If a Texas subdivision project goes dormant, can a city charge higher impact fees when the developer restarts, and can the developer get the old fees refunded?

TX AG Opinion GA-0797: How are impact fees handled when a subdivision goes dormant?

Plain-English summary

A state senator, acting for the City of Brownsville's Public Utilities Board, asked a series of questions about how two Local Government Code chapters interact when a subdivision project stalls. Chapter 245, the "vested rights" or "grandfather" statute, locks in the development regulations that were in effect when the first permit application was filed, protecting a project from later rule changes during its life. Chapter 395 governs impact fees, which are charges on new development to pay for the public facilities that growth makes necessary.

On the first set of questions, the Attorney General assumed a developer had initiated a project, paid the impact fees in effect at that time, kept ownership, but let the project go dormant under section 245.005 (where a permit can be given an expiration date for lack of progress). First, the developer is not automatically entitled to a refund just because the city already spent the collected fees. Chapter 395 requires a refund only in the specific circumstances in section 395.025: when service is denied though facilities exist, when the city collected fees but failed to start construction within two years or make service available in a reasonable time (no later than five years), or when fees are not spent as authorized within ten years. A project going dormant is not, by itself, one of those triggers, and the request did not give enough facts to know whether section 395.025 applied. Second, a developer trying to restart a dormant project after the city raised its fees does not keep grandfathered or vested rights under chapter 245, because once the permit has expired and the project is dormant (and absent a contract or other basis), the project becomes subject to current regulations. Because the answer to that question was no, the Attorney General did not reach the follow-up.

On the second set, the Attorney General confirmed that chapter 395 treats "assessing" an impact fee and "collecting" it as different steps: assessment is the determination of the fee amount for a specific development (and no specific act by the subdivision is required for it), while collection is the actual receipt of payment, typically at the building-permit or water-meter-connection stage. Likewise, adopting an impact fee (which must be done by ordinance, order, or resolution and applies to a broad service area) is a distinct activity from assessing a fee against a particular tract, although nothing prevents a single ordinance from doing both; whether a given ordinance does is a fact question the office could not resolve. Finally, and most usefully for developers, section 395.017 says that after impact fees are assessed against a tract, no additional or increased fees may be assessed against it unless the number of service units to be developed increases. So in the assumed scenario, where density did not increase, the developer would pay the originally assessed fees rather than the later, higher ones.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Local Government Code chapters 245 and 395 have been amended since 2010, and the impact-fee and vested-rights rules, including the timing and refund provisions, may have changed. Confirm the current statutes and case law before relying on anything below.

Who this opinion affected (as of 2010)

Developers and subdivision owners: The opinion told them that letting a project go dormant could cost them their chapter 245 vested rights, but that once impact fees were assessed against a tract, the city generally could not raise them unless the development's service-unit count grew.

Municipalities and utility boards: The opinion clarified that they must refund impact fees only in the section 395.025 situations, that assessment and collection (and adoption and assessment) are distinct acts, and that section 395.017 limited their ability to charge increased fees on an already-assessed tract.

Cities considering fee increases: The opinion meant a fee increase generally could not be applied retroactively to a tract whose fees were already assessed, absent a rise in service units.

Common questions

Does a developer get impact fees refunded if the project stalls?
Only if the situation fits section 395.025 (service denied, construction not started or service not provided in time, or fees not spent within ten years). A project simply going dormant does not by itself require a refund.

Does a dormant project keep its grandfathered status?
No. The opinion concluded that once the permit has expired and the project is dormant under section 245.005, and absent a contract or other basis, the developer has no vested rights under chapter 245, so current regulations apply.

What is the difference between assessing and collecting an impact fee?
Assessment is determining the fee amount for a specific development, and no specific city act is required for it. Collection is the actual receipt of payment, usually triggered when a building permit is issued or a water-meter connection is requested.

Can a city raise impact fees on a tract after they were assessed?
Generally no. Section 395.017 bars assessing additional or increased fees against a tract after the original assessment unless the number of service units to be developed on the tract increases.

