City owes 2 school districts money after failing to update impact fees

Evergreen, Vancouver districts shortchanged nearly $1.6 million due to error

By Amy Fischer, Columbian City Government Reporter

Published: April 29, 2016, 5:30pm

Vancouver City Hall (Lou Brancaccio/The Columbian)

The city of Vancouver owes the Evergreen and Vancouver school districts nearly $1.6 million after neglecting to update its computer system for almost three months following a school impact fee increase in January. In addition, builders of Evergreen district homes were overcharged.

As a result of the city’s error, developers of more than a dozen single-family and multi-unit housing development projects were undercharged by thousands of dollars each. The city has consulted with its attorneys and determined that legally, it cannot go back to the developers and demand more money, said Chad Eiken, the city’s community and economic development director. The state Land Use Petition Act limits the ability of the city to collect the difference because the land-use decisions were not appealed and therefore are final, he said.

City Manager Eric Holmes has met with superintendents of both school districts about paying the money in a time frame “that meets everyone’s interests,” he said Thursday. However, even though the school districts understand it was a mistake, they won’t forgive the debt. The city owes $1.19 million to Evergreen Public Schools and $393,000 to Vancouver Public Schools.

“Oh, heavens no,” Superintendent John Deeder of Evergreen Public Schools said Thursday. “I can’t forgive the money. … I’ve got to look my taxpayers in the eye. We need facilities. I can’t forgive a million dollars, or whatever it is.”

Pat Nuzzo, communications director for Vancouver Public Schools, said, “We are collaborating with city staff on resolving this matter in a way the works for the city, the school district and our taxpayers.”

Local governments charge impact fees on new development projects in an attempt to recover the costs to provide the public facilities required to serve the new development, according to the Municipal Research and Services Center. Adopted by each district’s school board, the fees are based upon a formula most school districts use, one that’s mostly driven by growth and the cost of construction of new school facilities, said Todd Horenstein, Vancouver Public Schools’ assistant superintendent for facility support services. The district’s last fee hike was about six years ago, he said.

On behalf of the school districts, the Vancouver City Council approved updated school impact fees in December for Evergreen and Vancouver districts. The new fees went into effect Jan. 6. However, nobody noticed until March 17 that the fee schedules hadn’t been updated in city computers, Eiken said.

During that gap, the city issued five land-use approvals for apartment projects and 11 single-family residential building permits that were undercharged a total of $1.58 million for school impact fees, according to city documents.

In addition, 32 single-family residential building permits issued in the Evergreen school district, which lowered its single-family rate, were overcharged by $889 each. Refund details haven’t been worked out yet between the city and the district, Eiken said, adding that affected people could start by contacting the school district.

Impact fees do not “lock in” until the city either issues preliminary land use approval or a building permit. Fees quoted at the pre-application stage are not locked in because they’re estimates. The city gave 14 projects at the pre-application stage an incorrect fee quote.

The blunder happened due to a “breakdown of communication between two teams in my department,” Eiken said Thursday. “It was a big mistake and staff feels terrible about it. We’re going to learn from it and make sure it doesn’t happen again.”

Staff updated the fee schedules immediately. The department is setting formal procedures in place to ensure the error isn’t repeated, Eiken said.

The city has been a pass-through agency for the collection of school district impact fees for 20 years, and fee updates happen periodically. This is the first time there’s been a gap in updating the fees.

Ryan Hurley, owner of Hurley Development of Vancouver, was undercharged by nearly $1.2 million for the 240-unit apartment complex he’s planning to build at Southeast Third Street and 192nd Avenue. The 182 percent fee hikes came months into the planning process with the city, and budgets already had been established, he said Thursday.

“Had this increase occurred, it more than likely would have resulted in a $42 million project not moving forward,” he said, questioning why the school districts had hiked fees so dramatically.

“In an affordable housing crisis, a (nearly) 200 percent increase is just not feasible or responsible,” Hurley said. “I feel it’s a shame that the city is caught in this circumstance.”

Jamie Howsley, a Vancouver land-use attorney with the Jordan Ramis law firm and a member of the city’s Affordable Housing Task Force, said the school impact fee hikes won’t be borne by the developers. They’ll be reflected in the higher sale prices of homes or in higher rents, which is counterproductive for a city wanting more affordable housing.

“There seem to be a lot of things working against each other,” Howsley said.