At a special meeting Feb. 8, Charleston City council members heard from Johns Island property owners and developers opposed a newly-passed plan that put Johns Island into a special district that imposes fees on new large-scale residential and commercial construction to fund road and drainage improvements.
The meeting took place at the Berkeley Electric Cooperative on Main Road.
Under the Municipal Improvement District, new development on two acres or more within city-owned property on Johns Island will be assessed a fee of $480 per apartment or single-family home every year for 30 years. Commercial space will be assessed a fee of $480 per 1,800 square feet every year for 30 years.
The fee increases by 2% each year, resulting in approximately $19,000 per unit over the 30-year lifespan, according to city staff.
The city expects to generate around $60 million to pay for infrastructure improvements like roads and drainage along with parks and recreational facilities.
The fee will be assessed on any new development or existing development that has not yet received a certificate of construction completion. There are approximately 3,500 new residential units already approved to be constructed and 500 more units are proposed on Johns Island, according to the city.
Affordable housing projects, owner-occupied projects and projects by nonprofits or churches will not be assessed the fee.
The plan has already been voted on — third reading took place in October 2021 — but council members were required to hold a meeting to hear opposition. Property owners and developers called the MID unfair, inequitable and burdensome.
“While a fee of $480 per unit or household may seem light to some folks, please consider that for a project like ours, for 240 mostly studio and one-bedroom units, that comes to $115,200 (additional) a year. So, you’re getting into a six-figure impact,” said Alan McMahon with The Beach Co., which owns 19 acres on Maybank Highway. McMahon said the 30-year lifespan of the annual fee results in fees of around $3 million.
“Aside from reducing the value of the project, that reduction has significant consequences with respect to lender requirements and loan requirements,” McMahon said.
Developers and property owners said they were concerned that there is no clear project list of infrastructure improvements that will be funded by the MID fees.
“The new developments that are going to pay for this improvement will benefit the same as the general public, and this is not fair or equitable to impose this assessment just on future commercial development,” said Jennifer Ivey, a lawyer representing two property owners.
Ivey added, “The method that was chosen for this assessment makes no distinction between the number of bedrooms or size of residential dwellings … this will discourage building long-term.”
Another lawyer representing a property owner stated the MID violates the South Carolina Enabling Act.
The city will vote on each property owner’s objection at a future council meeting.
Robert Summerfield, director of Planning, Preservation & Sustainability for the city of Charleston, said projects paid for with MID fees are required to be completed in the MID area.
Projects will be presented and discussed in a public forum, and a citizen advisory committee will be established. He said improvement projects will be prioritized for where there is the most need and will be determined as money from the fees starts coming in.
“This is not a substantial sum of money in the big picture for an infrastructure project,” Summervield said. “It’s really meant to supplement other funding sources that are either already earmarked, dedicated or what we would expect to become dedicated to these types of projects in the future. Essentially, you can think of it as gap funding.”
After the meeting, Summerfield said that any properties annexed by the city in the future would have to pass three additional readings by council to be included in the MID assessment.
Charleston Mayor John Tecklenburg said the city needs to do something to keep up with development on the island, and the MID option was chosen with citizen input.
“This whole initiative and idea came out of a series of meetings we had on Johns Island and a lot of citizens participated, where it was duly pointed out and acknowledged and recognized that Johns Island developed out without a lot of necessary infrastructure being put in place. The city is acknowledging that,” Tecklenberg said. “You’ve heard the term ‘impact fee’ — this is different legally than an impact fee, but in my mind it’s very similar. New development would pay an extra fee in order to build that road connector we need, or build a gymnasium or swimming pool or help with a drainage projects or things that we think our citizens would like to have out here.”