Background and statutory framework

Chapter 245 of the Local Government Code, the vested-rights statute, requires a regulatory agency to consider a permit application (such as a subdivision plat) under the regulations in effect when the original application was filed, and treats preliminary plans and related plats as one series of permits for a project (Tex. Loc. Gov't Code Ann. § 245.002(b); Milestone Potranco Dev., Ltd. v. City of San Antonio, 298 S.W.3d 242, 248 (Tex. App.—San Antonio 2009, pet. denied); Save Our Springs Alliance v. City of Austin, 149 S.W.3d 674, 681 (Tex. App.—Austin 2004, no pet.); City of San Antonio v. En Seguido, Ltd., 227 S.W.3d 237, 244 (Tex. App.—San Antonio 2007, no pet.)). Section 245.005 addresses dormant projects and lets a regulatory agency place an expiration date on a permit. The opinion noted it is not clear that chapter 245 even applies to impact fees, since section 245.004(6) excludes "fees imposed in conjunction with development permits."

Chapter 395 governs impact fees, described as charges on new development to pay for public facilities made necessary by growth (DeSoto Wildwood Dev., Inc. v. City of Lewisville, 184 S.W.3d 814, 820 n.3 (Tex. App.—Fort Worth 2006, no pet.)). Section 395.025 lists the circumstances requiring a refund, and "shall" imposes that duty only when those circumstances are met (Tex. Gov't Code Ann. § 311.016(2)). Section 395.016 distinguishes assessing a fee (subsection (f): "a determination of the amount of the impact fee," for which "[n]o specific act by the political subdivision is required") from collecting it at the building-permit or meter-connection stage (subsection (d)). Adoption of a fee is a separate, broader act tied to land-use assumptions, a capital improvement plan, and a service area, and must be done by ordinance, order, or resolution (§§ 395.045, 395.051), so adopting and assessing are distinct activities (Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 493 (Tex. 2001); Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 659 (Tex. 1995)). Section 395.017 then prohibits assessing additional or increased fees against a tract after the original assessment unless the number of service units increases, so the developer would owe the originally assessed fees (Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009)). The opinion observed that factors beyond chapter 395, such as agreements and local ordinances, can also matter.

Citations

Statutes:

• Tex. Loc. Gov't Code Ann. §§ 245.001-.007, 245.002(b), 245.004(6), 245.005 (West 2005)
• Tex. Loc. Gov't Code Ann. §§ 395.001-.082, 395.016(d), 395.016(f), 395.017, 395.025(a), 395.025(c), 395.051 (West 2005 & Supp. 2010)
• Tex. Gov't Code Ann. § 311.016(2) (West 2005)

Cases:

• Milestone Potranco Dev., Ltd. v. City of San Antonio, 298 S.W.3d 242 (Tex. App.—San Antonio 2009, pet. denied)
• Save Our Springs Alliance v. City of Austin, 149 S.W.3d 674 (Tex. App.—Austin 2004, no pet.)
• City of San Antonio v. En Seguido, Ltd., 227 S.W.3d 237 (Tex. App.—San Antonio 2007, no pet.)
• DeSoto Wildwood Dev., Inc. v. City of Lewisville, 184 S.W.3d 814 (Tex. App.—Fort Worth 2006, no pet.)
• Helena Chem. Co. v. Wilkins, 47 S.W.3d 486 (Tex. 2001)
• Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656 (Tex. 1995)
• Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863 (Tex. 2009)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0797
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2010/ga0797.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

September 20, 2010

The Honorable Eddie Lucio, Jr.
Chair, Committee on International Relations and Trade
Texas State Senate
Post Office Box 12068
Austin, Texas 78711

Opinion No. GA-0797

Re: Calculation of impact fees for a platted subdivision (RQ-0854-GA)

Dear Senator Lucio:

On behalf of the City of Brownsville's Public Utilities Board, you ask several questions about chapters 245 and 395 of the Local Government Code. [Footnote 1: Request Letter at 1-2 (available at http://www.texasattorneygeneral.gov).]

Chapter 245 is commonly referred to as the "vested rights statutes" and grants a project "grandfathered" status. See TEX. LOC. GOV'T CODE ANN. §§ 245.001-.007 (West 2005); Milestone Potranco Dev., Ltd. v. City of San Antonio, 298 S.W.3d 242, 248 (Tex. App.—San Antonio 2009, pet. denied) (referring to chapter 245 as "the vested rights statutes"); Save Our Springs Alliance v. City of Austin, 149 S.W.3d 674, 681 (Tex. App.—Austin 2004, no pet.) (referring to chapter 245 as containing a "grandfather clause" that protects owners from changes in laws that occur during the pendency of a development project). As one court explains, "[c]hapter 245 . . . recognizes a developer's vested rights and requires a regulatory agency to consider approval or disapproval of an application for a permit, such as a subdivision plat, based on regulations and ordinances in effect at the time the original application is filed." Milestone Potranco Dev., Ltd., 298 S.W.3d at 248; see Tex. Att'y Gen. Op. No. JC-0425 (2001) at 1 (explaining that chapter 245 works to "lock[] in, for the duration of a real-property 'project,' the development regulations in effect when the original application for the first necessary permit is filed").

