Horry County Council looking at lower impact fee rates | Horry County

Horry County Council’s landmark vote on impact fees next week will likely involve lower rates and a smaller infrastructure package than county leaders originally considered, according to public records and county officials.

Twice county leaders have voted in favor of fees that would raise the cost of a new home by at least $4,838 — and potentially thousands more if stormwater impact fees are included. But Tuesday’s third and final vote could see that rate reduced to as low as $1,236 per new house, county records show. That proposal would also slash retail rates from nearly $7,500 per 1,000 square feet (excluding stormwater fees) to $1,797 for the same space. Of course, the rates also could fall somewhere in between those extremes, though multiple council members insist there’s a consensus that the reduced impact fees will pass.

“We’re swimming into the shallow end of the pool rather than jumping into the deep end,” Horry County Councilman Johnny Vaught said. “We know we’ve got to have impact fees of some kind.”

Impact fees are one-time levies on new construction. Although discussed by county officials for decades, this is the closest the council has ever come to actually implementing them. The process began after more than 72% of county voters supported impact fees in a 2018 advisory referendum. Last year, council members delayed a vote on the fees, citing concerns about hurting the local economy during the COVID-19 pandemic. Yet the building market remained strong. As of last month, residential building permits were up nearly 48% over the same time in 2020.

Impact fees are intended to help pay for the infrastructure needed to accommodate the county’s growing population, which is projected to swell to nearly a half-million people by the end of the decade.

But state law severely limits how the fees can be used. For example, impact fees can pay for new roads, police stations and firehouses, yet they can’t be spent on recurring expenses such as police officer and firefighter salaries or maintaining existing roads.

State law also restricts how the fee rates can be set. Up to this point, the levies that have been discussed were based on a council-commissioned study that concluded these were the highest fees that the county could legally charge. 

Although the council’s second vote on impact fees unanimously passed last month, the move was largely procedural, as multiple council members said they wanted to see the rates lowered, particularly for commercial projects.

“The fee of commercial was egregious — $7,400 per 1,000 square feet. I don’t agree with that,” councilman Cam Crawford said. “I don’t think that that’s practical. … That will have adverse effects on the economy.”

Developers, builders and other construction-related businesses also raised questions about the fees. Last week, some county council members met with about 25 representatives from various building and development industries to hear their concerns and answer questions. And county staff held two informal briefings Tuesday with small groups of council members to discuss impact fee options.

“We will pass something,” councilman Gary Loftus said of next week’s vote. “It won’t be the full monty.”

Some council members initially wanted to lower the impact fees by a specific amount, perhaps even half or a third. The problem with that proposal is that such a reduction is hard to accomplish legally. Under state law, impact fees must improve specific services. If the full fees aren’t collected, then the council would have to pull money from another source, such as raising taxes, to ensure those services are paid for.

But there is another alternative that council members discussed in depth this week. Instead of cutting the overall fees by a set percentage, the council could eliminate specific categories of impact fees, say for roads or stormwater. The council could also shorten the project list, therefore requiring fewer dollars to pay for those items.

“It’s not an all-or-nothing [deal],” Loftus said. “It’s a smorgasbord and we can pick and choose. And I think we’re coming to somewhat of a consensus of what things to pick and what things to choose.”

One way to think of impact fees is like a buffet restaurant. There’s a premium price for the buffet with all the menu options, or certain dishes can be ordered a la carte at discounted rates.

So rather than approve the maximum impact fees allowed (i.e. the buffet), council members are considering an option that would include just those impact fees for certain services (i.e. the a la carte option): public safety, including fire, police, the animal shelter and the emergency operations center; recreation, including beach accesses, trails, boat landings and parks; and waste management recycling centers.

Under this proposal, the cost of a new house would increase by $1,236 and retail fees would increase by $1,797 per 1,000 square feet, according to county records.

Those are lower than neighboring Georgetown County’s impact fees, which are $3,844 per new home and $2,132 per 1,000 square feet of retail space.

So how did county leaders get those lower prices?

The biggest savings would come from eliminating the impact fees for road construction.

That would trim the residential fee by $3,113 and the retail rate by $5,034 per 1,000 square feet. County officials said there are already other sources paying for county road projects, such as the nearly $600 million RIDE III program.

“A lot of the road things, we can get the money from somewhere else,” Horry County Council Chairman Johnny Gardner said. “So I think for right now … we can put that to the side and adjust it the next year or the year after.”

County officials pointed out that the budget they approved last month includes a $45-per-home increase in the county’s annual stormwater fee. That hike will pay for new staffing, equipment and projects, meaning an additional impact fee for stormwater infrastructure should not be necessary.

