Attorneys argued the Fort Mill school impact fee case. Here’s what the judge heard.
Builders made their case Monday in a York County courtroom for why they believe it shouldn’t cost so much to build a home in the Fort Mill School District.
Homebuilder companies and trade groups filed a suit in September 2018 after York County raised impact fees for every new residence built in the Fort Mill school district. The $2,500 fee, in place since 1996, gave way to a more than $18,000 charge for a home, more than $12,000 for an apartment.
Impact fees are charges on new construction. The fees help pay for public infrastructure brought on by community growth. The Fort Mill School District fee pays for school construction and related needs.
Judge William McKinnon heard arguments in the case Monday.
The trial could have implications throughout South Carolina. The builders are challenging the state law that allows impact fees, which now are present in many fast-growing areas. Fort Mill, Rock Hill, Tega Cay and other municipalities have them. The Clover School District wants to add them, and they’ve been discussed by county councils in York, Lancaster and Chester counties.
Attorneys representing York County and South Carolina argued in favor of the fees. They argued there isn’t anything about the new fee that’s outside what state law allows, and builders simply don’t like the higher costs.
“Construction costs change all the time,” said Sarah Spruill, an attorney representing York County. “Outside of a protected vested interest, there’s no reasonable expectation on anybody’s part — on the part of any homebuilder — that costs won’t change. And what we’ve got here is a complaint that the cost of building has gone up.”
Attorneys for the Homebuilders Association of South Carolina and local building companies argued the new fees are arbitrary and state law doesn’t set a cap on how much communities can charge. They argued builders who bought property before the fee increase now have a hard time building at the right price.
Builders say their main concern is the almost overnight increase -- and so high an increase -- on property they’d already purchased with the business model of a $2,500 per home fee.
Mukesh Patel owns Soni Homes. He started building in York County more than 20 years ago. Patel testified he started building in the Fort Mill district at about $150,000-$200,000 per home. Now his homes cost $400,000-$700,000.
Patel said the $2,500 builders used to pay was within a range that made financial sense. He’s only paid the new fee once and had seven permits canceled since the new fee began, Patel testified. He has eight or nine more lots, he said, purchased before the higher fees began.
“We cannot pass this amount to the new buyers,” Patel said. “Because it’s a substantial increase.”
Patel testified he hasn’t purchased more land within the district.
“I could not find any that would make sense in a business way,” he said.
John Shea with Shea Homes offered similar testimony. His company has two homes under construction now in the Habersham subdivision, and 70 lots left in Enclave at Massey. Shea said he paid the higher impact fees 26 times so far.
When selling their land, landowners don’t consider impact fees that builders will have to pay, he said. Meanwhile, he said, homeowners can choose to buy homes built before the fees increased or they can choose other areas to live.
Shea also builds homes in the $400,000 price range. Patel and Shea said it would cost them, but they’d have to build on the property bought with the expectation of lower impact fees.
“We would build through it,” Shea said.
Mark Nix, executive director of the South Carolina Homebuilder Association since 2007, said most impact fees are a matter of hundreds of dollars. He’s only aware of one, in Maryland, higher than the new Fort Mill district fees.
Nix testified York County has done a fantastic job of growing economic development, but that housing is a major piece to that puzzle.
“A house is where a job goes to sleep at night,” Nix said. “You need those.”
Impact fees often go to school, fire, police and similar public needs. A drastic housing price increase could hurt some of the same people who fill those jobs, Nix testified.
“You’re completely pricing out those people from living in the places where they work,” he said.
Attorneys for the county and state say there isn’t anything unconstitutional about the fees, as claimed by the plaintiffs. Spruill notes the original impact fee, set in 1996, came with a study showing it could be set at more than $5,000. It was a compromise then, she argues, to set the fee at $2,500 where it remained for two decades.
“It stands to reason that school costs have increased since 1996, so there’s nothing inherently shocking about the finding that the impact for each new home had increased pretty dramatically,” Spruill said.
She calls the impact fee decision a routine one from a municipality making the best decision it can on funding.
“Local governments can pass ordinances that impact growth and/or increase costs,” Spruill said. “They do it all the time.”
Zoning, building code and permitting costs, along with moratorium decisions, are just some examples, she said.
“There is a long list of things that are accepted within the powers of local governments that affect builder costs and timing windows,” Spruill said.
Arguments will last into Tuesday. It could be some time before the judge in the non-jury trial renders his ruling.
