IMPACT FEES: ROUND TWO WITH
THE ILLINOIS HIGHWAY CODE

By WENDY U. LARSEN and MICHELLE J. ZIMET, Siemon, Larsen & Purdy

"Impact fees" are making front page news in Illinois — a state that has long been known in the land use literature as a "developer state."¹ Indeed, Illinois has traditionally been more cautious about exacting fees or land from developers than have some of the high growth states like California and Florida. Many in Illinois never realized that eventually it too would inherit many of the attributes of these high growth areas.

Despite initial resistance, however, impact fees have arrived in Illinois.² A recent survey conducted by the Northeastern Illinois Planning Commission (NIPC) indicates that 38 of 112 of the local governments surveyed are presently exacting impact fees from developers in their jurisdiction.³ The NIPC study showed that while impact fee usage differs by community, Illinois impact fees can be grouped into 6 categories: schools and libraries (29%); parks and open space (26%); utilities (21%); transportation (11%); police, fire and emergency medical services (9%); and other (4%).⁴

What is remarkable about these statistics is that they show that even without specific enabling legislation, local governments in Illinois have quietly taken the initiative to institute their own responsible growth management and growth financing efforts. While communities in many other states have implemented impact fee programs without enabling legislation, it has taken Illinois communities a longer time to join the impact fee bandwagon. In Florida, for example, impact fees have been an accepted fact of life for new development, without statutory authority, for over fifteen years. See, e.g., City of Dunedin v. Contractors and Builders Association of Pinellas County, 312 So.2d 763 (Fla. 1975).

On September 17, 1987, the Illinois General Assembly amended the Illinois Highway Code to allow a county board of any county with a population between 400,000 and 1,000,000 people to collect transportation impact fees. Ill. Rev. Stat. ch. 121, par. 5-608 (P.A. 85-464, effective January 1, 1988).⁵ The amendment authorized these counties (Lake and DuPage Counties fell between the population brackets) to create transportation impact districts, to collect impact fees, and to adopt reasonable rules and regulations necessary to administer and enforce the fee program. The legislature evidently intended to afford county boards the greatest possible flexibility in implementing impact fees. There was no floor debate in either the House or the Senate, and the bill was unanimously approved. Pursuant to this new amendment to the Illinois Highway Code, DuPage County adopted an impact fee ordinance on November 22, 1988.

On June 30, 1989, only 18 months after the impact fee law went into effect, the legislature passed House Bill 113 which repealed Ill. Rev. Stat. ch. 121, par. 5-608 in its entirety and substituted a new Division 9 to Article 5 of the Illinois Highway Code, entitled "The Road Improvement Impact Fee Law." Unlike its predecessor, the new amendment was not passed without fanfare and is the result of an ongoing dialogue, debate and compromise between parties.⁶

The new impact fee law provides specific authority to counties with a population over 400,000 and all home rule municipalities to impose impact fees. As discussed above, many home rule municipalities have previously adopted impact fees pursuant to their home rule powers. However, the new legislation limits home rule powers by providing that all transportation impact fee programs must be enacted pursuant to the legislation (see sec. 5-904) and by specifically providing for home rule preemption. (Section 5-919 states that the new legislation constitutes a limitation under Illinois Constitution, Article VII, sec. 6 (i) in that no home rule municipality may impose impact fees in a manner inconsistent with the Division.)⁷

The purpose of the new legislation is to authorize specific units of local government "to supplement other funding sources so that the burden of paying for road improvements can be allocated in a fair and equitable manner." (Sec. 5-902.) The General Assembly also acknowledges that its intent is to promote orderly economic growth throughout the State by assuring that new development bears its "fair share" of the costs of

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meeting the demand for road improvements. Id. The broad substantive limitation on the imposition of such fees is that no impact fee may exceed the proportionate share of costs incurred by a unit of local government in providing road improvements which are specifically and uniquely attributable⁸ to the new development. (Sec. 5-904(b).)

Unlike the prior amendment to the Illinois Highway Code, the present legislation does not contain a broad clause that allows the governments to adopt "reasonable regulations" necessary to administer and enforce the fees. See Ill. Rev. Stat. ch. 121, par. 5-608(c). Instead, the legislation mandates a very explicit procedure that units of local government must follow in implementing its impact fee ordinance or resolution. Oddly enough, however, the more detailed language contains few items that were not already adopted in DuPage County's ordinance or included in most other impact fee programs around the country.

