High impact: Could ‘developmental impact fees’ ease Downtown’s growing pains?

When the 76-story residential tower at 8 Spruce St. opened in 2011, it brought 900 new households — and their associated stress on local infrastructure — to the booming Downtown area. Would “developmental impact fees” help the city pay for the necessary upgrades to accommodate future development? Downtown Express takes a deep dive into the issue.
Associated Press / Mary Altaffer


Downtown’s population boom is off the charts, and to deal with it, Community Board 1 is thinking outside the box.

Between 2000 and 2013, the number of Lower Manhattan residents increased by 77 percent — and by 240 percent specifically in the Financial District — but all that development imposes costs on the community, and CB1 is considering whether so-called “developmental impact fees” — a one-time tax on residential developers to fund community needs — would be a feasible way to pay those costs.

CB1 hasn’t yet taken a formal position on the idea of impact fees — and there’s no proposal or specific request for city agencies or legislators to consider — but on April 9 two urban planners from the Fund for the City of New York’s community planning fellowship presented to CB1’s land use committee the findings of a study on impact fees and how the money raised could be used to fund community needs in the district.

“We know from the CB1 District Needs Statement that there has been a significant residential growth in CB1 communities, which has led to the increase in the need for schools, open spaces, and public infrastructure in the neighborhoods,” said Sarita Rupan, one of the fellows who presented the study, adding that the developmental impact fees “could help generate a large amount of revenue, which could be used by the communities to sustain growth.”

There are 29 states that allow municipalities to charge impact fees, which require developers to pay a specific amount of cash per square foot or per unit into a fund earmarked for local community needs, which could range from a new school to more green space. For instance, San Francisco’s Balboa Park neighborhood charges an impact fee of $10.70 per square foot of residential development, according to the presentation. If 2 Gold Street, a 51-story residential building that opened in 2005, was subject to the same impact fee, the building would have generated nearly $6.5 million for the neighborhood, the planners said.

If New York City charged the same impact fee of $10.70 per square foot, it would have generated nearly $250 million from new construction and residential conversions in the Downtown area between 2000 and 2016. During the meeting, committee members quipped how helpful that type of funding would have been for the community during the post-Sandy recovery in 2012 — as well as paying for the still-unfunded resiliency measures needed to protect Downtown from future superstorms.

The potential benefits of impact fees go beyond funding resiliency projects, according to the presenters. With the massive influx of new residents comes the need for more schools, parks, public transit, and even sanitation trucks.

Photo by Tequila Minsky Residential buildings such as the Frank Gehry-designed, 900-unit tower at 8 Spruce St. are free to put their garbage and recycling out on the sidewalk the day before collection any time after 4 p.m. — just in time for rush hour.

Photo by Tequila Minsky
Residential buildings such as the Frank Gehry-designed, 900-unit tower at 8 Spruce St. are free to put their garbage and recycling out on the sidewalk the day before collection any time after 4 p.m. — just in time for rush hour.

As Downtown Express reported in 2016, by next year, 19 more tons of garbage will be piled on Lower Manhattan’s streets every collection day.

The money raised by impact fees could also go towards making subway stations accessible for the disabled and elderly — another necessity as the population of Downtowners aged 65-plus increased by 79 percent between 2000 and 2010.

But CB1 members were not yet convinced that impact fees would be the best way to address Downtown’s growing pains.

“There’s a lot more information that we need to know before we can conclude that impact fees are something that is a feasible way for us to help defray the additional infrastructure costs of the increase of development in our area,” said Patrick Kennell, co-chairman of the CB1 land use committee.

While any type of impact-fee proposal is still a long way off, Kennell said he’s glad CB1 is taking leadership on the issue by having the study conducted.

But other city-planning experts have doubts on whether impact fees are even legally possible in New York — or at least worth the heavy lift of passing the necessary legislation. Vicki Been, former commissioner of Housing Preservation and Development, said developmental impact fees are constrained by a series of U.S. Supreme Court rulings, most recently Koontz v. St. Johns River Water Management District in 2013.

The city would have to identify a specific purpose for an impact fee as well as whether the harm justifies such a regulation. In the 2013 case, St. Johns issued a permit to Coy A. Koontz to develop his property, on the condition that he make some of his property a conservation area and did mitigation work in surrounding areas. The high court ruled 5 to 4 in favor of Koontz, writing that the government cannot conditionally approve permits in this way, unless the fees requested are directly associated with the impacts from the proposed land use.

“There would immediately be a lot of legal questions,” said Been, who is now a faculty director at New York University’s Furman Center, which researches housing and urban policy.

She also pointed out that New York already has indirect fees and requirements that function in a similar way to developmental impact fees. Affordable-housing requirements for developers are an indirect way the developers invest in the community. New York’s environmental impact reviews through the city and state require certain mitigation efforts on the part of developers before projects are even approved.

“How much more could you force developers to bare without shutting down development?” Been said. “That’s a tough question.”

Another question, she said, is what legal constraints exist with fees implemented in coordination with environmental reviews?

Pinpointing who is impacted by developments can also be difficult. Those who work and go to school in the district could be affected, but they don’t live in the community the funds would be going back into.

“There’s kind of a myth that you can say this building is built in my community district, therefore all of its harm must be in my community district,” Been said.

Developmental impact fees or no, CB1 is looking for ways to deal with to the rapidly changing face of Lower Manhattan.

“We’re not going to stop development,” said CB1 chairman Anthony Notaro. “I think we all recognize that.”

The goal, he said, is developing the neighborhood in a way that benefits everyone. The next step for the board is to get all the players at the table to discuss the possibilities of whether impact fees could work in Lower Manhattan.

“We know there’s a problem, and we want all stakeholders to be able to review it and have some input,” he said. “Our study is just one piece of the puzzle.”

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