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Waco council to vote on $4,500 fee for new homes, with wide exemption area
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Last: 3 yr ago by BaylorGuy314
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As a homebuilder, this has me frustrated.
First, let's look at a map.
The red line is Waco ETJ.
The light yellow shaded area is Waco City Limits.
And anything inside the green (which basically means from Valley Mills Drive to Bellmead and Loop 340 to MCC) is exempt from this fee.
1. MORE LAND, LESS CATTLE - Part of the issue is that the City has expanded their limits and ETJ enormously. The Waco ETJ is over double the size of the city limits as obvious in the picture above. Waco took on all of that years ago because they wanted the ability to potentially annex that area and tax it in the future as Waco grows, which is all fine and good but they don't want to add the infrastructure today to all of those places. That makes sense as it's a huge area and could be cost prohibitive to do but except...
They now want to charge a $5K fee on each home built in the ETJ...for what? No city services (no fire/police/trash/etc). No city water. No city sewer. Most of the ETJ has a higher density of cows/sq mile than humans/sq mile. Simultaneously, they are already making developers building in the ETJ construct a neighborhood to the exact same specs as if it's in the city limits because they want to be able to potentially tie city services into it later.
That greatly increases development cost when building lots in the ETJ before you even consider this new fee, which will only increase cost further. All that's fine except that there is no plan or timeline on getting city services to almost any of the ETJ so you are penalizing people and increasing cost while expenses to you aren't increasing at all.
In reality, this fee for homes in the ETJ (and, in reality, the already-existing policy of forcing developers to build to city limit specs in the middle of nowhere) is just a way for them to pocket money now and discourage growth on the outside of the city while simultaneously trying to increase density inside the city limits where they can generate tax revenue today.
They'll tell you that they will use the monies from ETJ lot fees to hedge their cost of extending utilities into the ETJ in the future but we all know this- even if well intentioned - is a farce because it could be a decade or more before utilities are extended to some of these areas and all of that lot fee money will long since be spent.
2. EXPANSION TAX - Even inside the long-existing city limits they are trying to impose these fees, which raises a bunch of questions.
The argument for the fee is that, as Waco grows, there is increased growth on the edges of the City Limits. And building on the edge of the city limits requires the city to extend utilities/services into those areas. Extending utilities farther from the city center into less dense (at current, at least) areas is costly and, due to the lower density, it will take far more years of normal taxation to recover this upfront expense.
There is one issue with this - by having extended the city limits out that far (in most cases, many years ago) and having minimal infrastructure in those areas to-date, you've already been receiving regular city taxes for decades for areas in which you had limited expenses. That excess taxation (normal taxes; lesser cost) wasn't put aside, it was simply spent on other infrastructure needs closer to city center. Now that the city is growing and is obligated to extend the services within the city limits, the cost is prohibitive and no longer in the city's favor.
Their answer is to basically tax new builds inside the city limits to help "recover" infrastructure that they are already obligated to provide. They say that it's to avoid increasing everyone's taxes and while there may be a hint of truth to that (see #3 below about why I'm not so sure), most city taxes really cover maintenance and on-going expense, not one-time expenses.
3. EMPTY PROMISES - Part of the reconciliation of this is that the city is saying that, by virtue of this fee, there will parts of the infrastructure cost currently put on developers that will be able to be absorbed by the City. But this won't happen. Real world example - a multi-phase subdivision with multiple entrances inside the City Limits. The city is saying, "Yes, we are going to make you tie into this extremely poor quality road today as a secondary entrance and, as the phases in the subdivision grows, those lot impact fees will be accumulated so that the secondary entrance road is improved when the time comes." But it won't. The reality is that they will use the lot impact fees to hedge some of their cost and the improvement of the road will be a separate project many years down the road when it becomes a problem. And that additional cost - if the road improvement is approved - won't come out of impact fee funds received but will be paid for by all taxpayers. Further, and perhaps more importantly, there is absolutely no guarantee that the city will decrease the cost of the developers infrastructure requirements. They've indicated they SHOULD be able to decrease developer cost by collecting this impact fee but the reality is that the developers cost won't go down by near as much as the impact fees will go up. Again, this will allow the city to divert funds to other areas of town and is not so much a hedge on cost as it is an additional form of taxation on new growth.
