The No-Impact Impact Fee

by Martin Harris

Before that ill-destined decade began, it was pre-labeled as “the Soaring Sixties”. And even before it was over, that hopeful label had vanished, not only for all the adverse things which happened, but a handful of good things which didn’t. Example: within the planning-zoning fraternity (a little now-obsolete male-preference lingo, there): the majority went to considerable effort to torpedo two (in the minority view) promising initiatives: one was performance-standard zoning, whereby the traditional commercial-over-here, residential-over-there land use controls could be optionally supplanted by measures of beyond-the-property-line impact, so that a business with modest lighting, noise, smoke, or traffic effects could co-exist with, say, medium-density residential. If a proposal made the target numbers, it would get the permit; if not, it wouldn’t; and it was for that reason –loss of subjective control—that the fraternity largely disapproved. The other was impact fees, whereby proposals which would predictably be tax-minuses (demanding more in service-costs than they would pay in property taxes) demanding higher taxes in subsidy from pre-existing land-owners, would be charged an impact fee, typically to cover only the added public capital-investment, not the operational, costs the new development would generate. Even so, a massive resistance effort by developers made the concept unacceptable, for the usual political reasons. Now, in an historical and linguistic irony, the “impact fee” label has returned, and in Pennsylvania it’s being applied to a revenue windfall for local governments based on a recent revenue windfall for the State as it has approved natural gas exploration. Politicians in States which haven’t (think Vermont and New York) will doubtless want their voters/taxpayers to know as little as possible about what’s happening in the Keystone State part of the Marcellus and Utica Shale geology which is being explored (quite safely and profitably to all parties concerned, thank you) there but not being explored where parts of those formations underlie the Green Mountain and Empire States, where land-owners were being contacted for exploration agreements back in the late 70’s. The numbers are impressive: a recent Wall Street Journal report describes PA collecting $204 Million in drilling fees in 2011, about the same amount in 2012, and distributing much of that back to townships within such counties as Bradford ($8.49M) Greene ($3.1M) and even heavily-urbanized Philadelphia ($1.3M). And what adverse impacts do these payments reimburse for? Maybe additional retail business in Cumberland Township, a near-Pittsburgh rural enclave of 6,500, or possible “future emergency needs” in mid-State Coalmont Township. Nowhere in the detailed report is there any mention of actual negative impacts –school overcrowding, for example—that the old impact fees were intended to ameliorate. The closest is the possibility of equipment future wear-and-tear on highways.

In a third irony, consider that these fees enter the natural-gas bookkeeping as a “cost of production” and are factored into the price paid by end-users in such States as NY and VT where local governance has deemed any in-State enthusiasm for natural-gas exploration “the love that dares not speak its name” but has enthusiastically embraced new pipeline construction to import ever-more of the fruits of that illicit behavior into their own offices, businesses, and homes. You could, indeed should, say quite correctly that natural gas users in East Overshoe, VT, are paying for the new road-maintenance equipment just purchased in Cumberland Twp, PA, because the “impact fees” will continue as long as NG extraction and sale continue. You could also say, as Prez 40 did with regard to such end-user impacts, “Corporations don’t pay taxes; their customers do”. The Reagan truism directed at critics of General Electric consumer-product pricing in the ‘80’s is just as applicable to critics of NG exploration and extraction for sale in the ‘10’s, because production costs, even the artificial ones created by government added to the real costs created by natural conditions, must inevitably be passed along to the product consumer, or the product won’t be extracted, sold, and eventually used. In States like VT, that means one less energy choice for consumers: they can either “freeze in the dark”, as was sometimes recommended in this part of the country for Yankees during the energy crises of the ‘70’s, or they can utilize coal, hydro, nuclear, or bio-fuel power, mostly at higher unit costs, each of which has its own set of “impact” critics.

We’re not told how and why Pennsylvania solons chose to use the “impact fee” label for a primary-economic sector activity which, like agriculture, creates wealth from the ancient or modern sunlight-and-soil combination, and, by creating new value where none previously existed, creates a seven-fold multiplier effect as its output is then transferred through the secondary, tertiary, and so on sectors before end-user consumption. Read the writing of the National Organization for Raw Materials on this subject. Even the ideologically-biased Environmental Protection Administration bureaucracy has been forced to concede “no known cases” of environmental damage to such other land-based assets as aquifers from the hydraulic fracturing (“fracking”) which they have used (helped by its similarities to some unmentionable ancient Anglo-Saxon spellings?) as a pejorative much as impact fee opponents successfully re-defined real impact fees decades earlier. More accurately. the Harrisburg Green-Domers could have labeled their extraction tax a depletion tax, so as to offer a chuckle over the contrast between the Feds offering a mineral-depletion tax credit for the same activity that PA State pols now label a tax debit because of so-far-invisible negative impacts.

And there’s a fourth irony: we don’t know how much of the Utica Shale which underlies Vermont is NG-drillable (that’s what the Cambrian Corporation began to research in the ‘70’s) so we don’t know how much in “impact fees” Vermont pols are foregoing by their drill-permit denial policy, a refusal to embrace a taxable target in sharp contrast to enthusiastic tax-attacks on everything else, from gasoline to cloud computing, from soda pop to cigarettes, from upper-income “fairness” penalties to lower-income EITC reductions, from higher taxes for schools which can’t bring more than a third or so of their students to Proficiency to (contrast) freebie space and services for farmers’ markets selling “artisanal” produce. It’s as if Louis XIV’s Tax Commissioner “pluck the low-hiss goose” Jean Colbert had decided, for reasons of “fairness”, not to want to know about a new species of taxable goose in his bosses’ kingdom.