The new law adds a number of procedures, including a requirement that a unit of local government that wants to impose transportation impact fees must first appoint an Advisory Committee, whose members will be selected from the public and private sectors, which will advise in the development and implementation of the comprehensive road improvement plan. (Sees. 5-905(b); 5-907.) The unit must then establish a public hearing date to consider proposed land use assumptions that will be used to develop the comprehensive road improvement plan. The Advisory Committee is given 30 days from the date of the public hearing to issue a written report to the unit of local government regarding the proposed land use assumptions. (Sec. 5-905(g).) The land use assumptions must be approved, disapproved, or modified in 30 to 60 days.

After the land use assumptions have been approved, the unit of local government must develop a comprehensive road improvement plan and conduct a public hearing to consider the adoption of the plan. (Secs. 5-905(h), (j); 5-910.) Again, the Advisory Committee is given the opportunity to make recommendations on the plan before the unit of local government may act on the proposed plan. (Sec. 5-905(k).)

The existing law states that impact fees may be collected at the time a building permit is issued or at some other time that the county board directs. Ill. Rev. Stat. ch. 121, par. 5-608(a). The new law provides that impact fees may be assessed at the time of final plat approval, or when a building permit is issued when no plat approval is necessary.⁹ (Sec. 5-911.) Developers of single family residential developments must pay the impact fee as a condition of the issuance of a building permit. Developers of all other types of new development, including multi-unit residential development and all other non-residential development, may pay the fee as a condition to the issuance of a certificate of occupancy if there is an interlocal agreement providing that the developer notify other units of local government that the building permit or certificate of occupancy has been issued. (Sec. 5-912.) Developers who receive assisted financing may enter into an installment agreement with the unit of local government and pay the fee in installments over a ten year period of time.

All fees collected by a unit of local government must be deposited into interest bearing accounts which are designated solely for such funds for each service area.¹⁰ (Sec. 5-913.) Impact fees may only be expanded on those road improvements that are located within the service area or areas specified in the comprehensive road improvement plan, as updated from time to time. (Sees. 5-914; 5-915.) The fees may only be spent in the same manner as motor fuel tax money, namely for road improvement costs. Motor fuel tax rules generally prohibit the use of county motor fuel tax funds on municipal roads. However, a county may be able to expend impact fees on municipal roads if the municipal roads are designated as county roads by interlocal agreement. In any event, to the extent that motor fuel taxes are used for road improvements, a developer will be credited for such tax payments. If any person who pays the fee wishes to contest the land use assumptions or petition for the refund of collected fees which have not been encumbered by contract within the statutory period, the legislation also provides for refund and appellate procedures. (Sec. 5-917.)

For units of local government like DuPage County and the many municipalities that have implemented impact fee programs prior to the effective date of this new legislation, the Act provides transition clauses. These units of local government will have 12 months from the effective date of the Act to bring their ordinances or resolutions into "conformance" with the requirements of the Act. Units of local government working under the transition clauses will have to act quickly to come into compliance with the new Act since they will have to form advisory committees and develop comprehensive road improvement plans that meet the specifications of the Act (if they do not already have such plans).

The legislation also exempts certain developments who have received site specific development approval (and who meet certain conditions) from payment of the fee. It is not clear whether this exemption must be

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included in those existing ordinances which will be revised. However, given that refunds under prior programs are explicitly not required, it does not make much sense to require an exemption for the same category of development which previously paid the fee. Moreover, the Act provides that the legislation has no effect on the validity of existing agreements between a developer and a unit of local government pertaining to fees, exactions or donations made by a developer for the purpose of funding road improvements. (Sec. 5-918(b).)

Any unit of local government that wishes to adopt a transportation impact fee ordinance or resolution after the effective date of "The Road Improvement Impact Fee Law" will have to follow all of the procedures outlined in the Highway Code amendment. Ill. Rev. Stat. ch. 121, par. 5-901 et seq. While it may take some time for a unit to comply with all of the procedures (in terms of the timelines to be followed, the committees to be formed and the comprehensive plan to be developed), the Illinois General Assembly has nonetheless given a green light for local governments to assume more control of transportation financing and development approval.

10. Unlike the prior amendment to the Illinois Highway Code, the new legislation does not mandate that the unit of local government create transportation districts, per se. Instead, the legislation requires land area(s) to be designated by the unit of local government in the comprehensive road improvement plan as "service areas."

EDITOR'S NOTE:

The Governor signed the legislation into law on June 26, 1989. •

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