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Executive - Press Release

Posted on: October 17, 2013

[ARCHIVED] County Executive Gordon Slashes Capital Recovery Fees to Spur Economic Activity

County Executive Tom Gordon, as part of his ongoing economic development initiative, has ordered the Department of Special Services to slash capital recovery fees associated with new construction.

“Since the onset of the 2008 recession, at a time when we should have taken steps to encourage economic development, New Castle County actually increased the cost of doing business by 30 percent,” said County Executive Gordon. “We don’t believe that’s good economic policy, particularly when so many construction workers remain without employment.”

The County Executive is doing his part to ensure New Castle County does not stand in the way of any economic recovery, said New Castle County Chief Administrative Officer David Grimaldi.

“Government has a countercyclical role to play in the economy. Raising fees during a recession, which occurred during the most recent housing downturn, likely intensified the job loss in the home construction industry,” CAO Grimaldi said.

Because impact fees remain relatively low in the northern part of New Castle County, the revised fee schedule will pertain to development below the C&D Canal. CAO Grimaldi said that the new fee structure, effective Nov. 1, would lower the fees back to pre-recession levels.

“We will also reduce our annual cost escalator from the previous 4.5 percent compounded rate to the lesser of 3 percent or annual CPI so that we have a better mechanism to react to deflationary pressures in the future,” he added.

The new structure will reduce the current fee on single family homes from $12,782 to $9,815. Townhouses will be reduced from $10,652 to $8,179, and apartments from $8,521 to $6,543. Because recovery fees are paid into the capital account, the change will not affect the County operating budget. Even with the reduction, cash inflows into the capital account will still be able to meet outflows.

“We believe that the change will provide some relief to the profit margin compression experienced in the homebuilding industry thereby encouraging economic activity, job growth, and increased real estate transfer tax revenues,” said the County Executive.

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