For years, county mayors have come to Tennessee's Capitol asking for the right to enact a tax on development to cover cost influxes due to population growth, only to be rebuffed by lawmakers lobbied by powerful and well-funded business groups.
The fight over impact fees, or one-time costs paid by developers when building new housing or commercial projects and often based on project size, pits the Tennessee Association of Realtors and Home Builder Association of Tennessee against county mayors.
Joe Carr, a former state House Republican now serving his first term as mayor of Rutherford County, and Republican Maury County Mayor Sheila Butt spent the past two years lobbying for their local delegations to introduce bills for the authority to set an impact fee.
Both counties had risen in population, turning them from rural to suburban communities and prompting a need for increased public services like police and fire departments, sidewalks, and schools. They had recently raised property taxes but were searching for another way to generate government revenue.
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"The legislature has rightfully entrusted these cities, as well as other counties, with the local authority to find alternative methods to pay for growth other than constantly raising property taxes," Carr said in a statement to the Lookout. "Even though Rutherford County has an AAA bond rating — one of only three counties within the state to have such — the General Assembly refuses to allow Rutherford to have the same local authority as the municipalities within the county."
For most of Tennessee's history, cities and counties have had the right to implement an impact fee without state approval. But that changed with the 2006 County Powers Relief Act, which barred counties that didn't already have an impact fee from implementing a new one.
Only four counties met that criteria, including Wilson and Williamson counties, which, like Rutherford and Maury, have experienced significant population increases as the suburbs of Nashville continue to expand.
Since the act's enactment, no locality has been able to persuade the state to grant the authority to implement an impact fee.
Lawmakers don't just block the bills from passage but often spike them in subcommittees before a debate on the legislation can even begin because stopping them is a high priority of some of Tennessee's largest political spenders.
Since 2009, the Tennessee Association of Realtors has spent $6.4 million on campaign contributions, lobbying and independent expenditures to influence Tennessee politics, according to a campaign finance and lobbying database maintained by the Lookout. The Home Builders Association of Tennessee has spent $3.7 million.
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Both organizations have been among the largest political spenders in the state over the past 15 years and the most prominent opponents of impact fees. The groups' opposition carries significant weight, with the Tennessee Association of Realtors ranking as the state's No. 1 campaign contributor in the 2016, 2020 and 2022 election cycles.
Rutherford and Maury counties have both registered as lobbying organizations starting in 2024. Their expenditures will not be available until the reporting deadline later this year.
The Lookout reached out to the Tennessee Association of Realtors and the Home Builder Association of Tennessee for comment but has not heard back by time of publication.
Rutherford's 2024 impact fee attempt goes down quickly
Per the U.S. Census Bureau's latest estimates, Rutherford County has seen its population rise from approximately 262,000 to 361,000 since 2010. To assist with the growth, Carr and the Rutherford County Commission raised property taxes in 2023 by 16%. After the increase, Carr told the Daily News Journal the county had to increase taxes as government expenditures increased faster than revenue.
He then enlisted the efforts of Rep. Charlie Baum, R-Murfreesboro, to sponsor a bill allowing for an impact fee in Rutherford. But the measure hit a roadblock two weeks ago in a House subcommittee when opponents asked Baum to take it off notice, which means it would not longer be scheduled for discussion.
A similar process has taken place with past bills to implement impact fees.
Rep. Darren Jernigan, D-Old Hickory, and former Sen. Steve Dickerson, R-Nashville, sponsored legislation in 2020 to allow an impact fee in Davidson County, but it failed in a House subcommittee. In 2023, Butt enlisted the help of Rep. Scott Cepicky, R-Culleoka, and Sen. Joey Hensley, R-Hohenwald, for authority to enact an impact fee in Maury, with it failing in the same subcommittee.
Then on Tuesday, a measure sponsored by Rep. William Slater, R-Gallatin, to allow the city of Gallatin to increase impact fees also failed in the same place because it had no Senate sponsor.
Notably, Carr has faced opposition locally from Murfreesboro Republican Rep. Tim Rudd, who is a real estate agent.
"Based on what people told me, they didn't want impact fees," Rudd said. "They wanted a modification of the adequate facilities tax, and if the County Commission and Carr would just listen to us and help us get this, we could get Rutherford County more money. But they keep fighting us, and their way's not going to pass."
Rutherford County already has an adequate facilities tax, but it differs from an impact fee because it can be spent only on schools, not on roads or public services such as police and fire.
Rudd is attempting to broker a compromise for Rutherford to increase its revenue.
House Bill 2426, sponsored by Rep. Tim Hicks, R-Gray, would create a new adequate facilities option for five fast-growing counties. Rudd said this would allow Rutherford, along with Maury, Montgomery, Williamson, and Wilson counties to increase its adequate facilities tax by 50% next year and 10% every four years afterward.
Impact fees and higher housing costs
Both realtors associations' opposition to legislation appears tied to the potential for an impact fee to increase the cost of building homes. This could cut into construction profits and lead to a lower supply of homes for realtors to sell.
The research on impact fees is mixed. Think tanks on both sides of the political spectrum agree these fees can be poorly designed and increase the cost of housing for low-income and first-time home buyers.
But they also agree it could be beneficial if the impact fee isn't a flat rate but rather charged based on project value and if the new revenue goes directly toward improving infrastructure.
Read more at TennesseeLookout.com.