Chapter 395 governs the imposition of impact fees by municipalities as well as other governmental entities. See TEX. LOC. GOV'T CODE ANN. §§ 395.001-.082 (West 2005 & Supp. 2010). "An impact fee is generally described in one Texas case as a charge 'on new development to pay for new public facilities that become necessary as the result of city growth in a particular area.'" Tex. Att'y Gen. Op. No. GA-0577 (2007) at 2 (citing DeSoto Wildwood Dev., Inc. v. City of Lewisville, 184 S.W.3d 814, 820 n.3 (Tex. App.—Fort Worth 2006, no pet.)).

I. First Series of Questions

As a preliminary matter, we clarify the context in which you ask your first series of questions. In relation to your first three questions, you ask that we assume "a developer initiates a development plan, pays the impact fees applicable at the time of initiation, and retains ownership of the property, but allows a development plan to lapse due to inactivity under local ordinances and regulations." Request Letter at 1. We understand the initiation of a development plan to mean that the developer in your scenario filed some type of preliminary plan or plat that triggered statutory vesting rights under chapter 245. See TEX. LOC. GOV'T CODE ANN. § 245.002(b) (West 2005) ("Preliminary plans and related subdivision plats, site plans, and all other development permits for land covered by the preliminary plans or subdivision plats are considered collectively to be one series of permits for a project."); City of San Antonio v. En Seguido, Ltd., 227 S.W.3d 237, 244 (Tex. App.—San Antonio 2007, no pet.). We understand your reference to the payment of impact fees to mean statutory impact fees imposed under chapter 395 and, furthermore, we assume that the fees were collected in compliance with chapter 395. See TEX. LOC. GOV'T CODE ANN. §§ 395.016, .019 (West 2005) (addressing the collection of impact fees). Finally, we understand the "lapse" of the development plan "due to inactivity under local ordinances and regulations" to mean that the project is dormant under Local Government Code section 245.005. [Footnote 2: Neither chapter 245 nor chapter 395 uses the term "lapse" or "inactive." See TEX. LOC. GOV'T CODE ANN. §§ 245.001-.007 (West 2005), id. §§ 395.001-.082 (West 2005 & Supp. 2010).] [Footnote 3: It is not altogether clear to us how the project has become dormant under chapter 245 in light of the fact that impact fees have been paid. See TEX. LOC. GOV'T CODE ANN. § 245.005 (West 2005) (authorizing the placement of an expiration date on a permit if no progress has been made towards completion of the project and providing that the payment of impact fees to a regulatory agency constitutes progress towards completion of a project). However, we will assume for purposes of this opinion that the facts articulated in your request are correct. Cf. Tex. Att'y Gen. Op. No. GA-0249 (2004) at 2 (assuming the facts provided by the requestor are correct).]

A. Question 1(a)

Having clarified the context, we now consider your first series of questions. You want to know if, in this context, "the developer [is] entitled to a refund of the impact fees if the municipality and the municipal utility have spent the impact fees previously collected to construct regional capital improvements associated with anticipated new growth[.]" Request Letter at 2.

Chapter 395 provides for the refund of impact fees in specific circumstances. See TEX. LOC. GOV'T CODE ANN. § 395.025(a), (c) (West 2005) (providing for a refund where a municipality denies service, fails to commence construction within a certain time, fails to make service available within a certain time, or fails to spend fees as authorized by chapter 395 within a certain time). Section 395.025 addresses the refund of an impact fee and provides:

(a) On the request of an owner of the property on which an impact fee has been paid, the political subdivision shall refund the impact fee if existing facilities are available and service is denied or the political subdivision has, after collecting the fee when service is not available, failed to commence construction within two years or service is not available within a reasonable period considering the type of capital improvement or facility expansion to be constructed, but in no event later than five years from the date of payment under Section 395.019(1).