“We didn’t do what I’d call due diligence between [comparing] our budget and impact fees,” Vaught said of the overlap.

County officials are also considering eliminating the proposed impact fees for EMS. That service is already funded by countywide taxes and service charges. County staff are concerned about the possibility of doubly taxing the residents of the unincorporated areas by tacking on impact fees. If the EMS impact fee wasn’t approved, that would reduce the residential rate by $154 and the retail one by $762 per 1,000 square feet.

Lastly, the county is also considering trimming recreation centers from their list of projects funded by the proposed impact fees. That’s because the county is looking at paying for those facilities with hospitality fee revenues and other funding sources. If the county didn’t charge an impact fee for the rec centers, that would trim $335 off the residential impact fee rate. There would be no change to the retail rate because it’s not affected by that component.

“I’ve got some council members that want the fully funded version to pass,” Gardner said. “I’ve got some council members that don’t want it to pass at all. … But everybody else on council, I think, if it’s in the middle they want it to pass. They just want to tune up the numbers if we can.”

Loftus said he still considers the retail rate high, but he also sees how that could incentivize the redevelopment of older shopping centers.

“We have a lot of empty windows right now,” he said. “And the smaller retailers and so forth can get into existing buildings and they wouldn’t have to pay because the buildings are already built.”

So far, county officials said the building and development industry leaders they’ve spoken with have been pleased with the proposed changes. They found those more workable than the maximum rates, and they said the changes reflect a willingness on the part of council to ease into the fees and develop a process for managing a smaller program rather than the largest one possible.

“The fact of the matter is we have been presented with a Rolls-Royce study recommending the highest level of service legally defendable,” said G3 Engineering’s Felix Pitts, who has publicly questioned the fairness of the maximum fee system. “The county has no experience administering an impact fee. We’ve never had one here locally. And less is more in this situation.”

Pitts said implementing a smaller fee — rather than the maximum amount — would allow the local building and development markets to adjust to the changes.

“You don’t want to just jump off a cliff,” he said. “Council’s making the right decision putting the toe in the water first rather than just jumping in the pool. Check the temperature of the water rather than just jump in head first.”

Despite all the recent chatter about the 2018 referendum and an impact fee mandate, Crawford said that vote doesn’t mean council should shoot for the highest fees.

“The public expects us to get it right,” he said. “And I don’t think the referendum is a permission slip to shut down all future commercial activity in the unincorporated areas.”

Although council members appear to be galvanizing around a plan for impact fees, some questions remain.

For example, county staff have said the impact fees should be collected when a building permit is issued. That’s how the fees are collected in other parts of the state and county staff maintain that’s the simplest option. Developers, however, have pushed back against that idea, saying it would be better to make the fees due when a certificate of occupancy is issued or at the final inspection.

Another question is when the new fees will take effect. Some real estate industry leaders have asked council to hold off on collecting the fees until January, though a few council members adamantly insisted they won’t wait that long. Once the final rates are set, several county leaders said they expect to begin collecting the fees in the coming months, although not next week.

However, they also remain concerned about having the staff and procedures in place to handle the changes.

“It’s going to take a certain amount of bureaucracy set up to handle this,” Vaught said.

One concern that has emerged in recent weeks is whether steep impact fees will hamper the efforts of the Myrtle Beach Regional Economic Development Corp. (EDC), the county’s industry recruitment arm.

Last month, EDC President Sandy Davis told county leaders that the area lacks industrial buildings, meaning new ones must be built for companies moving to or expanding in the area. If the cost of constructing those facilities rises, she said, that impacts her ability to recruit industry.

“One of the reasons we’ve been losing projects is because we have no available industrial buildings,” she said. “So all of our companies that are currently looking and that we are working with would be impacted by these impact fees. … I know that there has to be a solution and I’m not against a solution. I’m just saying, just keep this in mind when we are recruiting.”

That message resonated with councilman Mark Causey, who hopes that reducing the proposed impact fees will alleviate some of those problems.

“My big concern was not so much of the residential stuff but just the potential of hurting all the money that we spent trying to create jobs,” he said. “Some of these businesses are looking. We don’t want to jeopardize that.”

For Jimmy Hardwick, who owns Homewood Metalworks near Conway, the council passing the maximum impact fees would end his plans to build an 80,000-square-foot manufacturing facility in the western part of the county.

Hardwick’s business employs about 30 people and the expansion would allow him to hire an additional 15 workers. 

He fears other companies will look elsewhere if the highest rates are approved.

“That’s a killer,” he said. “You just can’t do that and stay in business.”

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