4. UNAFFORDABLE - Developer costs won't go down - or not by much. But this fee - be it $4500 or $5500 - will get passed onto builders and then directly onto homebuyers, increasing the cost of new construction in a market that is already extremely strained on inventory. This will push $/SF up throughout McLennan County both on new construction and raise sales prices of existing homes as a secondary result.
The A&M Real Estate Center looks at Housing Affordability by MSA regularly. They do this by looking at median market price of MLS home sales vs median income. Waco is already considered less affordable than Harris County and several other large MSAs per this metric and is soon to surpass DFW. While home prices in those areas tend to be higher, the average incomes are as well. But what is less obvious in those figures is that Waco's median home price is still low thanks to lesser expensive homes in less desirable inner-city areas. All MSA's have this but Waco's is more pronounced. Thus, the affordability of *new* homes is actually worse in Waco (when considering median new home cost vs median income) than most major MSA's in Texas (with the exception of some higher net worth counties/communities and, say, Austin) and this new fee will only increase that cost. This doesn't help Waco grow and could further strain the market.
LET'S GET REAL - This is nothing more than the City recognizing that they have an obligation to serve an large geographical area. Waco is growing. Growth costs money. The City can't deviate funds from other areas to pay for it and they don't want to raise taxes, which I get- after all, that's super unpopular. And while they want to tax less dense areas they don't want to have to extend infrastructure to those areas that will make them too much more dense because it'll take longer to recover cost.
EDIT: Further, as CorsicanaBear points out below, the City has a huge donut problem. The City knows the inner city schools suck and there are tons of areas in the inner city that are run down so they want to keep this trend from continuing.
Recognizing all of that, they are just taxing new growth to keep people from moving outside of the city center because they don't want to spend the money developing on the outside of even their own city limits.
However, I believe the city is being disingenuous by (1) imposing this tax in areas well inside their city limits where they have been receiving tax money for years while simultaneously underserving the area; (2) by imposing this in the ETJ (which is enormously too large for the city's size due to their own greed and desire to keep other cities at bay) when they have no intention whatsoever of serving that ETJ with any city services for at least a decade, if not a generation, and (3) by trying to pass it off as if this will save taxpayers money and only impact new homes (it won't because long term maintenance/etc is going to cost way more than one-time fees and that will get pushed onto all homeowners).
First, let's look at a map.
The red line is Waco ETJ.
The light yellow shaded area is Waco City Limits.
And anything inside the green (which basically means from Valley Mills Drive to Bellmead and Loop 340 to MCC) is exempt from this fee.
1. MORE LAND, LESS CATTLE - Part of the issue is that the City has expanded their limits and ETJ enormously. The Waco ETJ is over double the size of the city limits as obvious in the picture above. Waco took on all of that years ago because they wanted the ability to potentially annex that area and tax it in the future as Waco grows, which is all fine and good but they don't want to add the infrastructure today to all of those places. That makes sense as it's a huge area and could be cost prohibitive to do but except...
They now want to charge a $5K fee on each home built in the ETJ...for what? No city services (no fire/police/trash/etc). No city water. No city sewer. Most of the ETJ has a higher density of cows/sq mile than humans/sq mile. Simultaneously, they are already making developers building in the ETJ construct a neighborhood to the exact same specs as if it's in the city limits because they want to be able to potentially tie city services into it later.
That greatly increases development cost when building lots in the ETJ before you even consider this new fee, which will only increase cost further. All that's fine except that there is no plan or timeline on getting city services to almost any of the ETJ so you are penalizing people and increasing cost while expenses to you aren't increasing at all.
In reality, this fee for homes in the ETJ (and, in reality, the already-existing policy of forcing developers to build to city limit specs in the middle of nowhere) is just a way for them to pocket money now and discourage growth on the outside of the city while simultaneously trying to increase density inside the city limits where they can generate tax revenue today.
