Hike in new home fees to pay for Carmel parks could mean higher prices for home buyers

Faced with a decrease in local income taxes, the Carmel Clay Parks and Recreation Department has proposed a 61% hike in construction fees for home builders to help pay for parks.

The change would boost impact fees for new construction from $4,882 to $7,863 per home or apartment unit, a cost that is likely to be passed on to homebuyers and renters.

Parks CEO Michael Klitzing said the hike would be assessed incrementally, at 11% a year, for five years and would generate an extra $924,000 for parks in that time.

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Collection of the fees goes entirely to the parks department for new projects to meet the recreational demands of extra residents moving into the city. It comes as the parks face a $3.5 million annual revenue loss because Clay Township's share of county income taxes will decrease when the township pays off an old bond in 2025.

“There is an imminent storm on the horizon in the form of a funding shortfall to support the park system,” said Joshua Kirsh, a Carmel Plan Commission member appointed by Carmel Clay Parks. ”If all of the park's stakeholders don't address it is going to look bleak.”

Options include a new bond issue, reallocation of city funds or a property tax hike.

Klitzing said he makes “no apologies” for the impact fees because the parks system is part of what attracts new residents to Carmel.

State law requires cities to review the impact fee every five years and adjust it according to future park needs, population growth, and assessed and projected land value, among other factors.

Under the law, Carmel could raise the fee even higher, to $8,276. In 2019, Carmel raised the impact fees 64% .

Steve Lains, executive director of the Builders Association of Greater Indianapolis , said the hike will add to the cost of new homes.

“It clearly raises the house costs and rents,” he said in an email. “Every increase in fees increases the cost of the home or cost to build an apartment.“

Lains said surveys indicate about 25% of home costs are due to permits, fees and regulatory expenses.

But Kirsh said the increase for buyers of the types of luxury homes built in Carmel would be “insignificant,” given the cost of the homes. The average home sale price in Carmel is $535,000 according to the real estate data company Redfin, so even if the entire impact fee was passed on now to a buyer of the average home it would raise the price by about a one-half of a percentage point.

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Kirsh said collection of the fees will dwindle over time as the city nears a full build-out.

“The city isn't getting any bigger,” he said. “There are fewer houses left to be built.”

Carmel charges builders the highest impact fees for parks of any Hamilton County city but the other three big cities in the county charge builders additional fees for roads, which Carmel does not.

The parks department will be concentrating in the near term on projects in seven parks, including a playground, splash pad, trails and shelters at Bear Creek Park and trails, boardwalks, restrooms and parking at Thomas Marcuccilli Nature Park.

Other parks to receive funding are West Park, the White River corridor, central core parks, Chinese Garden and Japanese Garden.

The proposal comes after the Parks Department and the Carmel Redevelopment Commission went to Hamilton County court to resolve a dispute about how the impact fees were being distributed.

Parks officials said the Board of Public Works and Safety and the CRC were circumventing standard distribution practice by intercepting the tax dollars and spending them on small plazas in the city core rather than the outlying larger parks.

The two sides settled the squabble outside of court by letting the Carmel City Council decide where funds should go in the future.

The Plan Commission approved the impact fee increase earlier this month but the Carmel City Council must still vote on it.

C all IndyStar reporter John Tuohy at 317-444-6418. Email at john.tuohy@indystar.com and follow on X/ Twitter and Facebook .

This article originally appeared on Indianapolis Star: Hike in new home fees to pay for Carmel parks could mean higher prices for home buyers