Supervisors Oppose Bill That Would End Proffers
Senate Panel Passes A Flat-Rate System

By Jonathan Mummolo
Washington Post Staff Writer
Sunday, February 10, 2008

A Senate committee has approved a bill that would replace the 30-year-old system under which Loudoun County and other local governments have collected millions of dollars from developers to compensate for the impact of new homes.

Under the bill, local governments no longer would be able to negotiate proffers -- payments made by developers to offset the cost of providing roads, schools and other government services to new residents. Instead of proffers, Loudoun and other Northern Virginia counties would be allowed to charge developers a flat fee of $8,000 per new house.

The Loudoun County Board of Supervisors voted unanimously to oppose the legislation Tuesday, saying it would hamstring the county's ability to manage the effect of growth.

The legislation, Senate Bill 768, also would sharply restrict the county's ability to receive non-cash contributions from developers, such as parkland, libraries, affordable housing units, trees and playground equipment.

Loudoun collects about $47,000 in proffers for each new residence, the highest such figure in the state.

Supervisors voted to "strongly oppose" the bill, saying it was a gift to building industry lobbyists in Richmond.

"Unfortunately, what this is is an anti-taxpayer bill," said board Chairman Scott K. York (I-At Large), "because what will occur is that the development community will forgo paying that which is the result of their development and put it on the backs of us, the taxpayers."

The legislation was endorsed by the Home Builders Association of Virginia -- which helped write the bill -- though the building industry has defended the proffer system in the past.

Mike Toalson, the association's executive vice president, said that the proffer system has gotten out of control in places such as Loudoun and that given the housing slump, developers need an alternative system to do business.

"We can't continue to bear this burden," Toalson said. "We're not there at the legislature in this slump asking to do away with proffers. We could do that, and we might be successful . . . but we're not doing that. What we're doing is bringing forth an alternative -- an honest, good-faith alternative -- that we believe will work for local governments and will work for people wanting housing."

The bill was approved by the Senate Finance Committee on Wednesday and could be voted on by the full Senate this week. Gov. Timothy M. Kaine (D) has not taken a position on it.

Supporters of the legislation cite a study by Stephen Fuller, director of the Center for Regional Analysis at George Mason University. The study, funded by the home builders association, compared the amount of local government revenue generated through proffers with the amount that would have been garnered if the flat-rate impact fees had been in place.

Fuller looked at fiscal 2004 through 2007 and concluded that more revenue would have been generated through flat fees, mainly because the fees would have applied not only to rezoned properties but also to by-right developments, which do not require rezonings and therefore are not subject to proffer negotiations.

But the study examined just Prince William and Chesterfield counties. Prince William would have collected an additional $70 million with impact fees over the four years, Toalson said. In Chesterfield, the difference was $39.3 million.

Critics say the study was not broad enough and did not take into account the particular needs of Loudoun, the fastest-growing county in the state.

"I don't think that Loudoun would benefit from an $8,000 number charged on by-right [development] as well as the rezonings," said Supervisor Lori L. Waters (R-Broad Run). "I think the number would have to be much higher."

Waters also said that if the bill becomes law, the board would be justified in denying more rezoning applications.

"One of the criteria that we take into consideration when we look at rezonings is whether or not they mitigate the fiscal impact [of development]. And if the number is set at $8,000, that is not going to come anywhere close to paying for a high school or . . . a library," she said. "I think we would have greater justification for rejecting the rezoning."

Fuller, the study's author -- who is not taking a stand on the legislation, said critics make a valid point that figures culled from two counties are not definitive evidence that counties everywhere would collect more revenue under the new system. For the policy to work, he said, the fee probably would need to be set differently from one locality to another.

"One size doesn't fit all, I think, would be a legitimate observation," Fuller said, adding that the general concept of applying impact fees across the board to match the revenue previously generated by proffers is sound. "Clearly, by broadening the base, you can lower the number [per house] and still come up with the same total."

The bill offers two caps for impact fees on single-family houses: $8,000 for those in the area covered by the Northern Virginia Transportation Authority and $5,000 for the rest of the state.

The bill's sponsor, Sen. John C. Watkins (R-Chesterfield), has said that the legislation would benefit home buyers most because developers typically pass along the cost of proffers to buyers. Toalson agreed.

"Every single penny of that $47,000 goes into the cost of that house," Toalson said of the average fee charged in Loudoun.

But the legislation has been opposed by slow-growth advocates, who have complained that the complicated and far-reaching bill was introduced without adequate time for review, a criticism echoed by several Loudoun supervisors.

The bill would "obliterate what we have worked [on] for 30 years with respect to the proffer system, only to destroy it in about 30 minutes' worth of work," York said.

"The impact to this county could be tremendously dramatic," said Supervisor Kelly Burk (D-Leesburg), "and I am shocked at how this bill has gone through with no study and no regard to what impact it will have on the Northern Virginia communities."