City explores options to generate revenue

Here’s a question: How does a city make improvements when it doesn’t have the money to spare? Answer — get someone else to pay for them.

The city of Sequim is exploring a number of options to pay for improvement projects without breaking the city’s budget.

The first options are impact fees and/or State Environmental Policy Act mitigation fees.

The two options, impact or mitigation, are in many ways similar. Both target developers and both are established to offset the impacts of increased development. For example, if a developer comes to the city requesting permission to build 900 townhouses, with impact or mitigation fees in place the city can require the developer to help pay for needed improvements in the city.

Impact fees are automatic and a developer must pay them. They are put into the city’s general fund and can be used on all kinds of improvement projects — open space, sewer, water or roadway improvements for example — not just those related to the specific development

SEPA mitigation projects are a little different. The city has to prove that the development will have adverse effects on the surrounding environment. If a proposed project does turn out to negatively impact the area surrounding the development, mitigation fees are enforced. Unlike impact fees, SEPA mitigation fees cannot be used for any needed city improvement. They must be invested in the specific area wherein the impacts occur. As Randy Young of the consulting firm Henderson & Young put it, “We welcome you here but you have to pay for all the things you’ve impacted.”

Young was present at the council’s May 12 meeting to discuss the differences between the two funding systems.

Young said that while growth and development pay a lot into a government, they don’t always pay into the right funds.

“There is not enough money to pay for all of the things citizens want,” Young said. He added that impact fees by no means stop or inhibit development — for developers, impact and SEPA fees are just another cost of doing business.

Young said the council has two other alternatives if it does not wish to adopt either fee: raising taxes or cutting the quality of life.

No action was taken by the council.

The presentation on May 12 was followed by another by consultants Gray & Osborne, this one regarding local improvement districts and transportation benefit districts as two more possible ways of city funding. The difference between LID and TBDs is who foots the bill.

The city has identified three areas for possible local improvement districts, all along Washington Street. LIDS only affect those property owners inside the designated improvement district. Based on a property appraisal, a parcel’s owner would pay a certain amount for any capital improvements within the district. Municipalities can create LIDs regardless of community support but usually a majority of the affected owners have to be in favor.

TBDs are citywide and can take different forms, from license renewal fees to a sales tax increase. In some cases — such as a $20 motor vehicle license renewal fee — a TBD would only affect Sequim residents and business owners.

Others, such as a sales tax increase, would affect anyone shopping in Sequim’s city limits regardless of where they live.

Gary & Osborne recommended the city adopt a establish a 2-percent sales tax increase because it spreads the charges to those who live outside of Sequim but use the city’s roadways and infrastructure.

Councilman Walt Schubert suggested the city create an LID as a demonstration to the community of the positive effect. Councilwoman Susan Lorenzen did not agree, saying LIDs were unfair, taxing only a certain group while benefiting the entire city.
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