to paying for roads in a Nov. 9 report. First, renew and increase the city’s quarter-cent capital improvements sales tax to bring existing roads up to code. Second, raise the transportation sales tax to pay for future maintenance of roads. Finally, charge an excise tax on new developments to pay for significant road upgrades and new road construction.

Excise taxes are taxes levied against a certain type of activity, such as construction. The excise tax is similar to the 10-cent-per-square-foot development fee Columbia charges now, but the consultants argue the $464,000 that fee generates each year isn’t enough. They estimate an excise tax alone could generate between $2.1 million and $6.3 million per year and suggest it could be based on the number of motor vehicle trips a development creates rather than the size of proposed buildings. The transportation committee is still debating whether the excise tax would apply to commercial as well as residential development and how much it would be.

Meanwhile, a new source of road funding — the transportation development district — has emerged as a way for developers to pass to consumers the burden of paying for road improvements. These districts allow developers to charge special sales taxes in stores within their developments and to use the proceeds to pay for road projects.

Already five such districts have emerged in Columbia: two along Stadium Boulevard and one each along Lake of the Woods Road, at the Bass Pro development and at the Wal-Mart planned for Grindstone Parkway. Developers of a Wal-Mart on West Broadway plan to use the same tactic, as does Elvin Sapp, developer of the Philips tract.

Developers’ contributions

Developers already pay for the right to build. In addition to the 10-cent fee, builders must pay water-meter and storm-water fees. Tapping into the city’s sewer trunk lines requires an additional investment, as does building roads within their subdivision. For larger developments, city officials might ask developers to make off-site traffic improvements or leave designated spots undeveloped.

Calculations by the Smart Growth Coalition, however, show that developers pay only 6 percent of the $30,000 worth of infrastructure a new home demands. The rest is passed on to the buyer, future homeowners and, eventually, the broader community.

“(The cost of infrastructure) is spread among all of those who pay taxes or utility fees in the associated public entity,” coalition members wrote in a Nov. 5, 2002, commentary. “Therefore, property owners in the new subdivisions pay only a small portion of the remaining costs required to meet their specific external infrastructure needs.”

The coalition recommended a steep increase in the one-time fees the city charges for new developments.

City officials and growth proponents greeted the coalition’s findings and recommendations with skepticism.

“I thought in a number of cases the methodology was flawed and the numbers were too high,” Watkins said. “(But) to my knowledge nobody tried to redo the exercise and come up with numbers.”

Until now, that is. In late October, the Central Missouri Development Council contracted with Impact Data Source of Austin, Texas, to study the costs and benefits of growth.

“It seemed to me that the numbers were somewhat one-sided from an anti-growth perspective and that the numbers weren’t complete,” said Don Stamper, executive director of the development council and a member of the transportation committee.

Jerry Walker, the principal consultant at Impact Data Source, said that the smart-growth study appears to overemphasize the costs of growth and that its calculations seem high. He hesitated to label the numbers inaccurate, however. Stamper expects the Impact Data report to be ready in mid-March.

“(Growth analysis) has to be a balanced picture, I believe, and when you look at costs alone you ignore some of the benefits that accompany development,” Walker said.

Londeree, also a member of the transportation committee, thinks an excise tax could provide the same benefits as the development fees he and the Boone County Coalition advocated in 2002.

“The rationale for this is that new developments are creating the needs,” Londeree said. “The philosophical question that needs to be answered by the committee is, ‘Should development pay its own way?’ ”

Asking for more

Londeree’s question cuts to the heart of the transportation funding debate, especially the excise tax.

Proponents such as Londeree say new developments increase traffic on nearby roads, so the people who use these roads should front the cost of their construction. Londeree recognizes city officials often ask developers to improve roads near their projects, but the process lacks consistency.

“In a sense we’re saying developers are partially paying for new roads, but it’s being done in a haphazard manner,” he said.

