Carmel, Ind. (December 5, 2023) – The Carmel/Clay Board of Parks and Recreation has filed a Complaint for Declaratory Action and Temporary Injunction against the City of Carmel. The action seeks to prevent further diversion of park and recreation impact fees from a designated fund earmarked for capital improvement projects constructed by the Park Board to funds under the control of the Carmel Redevelopment Commission (CRC).
“The Board attempted to work through this issue amicably with the City and was unable to do so. After receiving two legal opinions that funds generated by the impact fee ordinance are required to be deposited with the Park Board, we believe the only recourse to prevent further diversion of millions of dollars of impact fees allocated to parks to other purposes was through judicial clarification,” stated Park Board President Rich Taylor.
Since 2018, the Board of Public Works and Safety (BPW) has authorized over $6.6 million of impact fees for 15 CRC projects to be diverted to funds controlled by the CRC. Additionally, the BPW will consider at its December 6 meeting nine resolutions for CRC projects redirecting millions of additional impact fee dollars away from the Park Board in violation of Indiana law and city ordinance.
The following information is provided to help explain park and recreation impact fees and why the Carmel/Clay Board of Parks and Recreation decided to take legal action:
What is an impact fee?
In 1991, the Indiana General Assembly passed legislation creating an alternative funding mechanism for local infrastructure improvements in fast growing areas. As established in IC 36-7-4-1300 et seq., the Impact Fees Law allows units of local government the option of passing onto new residents the costs of building new infrastructure expected by and required to support those same residents. This helps maintain quality of life as the community grows, while also ensuring existing residents do not bear the financial burden of the population growth. Impact fees may be assessed for park and recreation facilities, roads and bridges, drainage and flood control, and water and sanitary utilities.
When was the impact fee first implemented in Carmel?
The Carmel Common Council first authorized the Park and Recreation Impact Fee in 1996 through adoption of Ordinance D-1249-96. As required by state statute, the impact fee has been reauthorized five times since its original adoption, most recently on November 18, 2019, through Ordinance Z-644-19. Carmel has chosen to only charge impact fees to support new parks and recreation infrastructure for the community.
What is the process for approving the impact fee?
The impact fee is formally established through the zone improvement plan, which is prepared by Carmel Clay Parks & Recreation in coordination with the City of Carmel’s Department of Community Services (DOCS), reviewed and approved by the Carmel Plan Commission, which also serves as the impact fee advisory committee, and adopted by the Council through an ordinance. Plans must be updated at least once every five years per state statute.
Who pays the impact fee?
The impact fee applies to all new residential development within the City of Carmel. The fee is assessed and collected by DOCS for every new residential dwelling unit at the time a construction permit is issued, with funds deposited into a designated fund for CCPR controlled by the Park Board. For multifamily housing, the impact fee is collected for each unit in the building. (For example, the total fee for a 100-unit apartment complex = 100 x impact fee rate.) Fees are not charged for residential remodels or commercial developments of any type. Since most single and multifamily residences are built as part of a larger development, this fee is typically paid by the developer and factored into the sale price or rental fee as one of the many costs of construction.
What projects do impact fees fund?
Indiana law limits the use of impact fees for new capital projects solely within the parks or designated areas specifically identified in the zone improvement plan, which currently includes:
- West Park: Continued implementation of the 2016 West Park Master Plan, including phase 2 development of the westernmost portion of the park referred to as The Groves
- Bear Creek Park: Acquisition and development of a new park in northwest Carmel
- White River Corridor: Acquisition and development of parkland along or near the White River, including the White River Greenway
These projects were identified as needs in the 2020-2024 Comprehensive Parks and Recreation Master Plan, which was developed concurrently with the current zone improvement plan. This master plan incorporated significant public input, including a statistically valid community survey, and was formally adopted by the Park Board in 2019.
Throughout much of CCPR’s 30-year history, impact fees have been a critical funding source to help develop our award-winning park and recreation system. Recent projects have included the acquisition of Bear Creek Park, partial funding for phase 1 of The Groves in West Park, partial funding for the development of Founders Park, and a 40-acre acquisition expanding West Park. CCPR has received just over $4.9 million in impact fees since 2020.
What is an impact fee credit and who approves them?
Both state statute and city ordinance permit the issuance of credits in lieu of impact fees, commonly referred to as an impact fee credit. A developer or individual may be granted the option of financing, constructing, and dedicating parks and recreation infrastructure instead of paying all or part of the park impact fee. The waiver must be approved by the Park Board if the improvement is specified within the zone improvement plan. The Park Board granted its first and only impact fee credit on December 14, 2021, in the amount of $75,560 in return for the donation of approximately 9 acres of new parkland adjacent to Bear Creek Park and $158,025 in improvements to be provided by the developer. The property will serve as part of a new Bear Creek Greenway.
With the adoption of Ordinance Z-547-10 on December 20, 2010, the Council gave the Board of Public Works (BPW) authority to grant impact fee credits for infrastructure or other improvements not included in the zone improvement plan. IC 36-7-4-1335 authorizes such waivers for improvements that are beneficial to the community and not just the development and are either a useful addition to the current zone improvement plan or reasonably likely to be included in a future zone improvement plan. Since 2018, BPW has approved impact fee credits totaling over $12.9 million.
How are impact fees being improperly directed to the CRC?
Over $6.6 million of the impact fee “credits” approved by BPW for 15 Carmel Redevelopment Commission projects are truly credits in name only. In each of these cases, the developer is directly paying CRC the amount of the impact fee owed, instead of providing new recreation amenities as envisioned by the enabling legislation. Two law firms independently evaluated this practice and concluded it does not comply with state statute or city ordinance, which requires all sums collected as a result of the impact fee ordinance to be deposited into a designated fund controlled by the Park Board.
At its meeting on December 6, 2023, BPW is considering three similar “credits” for almost $6.2 million and six additional credits for undefined amounts, likely totaling multiple millions of dollars more.
While the Board of Public Works began approving impact fee credits for CRC projects in 2013, the number and value of these credits have escalated greatly since 2020. In approximately four years, the BPW has approved over $10.9 million in impact fee credits, redirecting these dollars away from the Park Board and to CRC projects. During this same timeframe, the Park Board has only received $4.9 million.
Based on the impact fee credits scheduled to be considered by the Board of Public Works at its December 6 meeting, if approved, CRC projects will receive at least an additional $12.3 million in credits, and in reality much more. Added to the credits already approved, this means the CRC and its projects will receive over 83% of all impact fees collected or approved as of 2020.
Park impact fees originally intended as a source of revenue to provide necessary capital funding to the Park Board and Carmel Clay Parks & Recreation is now primarily a source of funding for the CRC.