Idaho Falls council debates basing residential impact fees on square footage; basements and garages draw scrutiny

City staff and consultants told the Idaho Falls City Council at a workshop that a proposed shift to charging residential development impact fees by square footage — rather than by housing type — would change how the city measures and collects fees and could affect housing affordability and the city’s ability to fund capital needs.

The discussion centered on how to define “square footage” for fee calculations: should the city count all conditioned space, only finished space as defined by MLS practice, or treat unfinished basements and garages differently? City Attorney Michael Kirkham and consultant staff presented legal and comparative examples and answered council questions; staff said an updated ordinance is intended to move through work sessions this summer with implementation planned for Jan. 1 if the council so decides.

Why it matters: Impact fees pay for growth‑related needs in transportation, parks, police and fire. How the city defines and discounts square footage will change what builders and homeowners pay and can reduce or increase projected fee revenue the city will rely on to maintain service levels.

Holly, a consultant presenting the study, told the council that the draft charges residential fees by square footage and that “the critical question … is sort of what constitutes square footage. Is it all the space? Is it finished space? Is it the heated space?” She said many jurisdictions count climate‑controlled, finished living area and commonly exclude automobile garages.

City Attorney Michael Kirkham summarized the legal framing: the fee must be tied to impacts from new development. “What you are trying to capture is the impacts from new development,” he said, and any exception (for example excluding unfinished basements) should be justified by showing those spaces do not create the impacts being funded.

Council and staff discussed several options raised during multiple advisory‑committee meetings: (a) count all conditioned, finished living area and exclude garages; (b) exclude unfinished basements and count only finished below‑grade space; (c) assess a partial fee when an unfinished basement is later finished (charged at the time of finishing); or (d) keep a tiered square‑foot schedule but continue charging a percentage (for example 75%) of the consultant’s maximum supportable fee.

Staff provided local permit data to show how the options might play out. Department permitting staff reported that, looking back from 2024 through July 2025, the city issued 30 single‑family building permits in 2024 and 42 single‑family permits in 2025 (year‑to‑date), for a total of 72 single‑family permits in roughly the last 18 months. Basement‑finish permits in that period were 24 in 2024 and 16 so far in 2025 (40 basement permits total). Staff cautioned that basement‑finish permits may lag actual construction and that some homeowners never pull permits; in many cases unpermitted work is discovered only at resale.

Councilors and staff repeatedly raised enforcement and equity tradeoffs. Several members favored excluding garages from fee calculations. Some members argued that excluding unfinished basements would be hard to justify using the datasets the consultant used — the study uses American Community Survey/Census data and local permit data that do not reliably separate above‑ and below‑grade finished area — and that a discount to the maximum supportable fee (the council previously used 75% in earlier policy decisions) may be a pragmatic compromise. Others said charging at time of finishing an unfinished basement would be a reasonable approach that reduces upfront cost barriers for starter homes while preserving the city’s ability to capture impacts later.

Councilor Francis said she favored a simple, enforceable rule: “I think whatever is above grade, you pay the full fee,” while also excluding garages, and asked staff to return with ordinance language that city staff and code‑enforcement could apply consistently. Consultant staff and the city attorney said the ordinance should include the study’s maximum‑supportable fees and identify any council decision to charge less, because lowering the fee effectively shifts the funding burden to other revenue sources or accepts a long‑term decline in level of service.

Next steps: staff told the council they will return with word‑smithing for the ordinance at the next work session in late July. Staff also said an affordable‑housing credit included in the draft ordinance likely will be removed from the ordinance text and considered instead through other economic‑development tools; staff plans to bring the housing‑credit conversation back in August for fuller discussion.

Council comments reflected competing policy goals: reduce barriers to entry‑level housing, keep the fee structure administrable and defensible under state law, and avoid creating incentives to build or finish space without permits. Staff said the legislature requires a five‑year update of the study and that the ordinance must document the maximum supportable fee even if the council chooses a lower collection percentage.