Impact fees help accommodate fast growth, but at what cost to Lexington businesses?

Town of Lexington faces a tight deadline to update impact fees, as state leaders question if municipalities have enough time to use these fees.

Posted 1/18/25

Lexington leaders have until Feb. 1, 2025, to update impact fees.

Some council members' anxiety about it, aside from such a close deadline, is how it might impact area businesses, especially …

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Impact fees help accommodate fast growth, but at what cost to Lexington businesses?

Town of Lexington faces a tight deadline to update impact fees, as state leaders question if municipalities have enough time to use these fees.

Posted

Lexington leaders have until Feb. 1, 2025, to update impact fees.

Some council members' anxiety about it, aside from such a close deadline, is how it might impact area businesses, especially small businesses.

It’s been five years since the town first started charging impact fees, which in short, are fees paid by developers, both commercial and residential, to help accommodate area growth. They are more common in fast-growing areas like the town of Lexington.

It’s another pot of money for the town to pull from to aid in transportation, parks and recreation, and municipal facilities-related needs. In Lexington, impact fees helped make the Virginia Hylton Park upgrades possible, as an example, so some town council members during the Jan. 13 special called meeting, said they find the fees well worth it.

“Traditionally, elected officials rely on rising local property taxes in addition to state or federal funding to pay for future year capital improvements,” public documents state. “However, recent decreases in outside governmental funding, increases in construction costs for replacing and expanding public facilities, and rising resistance to increased property taxes have led many local governments to consider other funding mechanisms for implementing needed improvements.”

While generally thought of as a positive program for municipalities struggling to accommodate fast growth, some worry about impact fees burdening small businesses.

Town of Lexington Councilman Gavin Smith said that commercial developers have taken on the bulk of the last five years’ town impact fees while residential developers haven’t shouldered nearly as much. He said council should treat this deadline to update impact fees as an opportunity to lessen the financial burden on area businesses.

The good outweighs the bad, though, Councilman Todd Lyle said, citing improvements to traffic and other town projects that impact fees helped with.

With that, first reading of the update to town impact fees passed, with only two against – Smith and Councilman Will Allen.

The town’s planning commission was unanimously in favor of the update.

This conversation isn’t new and isn’t over, though. December 2023 reporting from the Chronicle details a change council made to impact fees that excuses temporary businesses from paying them. Earlier reporting also details 2023 opinions from council members saying that small businesses shouldn’t have to pay impact fees, but that home developers should shoulder them.

Some say state law, however, doesn’t afford council this desired flexibility.

The most notable fact about impact fees is that they don’t burden the individual taxpayer. Secondly, in South Carolina, it is the state that grants the municipality power to collect impact fees. Thirdly, those who are charged impact fees can appeal them with the town administrator, affording the town the ability to examine individual developers’ situations.

And finally, the town must reimburse impact fees not put towards a project within three years.

This three-year restriction is prompting conversation at the state level.

Some projects just need more time than that, S.C. Rep. Chris Wooten said during the Jan. 16 Legislative Breakfast hosted by the Lexington Chamber and Visitors Center, adding that in this legislative session, he wants to lengthen that time frame, thus allowing governments more time to use impact fees on public projects before having to reimburse them.

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