A study of fees that builders pay on new developments found compliance and oversight issues but also had an unexpected conclusion about home prices.

Impact fees are one-time payments that municipalities, counties and special districts charge developers for new projects to ensure growth pays for how it affects existing infrastructure like roads and water systems.

But a recent state legislative audit found that some local governments aren’t consistently following the rules for calculating and spending the money. The audit did not identify the local governments with compliance issues.

The fees are “very complex” and technical, and the state needs to provide more training and accountability measures to help fix issues, said Matthias Boone, a senior audit supervisor.

He and other auditors also found the fees don’t directly lead to a higher sale price.

“There’s no statistical relationship between the impact fees and the final sales price of the home,” said Leah Blevins, an audit manager with the Office of the Legislative Auditor General.

She added it “feels really counterintuitive” and that the fees affect the cost of building, but “other factors have a bigger influence” on the final home price.

Impact, if any, on home prices

Auditors reviewed fees across various communities and special districts and found that the charges vary widely across the state.

For example, the fees on a 2,000-square-foot home total about $11,000 in Kaysville, a growing city of about 33,000 in Davis County. In Grantsville, with a population 16,500 and the second-most populous city in Tooele County, that same home would cost a developer $35,000 in impact fees.

Those differences don’t necessarily mean one community is overcharging, Blevins said. Fees depend on local infrastructure needs and how communities calculate what new development should pay.

“It’s really difficult to say if something’s exorbitant because each situation’s so different,” Blevins told lawmakers.

The variation helps explain why there isn’t a direct tie to final sale prices, said Chris Gamvroulas, president of Ivory Development.

Auditors were clear that an analysis they conducted with the Kem C. Gardner Policy Institute of 10,000 home sales in 16 cities over three years found no statistically significant relationship between impact fees and a home’s final price tag.

That doesn’t necessarily mean the fees don’t affect prices over time, Gamvroulas said, or how builders approach a potential development.

Builders are “probably not as willing to purchase land” if there are high impact fees, he said, and they might leave out features they would typically include instead of raising the price to account for higher charges.

Auditors did a deep dive into nine jurisdictions and didn’t ring alarm bells, but they did flag concerns after finding more than half those either expended fees incorrectly or otherwise failed to comply with the state law governing impact fees.

There wasn’t any one reason for the noncompliance, auditors wrote, but the issues could mean “costly litigation” for local governments and show that the state needs to provide more support.

The team also examined 41 impact fee studies, which help local governments set fees at the right amount for projected growth, and found that more than half had not been updated within the past five years. Auditors said they should be updated about every three years.

Though auditors found compliance issues, they didn’t name any jurisdictions and instead put the onus on the state to improve guidance, training and transparency.

Auditors said Utah’s statutes provide more direction on impact fees than laws in other states they reviewed, but lawmakers raised concerns about accountability measures.

It’s largely up to courts, Blevins said, to hold local governments accountable over impact fees through civil lawsuits.

House Speaker Mike Schultz, R-Hooper, said that approach deserves a closer look.

He also expressed concern about administrative costs consuming money intended for infrastructure instead of benefiting the community as a whole, as intended.

The recommendations

Auditors made five specific recommendations that state agencies could make and that lawmakers could consider in interim meetings and the upcoming legislative session:

• A “menu of options” for changing the law governing impact fees that could address concerns about how and where local governments are using revenues from new development, and how complex and expensive the fees are to administer.

• A regular update cycle for impact fee plans and analyses to ensure they “reflect current conditions” and “are sufficient to fund planned growth-related infrastructure.”

• Improved oversight by the state auditor’s office to ensure annual reports “consistently provide project-level information” on impact fee revenues and spending.

• Better public access to information about impact fees.

• A requirement that local governments post their plans for —and analyses of — impact fees on their websites or other public sites.