Impact Fee or Illegal Tax?

In The Drees Company, et al. v. Hamilton Township, Ohio, et al., Appeal No. 2009-11-150, currently pending before the Twelfth District Court of Appeals of Ohio, Plaintiffs — including The Drees Company, the Homebuilders Association of Greater Cincinnati, and others — are claiming that an impact fee passed in May 2007 by Hamilton Township on new construction is, in fact, an illegal tax.

The alleged impact fee charges a new single family home $6,153.00 to obtain a Zoning Certificate. The fee is used to raise revenues to maintain existing service levels of roads, police protection, fire protection, and parks. However, the impact fees will fund projects benefiting existing residences throughout the entire township. Drees and the Homebuilders argued before the Court of Appeals that the Ohio Revised Code does not authorize townships to impose impact fees if they are indeed taxes, nor does it allow imposing taxes that are in conflict with provisions of the Revised Code which expressly states how a township may raise revenue for its parks, police, and fire.

In other words, all existing residents of the township pay for roads, parks, police, and fire through the normal Ohio Revised Code taxing and/or assessment methods. Whereas a new home owner or new owner of a business pays those same taxes and/or assessments but in addition pays an alleged impact fee for single family homeowners of $6,153.00. The Plaintiffs argued that the impact fees are really a tax in disguise since they benefit the whole township and not just the impact fee payer.

Plaintiffs also argued that limited home rule townships are creatures of statute and can only do those things that are allowed by statute. They are different than municipalities which can levy taxes. The case was argued on June 22, 2010, before the Twelfth District Court of Appeals, and a decision is expected within the next several months.