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School impact fees scorched for being useless tax that only adds to housing costs

Tom Yamachika and Mark Coleman note on “Talking Tax” that state educaton officials collect the fees but never spend them

The Hawaii Department of Education is in the business of educating — and imposing taxes.

On last week’s episode of “Talking Tax” on ThinkTech Hawaii, co-host Tom Yamachika, president of the Tax Foundaiton of Hawaii, said, “Not even the Department of Taxation has the power to levy taxes, only execute taxes enacted by the Legislature.”

And yet, somehow the DOE acquired that power, by which it levies its so-called school impact fee on homebuilders.

The law behind the fee requires that developers of housing projects “contribute toward the construction of new or expansion of existing public school facilities” by either providing land or paying cash, which is pooled into a special fund for the DOE.

And what has the department accomplished with the money? According to Yamachika, nothing.

Speaking with co-host Mark Coleman, managing editor at the Grassroot Institute of Hawaii, Yamachika said the balance of the fund has swelled to over $18 million since the fee was formalized in 2007, while not a single penny from it has been spent.

Coleman emphasized that while the DOE isn’t utilizing the funds, the fee contributes to escalating housing costs and “makes affordable homes a little less affordable.”

He cited a recent example where a fee waiver was granted for an affordable housing project in downtown Honolulu, saving the homebuilders more than $200,000 in construction costs.

Coleman added: “At a time when people are constantly asking for more money at the Legislature, wanting to raise our taxes, they’re not even spending the money we’re giving them — or that they’re taking, I should say.”

He noted that there is a bill at the Legislature that would repeal the impact fee, which Grassroot supports.

Yamachika said he would be happy if the DOE would just spend the fees that it has collected.

“I think they ought to focus more on maintaining the assets that they have [by] spending the money that we give them, as opposed to letting it rot,” said Yamachika.

If you would like to hear the entire conversation, click on the image below.

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