They'll tell you that they will use the monies from ETJ lot fees to hedge their cost of extending utilities into the ETJ in the future but we all know this- even if well intentioned - is a farce because it could be a decade or more before utilities are extended to some of these areas and all of that lot fee money will long since be spent.
2. EXPANSION TAX - Even inside the long-existing city limits they are trying to impose these fees, which raises a bunch of questions.
The argument for the fee is that, as Waco grows, there is increased growth on the edges of the City Limits. And building on the edge of the city limits requires the city to extend utilities/services into those areas. Extending utilities farther from the city center into less dense (at current, at least) areas is costly and, due to the lower density, it will take far more years of normal taxation to recover this upfront expense.
There is one issue with this - by having extended the city limits out that far (in most cases, many years ago) and having minimal infrastructure in those areas to-date, you've already been receiving regular city taxes for decades for areas in which you had limited expenses. That excess taxation (normal taxes; lesser cost) wasn't put aside, it was simply spent on other infrastructure needs closer to city center. Now that the city is growing and is obligated to extend the services within the city limits, the cost is prohibitive and no longer in the city's favor.
Their answer is to basically tax new builds inside the city limits to help "recover" infrastructure that they are already obligated to provide. They say that it's to avoid increasing everyone's taxes and while there may be a hint of truth to that (see #3 below about why I'm not so sure), most city taxes really cover maintenance and on-going expense, not one-time expenses.
3. EMPTY PROMISES - Part of the reconciliation of this is that the city is saying that, by virtue of this fee, there will parts of the infrastructure cost currently put on developers that will be able to be absorbed by the City. But this won't happen. Real world example - a multi-phase subdivision with multiple entrances inside the City Limits. The city is saying, "Yes, we are going to make you tie into this extremely poor quality road today as a secondary entrance and, as the phases in the subdivision grows, those lot impact fees will be accumulated so that the secondary entrance road is improved when the time comes." But it won't. The reality is that they will use the lot impact fees to hedge some of their cost and the improvement of the road will be a separate project many years down the road when it becomes a problem. And that additional cost - if the road improvement is approved - won't come out of impact fee funds received but will be paid for by all taxpayers. Further, and perhaps more importantly, there is absolutely no guarantee that the city will decrease the cost of the developers infrastructure requirements. They've indicated they SHOULD be able to decrease developer cost by collecting this impact fee but the reality is that the developers cost won't go down by near as much as the impact fees will go up. Again, this will allow the city to divert funds to other areas of town and is not so much a hedge on cost as it is an additional form of taxation on new growth.
4. UNAFFORDABLE - Developer costs won't go down - or not by much. But this fee - be it $4500 or $5500 - will get passed onto builders and then directly onto homebuyers, increasing the cost of new construction in a market that is already extremely strained on inventory. This will push $/SF up throughout McLennan County both on new construction and raise sales prices of existing homes as a secondary result.
The A&M Real Estate Center looks at Housing Affordability by MSA regularly. They do this by looking at median market price of MLS home sales vs median income. Waco is already considered less affordable than Harris County and several other large MSAs per this metric and is soon to surpass DFW. While home prices in those areas tend to be higher, the average incomes are as well. But what is less obvious in those figures is that Waco's median home price is still low thanks to lesser expensive homes in less desirable inner-city areas. All MSA's have this but Waco's is more pronounced. Thus, the affordability of *new* homes is actually worse in Waco (when considering median new home cost vs median income) than most major MSA's in Texas (with the exception of some higher net worth counties/communities and, say, Austin) and this new fee will only increase that cost. This doesn't help Waco grow and could further strain the market.
LET'S GET REAL - This is nothing more than the City recognizing that they have an obligation to serve an large geographical area. Waco is growing. Growth costs money. The City can't deviate funds from other areas to pay for it and they don't want to raise taxes, which I get- after all, that's super unpopular. And while they want to tax less dense areas they don't want to have to extend infrastructure to those areas that will make them too much more dense because it'll take longer to recover cost.
EDIT: Further, as CorsicanaBear points out below, the City has a huge donut problem. The City knows the inner city schools suck and there are tons of areas in the inner city that are run down so they want to keep this trend from continuing.
