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City Claims Impact Fee Is a ‘Tax’

In 1998, Drebick Investments was assessed a flat-rate citywide transportation impact fee of more than $130,000 as a condition for the city’s approval of a four-story office complex located on the edge of town.

Drebick argued that its project would have less impact on city streets than a typical project in the middle of the city and that traffic going to the development would use a nearby local freeway instead of going through town.

A hearing examiner agreed with Drebick and noted that the impact fees paid could potentially be allocated by the city to individual transportation facilities that did not reasonably benefit the Drebick proposal. That was a violation of state law. However, a trial court later ruled that the impact fees were a “tax” and, as such, the city’s fees were not required to meet regulatory standards for “nexus” and “proportionality.”

Drebick is arguing that if the assessment is a tax, then the city needs to prove that it was authorized. Otherwise, it needs to meet regulatory standards for imposing an impact fee.

Olympia maintains that it has taxing authority under a state statute, and that it is authorized to raise revenue for transportation needed to support new development generally.

The case, Drebick v. City of Olympia, will soon be decided by the Supreme Court of Washington.

The Building Industry Association of Washington and the Pacific Legal Foundation have filed friend-of-the-court briefs supporting Drebick Investments in this case.

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