The excise-tax proposal has triggered opposition from developers.

“I think these excise taxes that they’ve been talking about are something that over the long run are going to prove unworkable,” said Dan Simon, an attorney who has represented developers such as Elvin Sapp and Don Stohldrier.

Simon and other opponents saythe debate over financing for new roads and other infrastructure ignores the benefits of development.

“I think everybody looks at this and says, ‘growth has a cost,’” Simon said. “Everything in the world has a cost. I want to look at the other side of this and ask, ‘What is the cost of no growth?’” His answer: a loss of jobs connected with building and development.

Simon agrees the city must catch up on road funding but thinks sales and property taxes are most fair.

Bruce Beckett, an attorney who says he has worked on too many rezoning requests to count, noted that the city already asks developers for off-site traffic improvements.

“I can’t argue with the logic of it,” Beckett said. “(Developers are) precipitating the need for it.”

But additional costs such as excise taxes can jack up the cost of building and discourage development, Beckett said.

“I don’t think you ought to put any more of a burden than you’re putting now on developers,” he said. “Every higher burden we put on them drives up the cost to the consumer and makes us less competitive with other communities.”

Annie Pope, executive director of the Homebuilders Association of Columbia, said consumers shoulder the burden when the cost of building rises.

“I will guarantee you that every penny will get passed on to the homebuyer,” she said. “There is absolutely no chance that any of it will be absorbed by the developer or by the builder.”

Developers and homebuilders, she argues, cannot afford new costs because development is risky. To get start-up money, developers must assure banks their projects will yield quick returns, allowing them to pay off loans.

Excise taxes also fail to target those who create the demand for new roads, she said, noting the revenue could be used to pay both for new roads and for maintenance of old ones.

“We don’t understand why a new homebuyer should pay for maintaining old streets as well as building new streets,” she said. “We would like accountability.”

Using an excise tax to pay for roads is not without precedent. Liberty City, Lee’s Summit, Independence, Raymore and Pleasant Hill already use similar excise taxes, said Steve Chinn, an attorney with Stinson, Morrison, and Hecker.

Revenue from the excise taxes in Liberty City and Lee’s Summit go into a general fund for roads without specifying projects. Mike Wahlstedt, a consultant with TranSystems Corp. of Kansas City, said that allows greater flexibility.

“If you have to use (resources) in specific areas, then it becomes more difficult to administer,” he said. “By pooling the money, it makes better use of those resources.”

Consensus?

Watkins, the assistant city manager, said finding a fair way to cover the cost of infrastructure requires community discussion. Thus far, Columbians have reached no consensus.

“Communities have different cultures as to what’s fair and what’s appropriate,” he said.

Establishing a community standard for fairness is difficult, especially because it splits the community between those who have paid for existing infrastructure and new arrivals who benefit from it, Mayor Darwin Hindman said.

In the case of roads, Hindman hopes the transportation committee’s recommendations will help identify the fairest approach. At the same time, he believes much of the community wants a larger contribution from new development.

“There’s a strong feeling among established parts of town that new development is not paying its way, is not paying its fair share,” Hindman said.

Fifth Ward City Councilman John John said the key is balance. Developers could pick up another $1,000 to $1,500 per home, but new and current residents also have to pitch in, he said.

“If you try to hit one side too hard, then you’re going to run into problems,” John said.

From his seat on the Planning and Zoning Commission, Wade has followed the debate over fair funding and watched the city’s growth with some concern. Wade said the city needs a more comprehensive approach and echoes the call for developers to invest more in infrastructure.

“I would hope that developers would understand that the cost of development has to include sharing the cost of the expansion of our infrastructure,” Wade said. “That’s the only thing that will then maintain the other conditions by which that growth can be maintained and the community (can) continue to have the characteristics that we all attribute to Columbia as being a good place to live.”

“I think we are on the verge of beginning to actually degrade these characteristics that make Columbia so good.”


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