New Horry County homes likely to have an added cost — impact fees. What you need to know.

Even though several developers and homebuilders urged the Horry County Council to reconsider or amend a proposed law that would impose fees on new homes and construction, Johnny Gardner, the council chairman, sounded a confident tone last week.

“This is going to happen,” he said of the proposed measure to implement impact fees. “When these guys come to the podium and say, ‘I thought there was some talk about having a committee?’ that’s talk about killing this, that’s what that is. This thing has been read and written and kicked and examined and it always gets killed because they fill this place with people that are against it and people back down. But right now, nobody is backing down.”

After a hearing on the measure Thursday, Gardner said he believed he had the majority of the council behind him to vote to pass the measure, which would be a remarkable feat in a South Carolina county that’s both exploded in growth, and is also home to leaders generally averse to new taxes and fees imposed on businesses.

With impact fees, Horry County would charge developers and homebuilders a one-time fee to help match infrastructure needs with the growth. The county would charge the fee on every new home, hotel, business and apartment building in the unincorporated areas of the county, which have seen more people and increased building in recent years.

The impact fee measure, long debated but never enacted in Horry County, stems from a 2018 ballot referendum in which 72% of voters said they favored the measure. The measure now faces a critical vote at county council’s Tuesday meeting. If the council passes the measure then, it could pave the way for the county to enact the fees just weeks from now. In a county that’s added thousands of new residents and homes each year for the last several decades, the county imposing impact fees represents one of the strongest responses to that growth yet.

Here’s what you need to know ahead council’s vote.

What are impact fees, and how do they work?

Generally speaking, impact fees are a one-time charge on all new buildings in an area, collected to help pay for infrastructure those buildings and people will need. When a new housing development is built, for example, the people living there will need water and sewer lines from the local system into their homes, roads to get in and out, and fire stations nearby in the event their house catches on fire. Local governments, or public agencies, are required to provide all of those infrastructure needs, which cost money. Impact fees help offset the cost.

The purpose of impact fees, according to the South Carolina Supreme Court in 1999, is to “’fairly distribute the capital improvement costs of growth and development among those who are generating the need for the improvements.’” The state made impact fees legal in 1999 and a number of cities and counties around the state now use them, including Charleston, Rock Hill, Georgetown County and Beaufort County.

In Horry County, that means when a developer builds a new subdivision of homes along Highway 90, for example, the developer will be responsible for paying a fee on each new home they built. The same goes for new hotels, apartment buildings, car dealerships, stores, restaurants, storage facilities and more. The Grand Strand Water & Sewer Authority already charges developers impact fees when developers build in places that aren’t yet connected to the authority’s service area.

Once Horry County collects those impact fees, county leaders can then choose to spend the money on infrastructure like roads, fire stations, parks and more. Currently, Horry County could charge up to — but not more than — $4,838 for a new home, $3,274 for a new apartment unit, $2,587 for a new hotel room and $7,439 per 1,000 square feet of a new retail business. Impact fees for stormwater infrastructure could drive those amounts even higher, up to $6,000 for a new single family home in some areas, depending on which watershed the home is in, and up to $8,400 for a new retail business, also dependent on the watershed.

However, things aren’t as simple as that, because impact fees come with a number of rules and conditions.

First, the county has to adopt a general plan of which infrastructure projects — also called capital projects — it wants to put the new money towards. Local governments make these sorts of plans frequently, usually in concert with their annual budgets, and Horry County paid a consulting firm to help it adopt a capital improvement plan for its impact fees two years ago. That plan was included in a study the firm conducted for the county, which was needed before the county could adopt impact fees.

Next, the county has to outline a schedule for which parts of the impact fee will go towards which types of infrastructure projects. If a developer will pay an impact fee for a new home, the county has to outline that a certain amount of that will pay for parks, another amount will pay for fire stations, another amount will pay for roads, and so on. For example, a $4,838 charge on a new single family home could spent this way:

• $814 goes to parks and recreation

• $76 goes to police

• $524 goes to fire and emergency services

• $38 goes to an emergency operations center

• $3,113 goes to transportation infrastructure, like roads

• And $273 goes to waste disposal infrastructure.

Charges for other types of buildings could be broken down differently. For example, new retail stores would contribute greater portions of its impact fees to roads and emergency services, but none at all to parks and recreation. Impact fees can also go towards stormwater projects, based on the watershed the new home or business is built in.

Another stipulation is that county has to spend the impact fee, per the captial plan and the fee breakdown, within three years of collecting it. That means county leaders will have to plan carefully what projects they put the money towards so that they can be sure they’re putting the correct amounts of the fee to the right types of projects within the window of time in which they’re allowed to spend that money.

In total, county administrators estimate that Horry County could collect nearly $22 million in additional revenue each year if growth projections hold true. That could add up to nearly $209 million in new spending over ten years, a sum that’s more than one-third of county’s current RIDE 3 program for road building.

Local advocates like April O’Leary, who heads the anti-flooding group Horry County Rising, said last week that impact fees contributing to stormwater projects at all will help the county tremendously.

“We really do need to also consider other diverse investments, and impact fees is one of those,” O’Leary told council members. “As far as accommodating residential homes and new growth, we will need to diversify our investments to enhance our stormwater (infrastructure) in order to accommodate all of the people that are finding our county a beautiful place to live and work.”

