A new audit performed by the Orange County Comptroller’s Office, as a follow-up to an audit conducted in 2018, has found that Orange County continues to have a problem with calculating transportation impact fees owed by commercial developers.
The new audit, released Wednesday, reveals that about one-third of the impact fee assessments auditors examined were calculated incorrectly — with the majority of such cases involving overpayments, meaning the county charged developers too much. Out of a sample of 32 cases, for instance, 11 were identified by auditors as overpayments. Another three involved underpayments, meaning payees forked over too little when they really should have paid more.
The largest overpayment auditors identified was $405,543 — a charge that has since been refunded to the payer (after auditors pointed the problem out to county management). The three incorrect assessments that resulted in underpayments totaled $8,906.
“It’s important, you know, not just for our office, but really anybody that lives or works in Orange County that these fees get calculated correctly and there aren’t underpayments or overpayments,” comptroller Phil Diamond explained to Orlando Weekly Wednesday.
“Even though we happened to find a lot of overpayments this time, it certainly could have been the other way around. It certainly could have been a situation where developers underpaid their impact fees, and there would have been less money available to fix traffic.”
That’s right. While the term “transportation impact fees” may initially elicit a yawn or the inclination to keep scrolling, Diamond argues the issue of correctly calculating these fees is one that affects everyone in the community. Transportation impact fees are one-time fees that Orange County imposes on new construction, with the primary purpose of helping to fund public infrastructure projects that can help accommodate the anticipated growth, demand or traffic a project is expected to bring. These fees were originally adopted in Orange County in 1985, and are levied on a wide range of development projects, ranging from fast food restaurants to retail stores, hotels, movie theaters and gas stations.
Such fees play an important role in the government’s ability to attend to public works projects or infrastructure improvements. For example, that dilapidated or broken sidewalk you’ve been bugging the county to fix. Or old roads that aren’t suitable for the growth in traffic they’re seeing due to new residential construction.
During the last fiscal year alone, Orange County collected $9.5 million in commercial transportation impact fees, according to auditors. During the Comptroller’s audit period, from January through August 2023, $6.3 million was collected, with much of that coming from impact fees levied on retail, fast food and warehouse projects.
Such fees, while an important consideration in Orange County development, exist in other municipalities, too. And in 2021, the Florida Legislature even passed a bill limiting how often cities and counties can increase their impact fees, affecting not just transportation impact fees but also school impact fees.
Business lobbying groups like the Florida Home Builders Association and National Utility Contractors Association of Florida were in favor of the move, which essentially tied the hands of local governments on the issue. Lobbyists for Florida city and county governments were against it.
The Comptroller Office’s new audit focused solely on impact fees assessed for commercial development, not residential, even though impact fees are assessed for those, too. Residential developments, such as Disney’s massive affordable housing proposal approved by the Orange County Commission earlier this month, can in some cases draw concern from neighbors who worry about new development causing or worsening traffic congestion.
Transportation impact fees are supposed to help fund solutions to those concerns, which is why Diamond argues it’s important they’re calculated correctly. “It’s important that the county do a good job calculating this, because we want to make sure that developers are paying their fair share, and that developers are also paying the correct amounts,” said Diamond.
“We want to make sure that developers are paying their fair share, and that developers are also paying the correct amounts”
His office’s latest audit found that the department that oversees this assessment process — the Planning, Environmental and Development Services Department — failed to implement a previous recommendation from auditors to ensure staff is recording data in a “timely” and “accurate” manner. The county did manage to upgrade their overall system, but auditors found the upgrade did not sufficiently address the accuracy of staff’s calculations.
As Diamond explained it, if staff are manually inputting incorrect information, the overall fee assessment is going to be incorrect, too. Transportation impact fees for development projects are calculated based on three main things: the assigned land use classification (e.g. retail), impact fee rates for those classifications and square footage/number of dwellings.
Under the county’s new Land Development Management System, part of that calculation process is automated. That’s something auditors had previously recommended. Before that, auditors found that the department was using an Excel spreadsheet to calculate total impact fees, which the Comptroller’s Office in 2018 argued was insufficient and needed to change.
But the accuracy of calculations hasn’t improved. In fact, it’s gotten worse. When auditors first looked at the accuracy of impact fee assessment in 2018, they identified incorrect assessments in 25 percent of the 65 cases they examined. Their new audit, examining a sample of 32 assessments, identified errors in 34 percent of cases.
Another recommendation from auditors in 2018 that the county didn’t fully implement was fully refunding fees they’d incorrectly assessed developers due to miscalculation, and collecting fees from developers who should have paid more.
Depending on the case, that can range from several hundreds of dollars to hundreds of thousands of dollars. As Diamond puts it, “It’s real money.” Just a few thousand dollars can be enough to help cover the cost of small-scale projects in neighborhoods — for instance, a small section of a sidewalk that needs renovating or replacement. A refund of $500,000, though, due to a county error, could mean a road or sidewalk project is shelved or delayed until the county can find the funds from somewhere else.
“The more money there is available for transportation projects, the more projects you can do,” Diamond explained. The less money that’s there, the fewer projects can be done.
Orlando Weekly reached out to the Orange County government for comment on the audit’s findings, but did not receive a response ahead of publication. After this story was published, a county spokesperson told us that all under-assessed fees identified by auditors have been collected, “so there is no negative financial impact on the County.” Refunds for overpayments are also being processed.
“Orange County sincerely appreciates these independent reviews as an opportunity to improve our processes and procedures as we continue to strengthen our organization to serve our customers to the best of our abilities,” the spokesperson added.
Additional responses from county management to the audit findings were included in the final report. The county confirmed that training sessions have already been conducted for staff on how to accurately calculate impact fees, and that such training sessions will be held annually moving forward, the county added, to “ensure accurate data is entered into the system.”
The county also created a system user guide for staff, and has scheduled certain “project enhancements” that include the programming of additional system input edits that are meant to help increase the accuracy of automated calculations that auditors flagged.
In addition, the county says they have implemented a second review for all completed impact fee assessments to double-check the accuracy of the information that staff recorded. Under-assessed fees have been collected and refunds for overpayments have been processed to be completed by the end of the 2025 fiscal year. The county notes, “A follow-up review will occur to track the completion of the refunds initiated on a monthly basis until completed.”
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This article appears in Oct 23-29, 2024.