Repositioning Your Florida Development by Substantially Reducing Transportation Mitigation Costs
In May of 2011, we issued a comprehensive GT Alert, The Future of Growth Management in Florida, which reviewed the landmark Community Planning Act. Among the many significant changes, the Act repealed mandatory transportation concurrency and substantially modified the proportionate share methodology. Local governments now have the option to amend their comprehensive plans to delete transportation concurrency policies. Those local governments that choose to continue transportation concurrency must also implement new requirements pertaining to how proportionate share must be calculated. The revised methodology will substantially reduce proportionate share obligations for many existing Developments of Regional Impact (DRIs) and sub-DRI projects, as well as new developments. Following is an explanation of how these new procedures work and how you can obtain these benefits.
From Boom to Bust - New Opportunities
Many DRIs and sub-DRI projects were permitted at the height of the development boom (pre-recession) with costly proportionate share obligations (i.e., roadway mitigation). Consider the following perfect storm, which drove up proportionate share obligations:
- traffic growth rates peaked, resulting in more roadway failures and higher proportionate shares;
- the queue of approved projects drove up “committed” background traffic growth, resulting in higher proportionate shares;
- the Florida Department of Transportation (FDOT) defined stringent rural and transitioning roadway level of service (LOS) standards on interstates, often resulting in the need for major interstate improvements;
- roadway construction costs peaked, resulting in higher overall road improvement costs and higher proportionate shares when combined with the previous factors;
- many local governments and FDOT challenged the ability to utilize proportionate share payments against impact fee credits; and
- SB 360 imposed strict requirements in terms of identifying viable roadway projects that would be considered as acceptable proportionate share contributions.
These factors combined to trigger proportionate share obligations exceeding $50 million for many DRIs; obligations that are simply not financially feasible in Florida’s new economy. The silver lining is that the recession reversed these conditions in many areas, allowing for a more reasonable recalculation of proportionate share simply due to lower projected background growth and defunct projects that may be removed from “committed traffic.” Conversely, in areas where background traffic projections remain high and continue to cause LOS failures, the Act provides significant relief. Under the new law, development projects may not be charged a proportionate share based on the need to correct “transportation deficiencies” resulting from existing and projected background traffic levels. The Act also provides that:
- background traffic shall be forecast through the build out date of the project (or phase);
- if the background traffic results in LOS failures, improvements required to correct transportation deficiencies “shall be assumed to be in place”;
- local governments shall be responsible for the assumed improvement;
- the cost of correcting the “transportation deficiency” shall be removed from the project’s proportionate share calculation; and
- the developer shall be charged a proportionate share only for the improvements needed beyond the assumed improvements.
If your project is located where transportation deficiencies exist or are projected based on background traffic growth, your project can assume the deficiency is corrected and may not be required to pay any proportionate share on such road segments. The Act also provides an opportunity to credit previously paid impact fees and future impact fee obligations against pending proportionate share obligations to reduce your short term out-of-pocket costs.
Repositioning Your Project
Who can benefit from the new process? Any landowner, developer or lending institution that:
- has an existing DRI or sub-DRI project with substantial remaining, un-built entitlements;
- has an existing DRI or sub-DRI project with remaining proportionate share payments and/or impact fees that are yet to be paid;
- may be contemplating new development projects; or
- may be involved in real estate transactions or investments.
Our experience confirms that the Act may yield proportionate share reductions ranging from 40 to 80 percent. Even smaller projects can substantially benefit from these reductions. Of course, the extent of the benefit for any given project will depend on the project circumstances. Various provisions of the Act can be utilized together to maximize the benefit for any given project. For example, permit extensions may be utilized in conjunction with the recalculation of proportionate share to reduce and defer payments. Projects with significant interstate impacts may benefit substantially, given that local governments now have discretion to set the LOS standards on interstates. These are just a few examples to illustrate the potential for repositioning your project. For DRIs, the Act provides that the recalculation of proportionate share shall be presumed not to trigger a substantial deviation and shall not be considered as causing additional regional impacts.