HORRY COUNTY — County council has debated implementing an impact fee for decades, longer than some of its current members have been alive.
And heading into 2020, the county seemed closer than ever to issuing a charge on new development. But the pandemic and its resulting economic uncertainty will likely delay the impact fee proposal for another year as council continues to consider what is an appropriate amount to charge new development, while avoiding an economic slowdown in the construction and real estate industries that are having historic success while the tourism industry suffers.
“We have a big impact from the pandemic, and until we know what that is, I don't think doing a major deal like impact fees are appropriate,” Councilmember Johnny Vaught said. “Now I’m for impact fees, I think development ought to pay for development, but right now is not the right time to do it. And I don’t know when it will be, but it’ll be likely once we come out from under COVID and know more about the hospitality fee.”
Impact fees are a program that intends to make new construction pay for some of the strains new businesses and residents have on infrastructure like stormwater and public safety. For a fast growing county like Horry, the fees are an enticing new revenue stream as local governments struggle to pay for an ever growing population.
In 2018, more than 70 percent of Horry County voters supported implementing such a fee during a non-binding referendum placed on November midterm election ballots. The revenue could go to build new fire stations, roads, stormwater control infrastructure and a variety of other needs without an explicit tax increase on current residents.
State law, however, caps the uses of these fees. The revenue must go to benefit the community that paid it and be used within three years of collection. As prescribed by law, Horry County has already undergone arguably the hardest step of implementing these fees which the competition of a through study outlining the impact growth has on county finances.
During 2019 the county began its impact fee study and the accompanying research into how such a fee would affect affordable housing. When it was presented to council, the proposed impact fees were broken down into types of construction like residential, hotel or commercial.
According to the county’s presentation in December 2019, the fee at most could cost $4,565 per home, $7,439 per 1,000 square feet of retail space and $2,587 per room for hotels. The total revenue going into the county’s budget would depend on the level of year-to-year construction.
When the original study was presented, council members wanted to change the proposal to include a specific stormwater impact fee to cover new development’s impact on that specific kind infrastructure, which would also increase the overall price of the impact fee per unit.
The exact costs of the fee, however, will likely be lower than the maximum amount allowed by law as outlined in the study.
While most council members support an impact fee in some shape or form, implementing a fee this year and to the maximum extent possible seems unlikely for the Fiscal Year 2022 budget cycle. Vaught said the economic volatility of the times makes it hard to know how expensive the fee should be to alleviate any potential economic slowdown.
Jason Repak, vice president of the Horry Georgetown Home Builders Association, said the pandemic has seen an increase in homebuilding in the area. While there has been historic success over the past several months, he believes the economic struggles will soon begin to impact home prices. Simply, the cost of production materials is increasing or becoming difficult to find due to market conditions and demand.
The price of wood used for many homes, walls and exteriors has increased by 30 percent, Repak said. As the price to build goes up, especially for larger track home projects, the more expensive houses will become. Tacking on an impact fee, he fears, will make it even harder for people to afford a home for retirement or first-time buyers.
Repak cited a study conducted by the National Association of Home Builders that states for every $1,000 increase in a home price, more than 300 potential buyers will no longer be able to afford the costs.
“We are talking numbers in the 6,000 to 10,000 range especially for commercial,” Repak said. “I think if it wasn’t for commercial we wouldn’t be having this conversation. If the numbers they got back weren’t so prohibitive for building, I don’t think they would have stopped implementing an impact fee two years ago.”
Vice President of Governmental Affairs Madison Cooper of the Coastal Carolinas Association of Realtors is against impact fees outright, but especially implementing them at a time would affect Horry County’s competitive edge of low-cost living during a time when economic growth is needed.
In 2020, the CCAR presented council with its own study conducted by University of South Carolina Professor Joseph Von Nessen that outlined the burden an impact fee might place on the housing market. It found the proposed fees could lead to a 2.4 percent increase in home costs and a 25 percent increase in the cost for commercial construction.
The study argued this could lead to a 10 percent decrease in new businesses constructing buildings in the area, according to information obtained by the Post and Courier. This study was presented to council members but never made fully public. And with the hospitality businesses struggling, Cooper asked if adding another fee onto workers looking to buy a new home is a good idea.
“Does the county really want to add an additional burden to workers looking to fulfill the American Dream?” Cooper asked. “Regardless of when a fee is implemented it will have a large impact, but certainly during COVID and the uncertainty for our area’s workers.”
Potential harms to new businesses is a major concern from council members moving forward, especially for those businesses looking to reopen during the pandemic with a new building. The impact fee would be steep and levied against businesses of all types looking to build in the area regardless of local or corporate ownership.
“It’s prudent that County Council continue to work with those in the business, development and real estate communities to determine the market effect implementation of new impact fees at this time would create Pre-COVID,” said Karen Riordan, the CEO of the Myrtle Beach Area Chamber of Commerce. “County Council expressed a strong willingness to work with and listen to these communities which contribute tens of millions in tax revenue for the county. Since COVID, the market landscape has changed significantly. It’s important that Council maintain that strong dialogue before implementation of a plan that was created prior to the pandemic.”
Councilmember Danny Hardee, an impact fee supporter, said deciding to move forward with an impact fee this year is a “damned if we do, damned if we don’t” situation.
“With the situation going on with the pandemic, I don’t want to do anything to slow down home builders, but at the same time I support impact fees because I see it as the people moving in get to pay a little bit of what everyone else has already paid for,” Hardee said.
Hardee added that with a new, potentially deadlier strain of COVID-19 detected in South Carolina, it’s hard to know what the future will look like and if a fee would be an undue burden on industry or not.
In addition to wanting to see when the economy settles down, council is also awaiting the result of the hospitality lawsuit that could free up funds to cover the costs of projects related to growth in the touristy area. Hypothetically, this money could help decrease the overall need of an expensive impact fee.
Even with the potential economic impact, impact fees are likely to happen at some point in the future with a majority of the council supporting their implementation. Council Member Tyler Servant said the people overwhelmingly voted for these fees and council has a mandated priority to approve the proposal but in a way that is responsible given economic concerns.
“The people of Horry County spoke loud and clear when they passed a ballot referendum by a super majority in favor of impact fees. It’s our duty as council members to uphold their vote and to come up with the best plan possible to implement impact fees in a way that does not hurt the economy but at the same time deliver the results that voters expect,” said Servant, a realtor.