After approving fees on new developments for their impacts on schools and parks, the City Council concluded several months’ worth of work and research by passing transportation fees on Jan. 4, despite a staff recommendation to delay action until the Town Center visioning process and Comprehensive Plan amendment are complete.

Impact fees are a tool in the Washington State Growth Management Act (GMA) to help cities bring in funds to improve infrastructure that can be strained by more building and density; in other words, to ensure that growth pays for growth. A major issue in the 2015 campaign season and election, density and growth have been widely debated and now somewhat addressed.

New residential units (single-family, multi-family and senior housing) and non-residential uses that are either new or are a change of use are now subject to transportation impact fees based on the number of trips generated.

But the business community pointed out an adverse effect of the transportation fee ordinance: that by charging fees for restaurants and retailers, the Council could discourage that type of development on the Island and force residents to drive off-Island for dining, shopping and other services.

In passing the new transportation impact fees, the Council voted unanimously to exempt retail, supermarkets and restaurants throughout the Island from paying the fees. They said that businesses like those serve a “broad public purpose” for Islanders, who want to see small restaurants, independent shops and local fare, according to feedback from the Town Center visioning process.

But the fees must be paid somehow; by granting exemptions, the city is liable to “backfill” from other public funds, namely real estate excise tax (REET).  Staff estimated the cost of the exemption, which would shift “the cost of growth accommodating infrastructure back to the city,” to be $173,000 over 20 years.

The Council agenda bill noted that that number could be “quite low” and “not reflect desired and likely land use in the Town Center.” For 2016, Mercer Island’s obligation could be $214,235, as the city would pay the impact fees for Pagliacci Pizza and the restaurants and retail planned for the Legacy project.

Development Services Director Scott Greenberg said he was “uncomfortable recommending any exemptions, knowing it would be recommending a blank check.” He said that the city could continue to collect SEPA mitigation fees for certain projects instead of switching to impact fees, and recommended delaying action so staff could focus on other projects.

Mayor Bruce Bassett said that sooner would be better to adopt impact fees, as there may be pent up demand after the Town Center visioning is done and the moratorium on downtown development is lifted, or expires.

Councilmember Dan Grausz supported an option that would exempt all non-residential land uses throughout Mercer Island, not just retail and restaurants.

“The broad public purpose is that it is becoming increasingly difficult to travel off-Island… and it’s only going to get worse starting in 2017,” Grausz said. “We are losing businesses, not gaining them, and this would exacerbate the problem.”

Councilmember Benson Wong agreed, noting that “people want more vibrant businesses and not exempting them would be counterproductive.”

Without any exemptions, transportation impact fees were estimated to generate $5.4 million to fund eligible, growth accommodating transportation infrastructure over the next 20 years. Mercer Island’s transportation impact fees are all under $4,000, with the highest being $3,882 for a new single family dwelling and $2,213 for multi-family. Sammamish has the highest in the area, at about $16,000.