Impact fees are aptly named. They are so called because they are supposed to mitigate the “impact” of economic development. (Gee, I grew up thinking that economic development is a good thing!). However, impact fees in turn have an impact on the economy and growth and it is hard to make the case that it is a positive one. Here in Jefferson County, impact fees have been implemented to fund school construction and to fund various services in the county, including fire and rescue, emergency medical services and law enforcement. The “non-partisan” League of Women voters has even proposed additional impact fees to fund library construction.

As with everything that the government does, there are unintended consequences. The great French Economist Frederick Bastiat wrote an essay regarding this phenomenon in 1850 called “That Which is Seen and That Which is Not Seen”. In it he points out that “In the economy … a law gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen.”

When applying Bastiat’s principle to impact fees, we see the immediate effect - a home or a commercial building is constructed, an impact fee is assessed and applied to various pre-determined purposes. What is not seen is the effect that this has on the activity that is taxed - in this case new commercial and residential construction. With each successive increase in the fee, there is in an increase in the price of the construction. How does the government know how far it can go before it kills the goose that has been laying these golden eggs. We may have already hit that wall.

Writing nearly a century ago in his landmark treatise on socialism, the Austrian economist Ludwig von Mises said that “Without market prices for the means of production, government planners cannot engage in economic calculation, and so literally have no idea if they are using society’s resources efficiently”.  And that is the point - price matters - and planners have no idea what price is the right price. If you increase the price of something, there is less demand for it - pure and simple. In the case of impact fees, the resulting increase in price means there will be fewer commercial buildings and therefore fewer businesses; fewer homes - especially “affordable” ones for middle class folks like you and I. In short, as Bastiat would have understood, there are the unseen consequences of impact fees - and that is less economic activity.

Unseen consequences cannot be “proven”, but they exist nonetheless. The evidence, at least anecdotally, bears this out. Entrepreneur Steve Lanning, writing in the Quad State Business Journal, quotes Heather Morgan McIntyre, the Executive Director of the Jefferson County Chamber of Commerce from a recent interview in that publication. “The recent event of Jefferson County losing a large warehouse to Berkeley County which does not have impact fees was a reason for the change. We need to encourage business”, she said.

For further anecdotal evidence, I recall a conversation about a similar circumstance I had a few years ago with a local business person. What the conversation was about had to do with retailer Costco declining to locate in Jefferson County because of the impact fees. I am sure that there are those that could care less - but there are ripple effects and consequences. Not having a Costco here, means not having those jobs here, and Costco is one of those fascinating companies that believes that the minimum wage is too low.

Further, there are no less than three Costco locations between 20 and 30 miles from Jefferson County. After Walmart, Costco is the second largest retailer in the nation, meaning that there are quite a few Jefferson County residents that make the 40 - 60 mile round trip to shop there. That means gas consumption and other unseen consequences both economic and environmental. Further, I find it ironic that the management and founders of Costco are big donors to the Democratic National Committee and contributed heavily to the President’s re-election campaign. However, when it comes to impact fees, the enthusiasm isn’t there. Imagine that, minimum wage is too low, but impact fees - nope, no can do.

It is amazing to me that the same people that propose taxing tobacco and alcohol to discourage consumption do not understand that impact fees do the same thing. They affect economic action and activity. As Isaac Newton said, for every action there is an equal and opposite reaction. The laws of economics are as immutable as the laws of physics.

But then again, maybe they do realize it. In fact, there is a group of folks here in the county that understands quite well that impact fees inhibit economic growth which is why they support them. These folks even have a name - they are called “no growth-ers”.

However, that’s a different conversation. In the meantime, Commissioner Pellish seems to have summed up the current situation pretty well. According to him, we’re at the point where we either raise taxes, cut services or we let economic growth happen. I agree.

Impact fees most certainly impact economic growth…negatively. In its recent action to modify the impact fee program and to reduce its impact on the local economy, the County Commission is confronting reality. That is something to write home about.