An Echo City Buildout is a new type of city structure that we are encountering on the development impact side of RCS. The term Echo City Buildout was created during a conversation with Scott Thorpe and me, where we were trying to find a way to describe how development occurs in a built-out city. This type of city is a significant change from the typical city structure in which we calculate impact fees. In the traditional city structure, RCS would identify the vacant land and then ask the city staff what is most likely to be built on that open land. We then calculate an impact fee based on what type of land use the vacant land is most likely to become. I would be hesitant to say this process is easy; trying to accurately guess the build-out of a city is anything but easy, but it is straightforward. The Echo City Buildout adds an additional layer of complexity to this task.
Although a city is built out, this does not mean that the city will remain static. Land uses will change, and upsizing will occur. Development in some form or another will continue, regardless of the availability of vacant land. Furthermore, the adoption of AB-602 now requires cities that are charging impact fees to update their studies every eight years. In other words, impact fees will still be calculated for Echo Cities.
There are two major complications that we have run into when calculating impact fees for Echo Cities. The first is assisting city staff in determining what land use changes will occur in a built-out city. Determining what a parcel of vacant land will likely be developed into is not easy. Often this is a combination of knowing the current building trends in the city, knowledge of the zoning laws around the parcel, and then making an educated guess on the most likely land use to be built. With an Echo City, this process is even harder because there is not even a vacant parcel of land to begin the process with. Instead, the city staff has first to determine which existing land uses are most likely to change and what they will change into. There are no crystal balls, and no one knows the future, and yet we must still determine what is most likely to change in the existing land uses. Our only real certainty is that a built-out city will not remain static.
The second major issue we have encountered in Echo Cities is how the city charges impact fees when the change in land use results in a decrease in demand. When a parcel of vacant land is built upon, demand for the city’s infrastructure will increase. However, what happens to the demand on the city’s streets when thousands of square feet of retail land uses are converted to industrial land uses? According to the Institute of Traffic Engineers, daily trip ends of the city will drop. So how do you create projects that deal with an increase in the city’s traffic demand when that traffic is going down instead? The answer is that you have no choice but to eliminate that circulation impact fee altogether. The city will not pay developers for a drop in demand, but they also cannot charge developers for that same drop in demand.
If impact fees could be summed up in one word, it would be - fair. Above all else, an impact fee must be fair to the developer paying it and the residents who live in the city. Allowing the level of service to drop for current residents due to developers not paying impact fees is not fair. Charging developers for the replacement of infrastructure that has nothing to do with an increase in demand is not fair. And, charging developers an impact fee when their development decreases demand is not fair.
It may take some time for built-out cities to grow accustomed to an impact fee study resulting in a reduction of fees (I know it will take some time for me to get used to it), but at the end of the day, a proper impact fee must accurately predict what development will occur in a city, fairly charge development their share for increased demand, and ensure that the current level of service for residents is not negatively impacted.