Concerns about impact fees

Not surprisingly, a number of developers and homebuilders — that is, the people who would be on the hook to pay impact fees — raised a number of concerns about the county’s proposal. Several council members raised concerns as well. Jason Repak, the president of Hudson Homes and the head of the Horry Georgetown Home Builders Association, said impact fees would drive up the cost of housing in the county.

“Adding additional impact fee to these current costs could diminish the demand for new homes in our area. Doing so would be extremely detrimental to the long term revenue of this county,” he said.

Once the county imposes impact fees on developers, it’s likely those developers will pass the fee onto the homeowner or business buying from them.

Because of that, Drew Flynn, the vice president of Coastal Land & Development, argued the county would be smarter to tax those residents and businesses, not charge developers.

“I think the impact fees are for the end consumer and not for the ones that are investing money here to build this community and bring in revenue for Horry County,” he said.

And Dustin Martin, the president of Rabon’s Housing Center and the Grand Strand representative of the Manufactured Housing Institute of South Carolina, argued that impact fees would make mobile homes and other manufactured homes too expensive for lower-income residents because builders would pass those fees onto the buyers.

“Please reconsider this, as it would be a devastating burden to the county residents who are looking to obtain affordable housing,” he said.

Several council members on Thursday also expressed concerns about how high the impact fees may be on new businesses looking to build in Horry County. Both Cam Crawford, who represents the Socastee area, and Johnny Vaught, who represents part of the Conway area, said they worried that too-high impact fees on businesses could scare off entrepreneurs.

“One thing that we have to be very careful of is not throttling back the economic growth that’s going on in this county,” Vaught said. “And I’m not talking about building homes and stuff, I’m talking about businesses being built.”

Other new taxes coming too?

In addition to his concerns about charging businesses too much, Crawford pointed out in a recent interview that impact fees also come with a key problem: Governments can spend them on infrastructure, but not on operating costs. As council members have discussed impact fees this year, its become a common refrain for one to mention that they could build a new fire station with impact fees, but not hire anyone to work there.

As a solution to that problem, Crawford has pitched the idea of lobbying state lawmakers to raise the cap on the local option sales tax, a special type of sales tax that can boost local budgets. South Carolina currently limits counties to a 2% local option sales tax and Horry County has already reached that cap, with a 1% sales tax going to capital projects and another 1% sales tax going to the schools. Crawford said he and other council members could start lobbying state lawmakers to allow Horry County to raise its cap to 3%, which would add another 1% sales tax if voters approve it via a referendum.

Doing that, Crawford said, would allow the county to pay for infrastructure projects with impact fee money, and pay for operating that infrastructure with a sales tax.

“The impact fee sounds nice, and I get that, but I challenge everyone to look at what that can actually be used for,” he said. “I’m worried that the public thinks its some kind of cure-all but in reality its more of an ancillary thing.”

Crawford’s idea doesn’t yet have broad support among County Council members, but Harold Worley, who represents the North Myrtle Beach area, said it could be a good idea.

“We’re going to need that at some point in time,” he said. “The money that we’re collecting with this fee, this impact fee, it’s just a small portion, a small amount as to what we need for all this development so we’re going to need the other revenue sources to deal with growth.”

However, Gardner, the council chairman, has said he’s not a fan of the idea, and said he hopes impact fees will cover much of the cost of the county’s growth.

“I’m against tax raises unless we absolutely have to and if (impact fees) will keep us from having to do that I’ll just be tickled,” he said.

How we got here, and what happens next

Horry County has been growing for decades now, and the debate and discussion around impact fees dates back nearly as long. Liz Gilland, who served as chair of County Council in the early 2000s, said she remembers debates about the fees when she was in office, and that the county continually kicked the matter down the road. Rather than viewing impact fees as a means to keep pace with the growth in the county, she said county leaders saw them as slowing down that growth. The county, she said in a recent interview, needed to ask itself, “what do we need to do to prepare” for the growth? The county needed to ask itself other big questions, too, she said.

“How can we extend the life of the road until we can afford to get it widened? When we’re approving a 200 home development…how can we make it better?” she said. “Lets to the ingress and egress lanes, lets do the setbacks, lets do impact fees.”

“(We) could have done a whole lot of other things instead,” she added. “The typical answer you hear from people is that government tends to be reactive instead of proactive.”

Gardner agreed with that assessment.

“If we would’ve done this 15 years ago, we wouldn’t be in the trouble we’re in,” he said.

By 2018, the county put impact fees to a public referendum, and nearly three-quarters of all voters said the county should implement the fees.

Then, in 2019, the county commissioned a study of impact fees, the first step in adopting them. That study was completed in December 2019 and amended in the spring. But then the COVID-19 pandemic struck, and the county council decided to delay a vote on adopting impact fees until the crisis passed.

Fast forward to this spring, and county council members appear to be making good on that promise. As members debated next year’s $572 million budget, some suggested tying a vote on impact fees to the budget to settle the matter, once and for all.

Thursday’s hearing on impact fees comes ahead of a key vote on the measure on Tuesday. After that, the council will need to take one final vote on the measure before its enacted. Due to the concerns raised by Crawford, Vaught and others, the council will take several votes Tuesday to determine the scale of the impact fees.

One option would allow council members to vote for the impact fees as-is, at maximum levels for homes, businesses and everything else. Another option would lower the fee on new businesses. And a third option would exempt mobile and manufactured homes from the impact fee.

One way or another, though, according to Gardner and Worley, the council has enough votes to finally make impact fees a reality in Horry County.

“I don’t see how they can vote against it,” Worley said. “I think it’s the right thing to do.”