Lexington — Town planning staff and a consultant presented phase 1 of a five-year review of Lexington’s development impact-fee program at the Jan. 6, 2025 council meeting, focusing on parks and recreation and municipal facilities and equipment. The council did not take final action and scheduled a special meeting (Jan. 12) to consider a first reading after additional review.

The presentation explained the statutory and local basis for impact fees, the categories that the town’s ordinance currently covers (parks and recreation; municipal facilities and equipment; transportation), and the state-mandated five-year review tied to the comprehensive-plan schedule. The presenter said the town’s current ordinance has an effective date of Feb. 1, 2020, and that the requirement to update the study and ordinance is driven by state law and the town’s ordinance language.

Why it matters: Development impact fees determine how much new development contributes toward the capital cost of parks, municipal facilities and transportation capacity. Changes to those fees can affect housing affordability, the cost to build retail and commercial projects, and the town’s capital program.

What staff said
- Scope and timing: Staff said they are advancing updates for parks/recreation and municipal facilities/equipment now; the transportation category will follow after an update to the town’s local transportation plan.
- Fee calculation approach: The consultant described the technical steps used to calculate maximum allowable fees: inventory existing capacity, estimate future needs tied to growth projections, allocate costs by residential and nonresidential demand, and compute per-resident or per-employee costs. The consultant noted that once capacity is brought online, maintenance and operating costs become the town’s responsibility and cannot be paid for with impact fees.
- Results and effects: Using default assumptions (a 0% discount rate matching the town’s current ordinance), the consultant said impact fees for single-family detached units increased modestly since the prior study — in part because replacement costs rose — but that a decline in persons-per-household estimates in the U.S. Census Bureau American Community Survey partially offset the change. The presenter summarized that the current single-family “out-the-door” impact fee is roughly $2,500 and said parks and recreation accounted for about half of that amount in the current schedule.

Council questions and analysis
Council members asked a series of policy and technical questions about how the fee is applied and possible policy levers:
- Which uses pay which fees: Staff clarified that parks and recreation fees are charged only to residential development; municipal facilities and equipment fees apply to residential and nonresidential uses; transportation fees apply broadly to all land uses and are based on trip generation. The presenter gave an example that a general retail/shopping-center land use would not pay parks and recreation fees but would pay municipal facilities and transportation fees (presenter cited approximate per-1,000-square-foot figures of $341 for municipal facilities and $2,185 for transportation in the example shown).
- Discount rate: Council members discussed the ordinance provision that allows a discount rate to be applied to calculated (maximum allowable) fees. The presenter explained that the discount rate, set by ordinance, can be used to reduce the fee below the calculated maximum (for comparability with neighboring jurisdictions or to reduce legal risk). Discount rates apply by impact-fee category (parks, municipal facilities, transportation) and must be applied uniformly across land-use categories within a given impact-fee category.
- Risk and timing: Council asked what would happen if the town missed the five-year update deadline; the presenter, identifying as a planner and not a lawyer, said that falling out of compliance could pose legal risk and recommended completing the update within the five-year window; the presenter deferred to legal staff for a formal legal opinion.

Next steps
The planning commission had recommended the update on Dec. 18. Council members asked for additional time to digest the technical tables and to see the pending transportation-plan work that will determine transportation fees. Council scheduled a special meeting for Jan. 12 to consider a first reading. Staff said the transportation category will be updated under separate cover and that transportation fees will remain at their prior levels until the new transportation study is complete.

Quote from the presentation
"Impact fees are really to increase capacity of your system to accommodate new growth," the planning consultant told council in explaining the scope of eligible capital expenses. "Once you bring that capacity online though, now it's a town burden. So maintaining it, operating it, rehabilitating it, those then become requirements of the town for which impact fees cannot be used." (Presenter, Jan. 6, 2025.)

What the council did not decide
Council did not adopt new fees or change the ordinance at this meeting. The transportation fee schedule was not updated because the local transportation plan is still being revised.

The council’s next action on impact fees is expected at a special meeting scheduled for Jan. 12, when council members said they will consider a first reading after additional review of the materials and the consultant’s tables.