Recognizing all of that, they are just taxing new growth to keep people from moving outside of the city center because they don't want to spend the money developing on the outside of even their own city limits.
However, I believe the city is being disingenuous by (1) imposing this tax in areas well inside their city limits where they have been receiving tax money for years while simultaneously underserving the area; (2) by imposing this in the ETJ (which is enormously too large for the city's size due to their own greed and desire to keep other cities at bay) when they have no intention whatsoever of serving that ETJ with any city services for at least a decade, if not a generation, and (3) by trying to pass it off as if this will save taxpayers money and only impact new homes (it won't because long term maintenance/etc is going to cost way more than one-time fees and that will get pushed onto all homeowners).
Taxing people for not wanting to live in the bad parts of town and send their children to the crappy schools. Seems fair.
Two things. 1) The value of my home just went up by $4,500. 2) Ten years from now be prepared for massive protests against gentrification and the destruction of historically whatever neighborhoods.
Two things. 1) The value of my home just went up by $4,500. 2) Ten years from now be prepared for massive protests against gentrification and the destruction of historically whatever neighborhoods.
Illigitimus non carborundum
Taxing new nice things....
If you leave historically black and Latino neighborhoods... its white flight and you are a racist.CorsicanaBear said:
Taxing people for not wanting to live in the bad parts of town and send their children to the crappy schools. Seems fair.
Two things. 1) The value of my home just went up by $4,500. 2) Ten years from now be prepared for massive protests against gentrification and the destruction of historically whatever neighborhoods.
If you return and move back into historically black and Latino neighborhoods...its white gentrification and you are a racist.
Get it?
Two-sided coin with the same rigged result no matter heads or tails.Redbrickbear said:If you leave historically black and Latino neighborhoods... its white flight and you are a racist.CorsicanaBear said:
Taxing people for not wanting to live in the bad parts of town and send their children to the crappy schools. Seems fair.
Two things. 1) The value of my home just went up by $4,500. 2) Ten years from now be prepared for massive protests against gentrification and the destruction of historically whatever neighborhoods.
If you return and move back into historically black and Latino neighborhoods...its white gentrification and you are a racist.
Get it?
Redbrickbear said:If you leave historically black and Latino neighborhoods... its white flight and you are a racist.CorsicanaBear said:
Taxing people for not wanting to live in the bad parts of town and send their children to the crappy schools. Seems fair.
Two things. 1) The value of my home just went up by $4,500. 2) Ten years from now be prepared for massive protests against gentrification and the destruction of historically whatever neighborhoods.
If you return and move back into historically black and Latino neighborhoods...its white gentrification and you are a racist.
Get it?
I'm okay with white flight as long as there is no redlining to keep people like myself from buying in those area. I'm one of those minorities that fled to the suburbs as soon as I had children. Better school districts and since a pay good amount of taxes my child needs to get a good public education.
Gentrification is only bad if you force the people currently there out. There a way of fixing up the neighborhoods without making the price skyrocket to the point where people who currently inhabit the place can no longer live there. Those people will all have to move to some other place in the area and then you are just repeating the cycle again.
The only thing I know of is to give longstanding residents a cap on property taxes.ImwithBU said:There a way of fixing up the neighborhoods without making the price skyrocket to the point where people who currently inhabit the place can no longer live there. Those people will all have to move to some other place in the area and then you are just repeating the cycle again.Redbrickbear said:If you leave historically black and Latino neighborhoods... its white flight and you are a racist.CorsicanaBear said:
Taxing people for not wanting to live in the bad parts of town and send their children to the crappy schools. Seems fair.
Two things. 1) The value of my home just went up by $4,500. 2) Ten years from now be prepared for massive protests against gentrification and the destruction of historically whatever neighborhoods.
If you return and move back into historically black and Latino neighborhoods...its white gentrification and you are a racist.
Get it?
For example, let's say their house is valued at $100K but market value really says it's worth $200K due to development in the area. At a tax rate of, say, 3%, their prop taxes today are $3K instead of $6K if valued at market rates. You can acknowledge a market value of $200K but then limit their taxes to the $3K and then increase annually off that instead of jumping it up to market, dropping the exception when the property transfers to a new owner.