(c) The political subdivision shall refund any impact fee or part of it that is not spent as authorized by this chapter within 10 years after the date of payment.

Id.

The municipality must refund the impact fees under chapter 395 only if your scenario fits within section 395.025. See id.; TEX. GOV'T CODE ANN. § 311.016(2) (West 2005) (explaining that the term "shall" is construed to impose a duty unless the context or statute provides otherwise). If it does not, we find no other requirement in chapter 395 that a municipality refund impact fees. That a project becomes dormant under Local Government Code section 245.005 is not, standing alone, one of the circumstances that triggers a refund under section 395.025. Ultimately, however, you do not provide sufficient information to determine if the situation you describe fits within the refund provisions of section 395.025.

B. Question 1(b)

You next inquire whether "the developer who later attempts to reinstate the development plan after the municipality adopts additional or increased impact fees [is] entitled to grandfathered status or a vested right to be subject to the originally assessed impact fees[.]" Request Letter at 2. We understand the terms "grandfathered" or "vested" to refer to rights acquired under chapter 245. Milestone Potranco Dev., Ltd., 298 S.W.3d at 248; Save Our Springs Alliance, 149 S.W.3d at 681.

Even assuming chapter 245 applies to impact fees, your scenario involves a dormant project for which the permit has expired under section 245.005. See Request Letter at 1 (asking that we assume the development plan has lapsed due to inactivity). Thus, so long as the facts are as you describe and there is no contractual or extra-statutory basis for preserving the original application, the developer has no grandfathered status or vested rights in the project under chapter 245. See Tex. Att'y Gen. Op. No. JC-0425 (2001) at 3 (explaining that a "project would be subject to current development regulations" if the permit has expired and the project is dormant under section 245.005). Because we answer question 1(b) in the negative, we do not address question 1(c).

II. Second Series of Questions

In your second series of questions, you ask us to assume "a platted subdivision is assessed impact fees under Section 395.016(d), Local Government Code, but no impact fees are actually collected because of subdivision inactivity (for example, no requests for building permits or utility connections), and the municipality adopts additional or increased impact fees during the inactivity period." Request Letter at 2; see also TEX. LOC. GOV'T CODE ANN. § 395.016(d) (West 2005).

A. Question 2(a)

You ask whether "a distinction [should] be made between an 'assessment' or determination of impact fees and an actual collection of impact fees under [subsections] 395.016(d) and (f), Local Government Code." Request Letter at 2. Subsection (d) provides that a municipality may assess impact fees before or at the time of recordation of a subdivision plat, but may collect the fees when a building permit is issued or an application for an individual water meter connection is filed. TEX. LOC. GOV'T CODE ANN. § 395.016(d) (West 2005). Subsection (f) defines the term "assessment" to mean "a determination of the amount of the impact fee in effect on the date or occurrence provided in this section and is the maximum amount that can be charged per service unit of such development." Id. § 395.016(f). In a prior opinion, this office concluded that the collection of an impact fee refers to the time the governmental entity receives payment of the fees. Tex. Att'y Gen. Op. No. GA-0577 (2007) at 2. In sum, the express language of the statute reflects, and a prior opinion of this office recognizes, a distinction between the assessment of an impact fee and the collection of an impact fee under subsections 395.016(d) and (f).

B. Question 2(b)

You next ask whether "the enactment of an impact fee ordinance by a municipality constitute[s] an 'assessment' of an impact fee without any other specific act by the municipality[.]" Request Letter at 2.

Considered as a whole, chapter 395 contemplates that the act of adopting an impact fee and the act of assessing an impact fee are separate activities. See Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 493 (Tex. 2001) (stating that in determining legislative intent, a court "must always consider the statute as a whole rather than its isolated provisions"). First, the act of assessing an impact fee appears to relate to a specific new development whereas the act of adopting an impact fee generally relates to a larger area. As previously set out, section 395.016(f) defines the term assessment to mean "a determination of the amount of the impact fee in effect on the date or occurrence provided in this section and is the maximum amount that can be charged per service unit of such development." TEX. LOC. GOV'T CODE ANN. § 395.016(f) (West 2005) (emphasis added); see also id. § 395.001(10) (defining the term "service unit"). This indicates that the assessment of an impact fee is a calculation related to a specific new development. Similarly, section 395.016(d), upon which your scenario is based, indicates that an assessment is made against a particular subdivision plat. Id. § 395.016(d). In contrast, the act of adopting an impact fee is generally applicable to an area broader in scope than one particular development. For instance, the adoption of an impact fee is preceded by and based upon the adoption of land use assumptions and a capital improvement plan. TEX. LOC. GOV'T CODE ANN. § 395.045 (West 2005). The land use assumptions include a description of a service area. Id. § 395.001(5). The service area is the entire area "to be served by the capital improvements or facilities expansions specified in the capital improvement plan." Id. § 395.001(9).

