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Impact Fees Illegal, Says Mississippi State Supreme Court
 In a decision that likely will rebound on other Mississippi jurisdictions, the city of Ocean Springs’ impact fee ordinance is an illegal tax, the Supreme Court of Mississippi has ruled.
The high court last week affirmed the 2004 state circuit court decision in the impact fee lawsuit filed by the Home Builders Association of Mississippi against Ocean Springs. The Mississippi Supreme Court’s decision should concern cities that charge impact fees without specific authority from the state.
“This is a big victory for the hard-working people who provide housing in our state, and it is an even bigger victory for the thousands of Mississippians who have been charged illegal taxes,” said Clay Easterling, president of the home builders association and a builder and remodeler from Gulfport.
“As a lifelong resident of the Mississippi Gulf Coast, I can tell you that this decision could not have come at a better time. We don’t need cities collecting illegal taxes from people who have lost everything that they own,” said Easterling.
In January 2003, Ocean Springs enacted seven different impact fee ordinances on builders and developers that would have forced them to pay $4,598 per new home, a fee that would be passed on to home buyers in the form of higher prices. The state home builders association immediately filed suit, protesting that the Ocean Springs had neither express or implied legislative authority to craft or impose such an ordinance.
The state Supreme Court agreed, saying, “Under the Municipal Planning Statutes...there are no provisions which grant authority to adopt impact fees or other revenue raising mechanisms to implement the City’s Comprehensive Plan...The impact fees constitute a tax because the fees are simply a revenue-raising measure...a tax the municipality has no authority to assess.”
“There should be no question in anyone’s mind regarding impact fees after this ruling by the highest court in Mississippi,” said Marty Milstead, executive vice president and CEO of the Mississippi home builders association. “The home builders are calling on all municipalities to immediately stop charging illegal taxes and return the money that they have charged and collected illegally,” said Milstead.
Home builders and new home buyers more than pay their way in supporting the economy, Milstead said. For example, developers pay for the roads, parks and other infrastructure in new neighborhoods and then sign it over to the city in which it’s been built.
Home builders in Mississippi pay the permit, water and sewer and other fees associated with residential construction along with the thousands of dollars of sales taxes associated with the materials and supplies used to build a new home.
“When cities charge impact fees atop the other taxes that home builders pay, it unfairly discriminates against new home buyers and can have a significant effect on housing affordability,” Millstead said. “Our membership is delighted that the courts agree with our stand.”
The Home Builders Association of Mississippi represents 4,000 member firms. NAHB provided support to the builders association and this litigation through its Legal Action Fund.
For more information, contact Mary Lynn Pickel, NAHB director of Legal Services, or call her at 800-368-5242 x8485.
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