Lexington council approves first reading of Phase 1 impact-fee update

The Lexington Town Council voted 5–2 on Jan. 13 to approve on first reading Phase 1 of an update to the town's development impact-fee study, housing-affordability analysis and capital improvements plan, a package staff said adjusts project lists and fee amounts for parks and municipal facilities while postponing any change to the transportation fee pending a later study.

The update is the five-year review required by state statute and the town's impact-fee ordinance; staff presented collection totals, a proposed capital improvements list through 2029 and options for amendments before a second reading.

Rachel McAllister, a town staff member, told council that "the impact fee ordinance was enacted starting 02/01/2020, and it has a 10 year, sunset date," and that the five-year review is intended "to make sure that we're in compliance with state law." Stuart (staff member), who led the financial presentation, summarized collections and proposed allocations and said the update gives the town a chance to adjust fee rates or change the capital improvement plan.

Stuart presented the finances included in the update: total collections from impact fees to date of roughly $1.7 million to $1.72 million (including interest), with transportation receipts contributing about $1.01 million, parks about $389,000 and municipal facilities about $186,000. He told council that about $1.16 million was available to spend under the current budgets, with roughly $1.01 million earmarked for transportation projects and about $148,000 for municipal facilities. He also noted an inventory of 523 unimproved lots in the pipeline, of which staff said 364 would be subject to current impact fees.

Council members asked questions about timing, outreach and the distribution of fee burdens. Council member Gavin Smith said, "I'll be transparent and say, I don't think I have enough information," and asked why the update had been presented at a regular council meeting rather than in a prior work session. Several other council members urged that the first-reading vote would not lock the council into a final decision and that amendments could be made before second reading.

Some councilors pressed staff on how projects were selected for the capital improvements plan; Stuart said many of the transportation projects were derived from the town's local transportation improvement plan and other continuing town projects, and that the CIP entries were intended to give the town flexibility to supplement other funding sources.

The presentation and discussion also addressed exemptions and appeals. Stuart explained the town's administrative appeal process: an initial administrative review by staff, followed by a review by the town administrator, and a final appeal to council. He told the council that six appeals had been filed over the life of the ordinance, three resolved administratively and three that came to council.

Council and staff discussed the share of fees borne by commercial versus residential development. Staff noted that commercial payers have contributed the majority of fee dollars collected to date; some council members said that result differed from what they had expected when the ordinance was adopted. Council member Todd Lyle and others argued the transportation focus justified the structure; other members said the law constrains how the town can assign fees across categories.

The Planning Commission reviewed the materials at its Dec. 18, 2024 meeting and recommended adoption of Phase 1 to council; staff told council the commission's recommendation was unanimous.

Council member Todd Carnes made the motion for first-reading approval of Phase 1, and Mayor Pro Tem Ron Williams seconded. After discussion, the council voted 5 in favor and 2 opposed, carrying the motion on first reading. Council members were reminded that a second vote will be required to adopt the ordinance after any amendments the council chooses to make.

A resident, Judith Qualestine of 204 Rapala Way, spoke during public comment in support of the action.

The council directed staff to provide clearer public materials and additional documentation in advance of second reading; staff said they would work to increase transparency and provide more backup documentation to council and the public. The council adjourned after completing the item.

Ending: The Phase 1 update approved on first reading covers parks and municipal-facilities components; the transportation fee will be addressed in a separate, later update tied to the town's local transportation improvement plan. A second council vote is required before changes become final.