Second, chapter 395 requires an entity to take specific action when adopting an impact fee but not when assessing an impact fee. The act of adopting an impact fee must be reflected in an ordinance, order, or resolution, whereas, section 395.016(f) provides that, in regard to an assessment, "[n]o specific act by the political subdivision is required." Id. §§ 395.051, .016(f).

Third, chapter 395 does not use the term "assessment" when referring to the adoption of an impact fee. See Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 659 (Tex. 1995) ("[E]very word of a statute must be presumed to have been used for a purpose."). Section 395.051, for instance, provides that "[t]he political subdivision, within 30 days after the date of the public hearing on the imposition of an impact fee, shall approve or disapprove the imposition of an impact fee" and prohibits the "ordinance, order, or resolution approving the imposition of an impact fee" from being "adopted as an emergency measure." TEX. LOC. GOV'T CODE ANN. § 395.051 (West 2005) (emphasis added). Section 395.024 provides that "[t]he order, ordinance, or resolution levying an impact fee must provide that all funds collected through the adoption of an impact fee shall be deposited in interest-bearing accounts." Id. § 395.024(a) (emphasis added). The act of assessing an impact fee is, in contrast, referred to in a limited number of provisions of chapter 395, sections 395.016 and 395.017, and is not referred to in provisions related to the act of adopting an impact fee. See id. §§ 395.016-.017. In sum, we conclude that the acts of adopting an impact fee and assessing an impact fee are distinct activities.

However, we find nothing in chapter 395 that would prohibit a single ordinance from serving as both the means by which a municipality imposes and assesses an impact fee. Whether any particular ordinance both imposes and assesses an impact fee is an issue this office cannot resolve. See Tex. Att'y Gen. Op. No. GA-0648 (2008) at 6 (explaining that this office generally does not construe city ordinances and cannot answer questions that require the resolution of fact questions).

C. Question 2(c)

Finally, you ask whether the developer in your scenario pays "the originally assessed impact fees or the additional or increased impact fees" "when subdivision activity begins, assuming that no increased subdivision use density requires any consumption of additional utility service units." Request Letter at 2. Section 395.017 expressly provides that "[a]fter assessment of the impact fees attributable to the new development or execution of an agreement for payment of impact fees, . . . additional impact fees or increases in fees may not be assessed against the tract for any reason unless the number of service units to be developed on the tract increases." TEX. LOC. GOV'T CODE ANN. § 395.017 (West 2005) (emphasis added). Under the express language of the statute, no additional impact fees or increases may be assessed against a tract after the original assessment and thus, the developer in your scenario would pay the originally assessed impact fees. See Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009) (explaining that, when construing a statute, the "primary objective is to give effect to the Legislature's intent as expressed in the statute's language").

SUMMARY

Local Government Code chapter 245 recognizes a developer's vested rights and requires a regulatory agency to consider approval or disapproval of an application for a permit based on regulations and ordinances in effect at the time an original application is filed. A developer has no vested rights in a project under chapter 245 if the project is dormant under section 245.005.

Local Government Code chapter 395 governs the imposition of impact fees by municipalities. Impact fees are, as a general matter, charges on new development to pay for public facilities that become necessary as the result of growth in a particular area. A municipality must refund impact fees as provided in section 395.025. There is, as reflected in the express language of chapter 395 and in prior attorney general opinions, a distinction between the assessment of an impact fee and the collection of an impact fee. Chapter 395 indicates that the act of adopting an impact fee and the act of assessing an impact fee are distinct activities. However, we cannot say as a matter of law that a single ordinance could not serve as both the means by which a municipality imposes and assesses an impact fee. By its express terms, section 395.017 prohibits the imposition of additional or increased impact fees against a tract after the fees have been assessed unless the number of service units to be developed on the tract increases.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

DAVID J. SCHENCK
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Christy Drake-Adams
Assistant Attorney General, Opinion Committee