Council allows excise tax trigger change
The De Soto City Council last week agreed to make its excise tax a bit more developer friendly and will consider additional ways to make the fee less a hardship in a difficult time in the housing market.
The council agreed last week to a change in the excise tax that would allow it to consider requests from developers to pay the tax when a first building permit in a subdivision was pulled rather on submission of a final plat.
The change was made at the request of Bill Thompson, who is the developer of the 62-home Cherokee Woods.
In 2007 to get an agreement to finish an uncompleted stretch of Primrose Drive, the council agreed to form a benefit district to complete that street and two side streets in the Cherokee Woods subdivision. The final plat with defined easements and right of way would allow the city to accept the public infrastructure improvements made in the last year, which is being requested by the bonding company financing the benefit district.
City engineer Mike Brungardt said there was usually very little time before the filing of a final plat and the start of building activity in a subdivision because developers were anxious to start recouping the expense of infrastructure improvements. However, that might not be the case with the current housing market, he said.
The proposed change would allow Thompson to file the final plat, and satisfy paperwork the bonding company needs and not put a hardship on Thompson as he waits for economic conditions to improve to start homes in the subdivision.
Council members were agreeable to the change, but there was more concern about another request Thompson made.
He would like to build a couple of homes in the development, Thompson said, but banks would not loan the money with the added $80,000 needed to pay the excise tax. His request was to pay half the excise tax with the pulling of the first building permit and the remainder when the first two homes were sold.
The city used to collect excise tax when an application was made for a building permit. If that process were still in effect, builders of the homes in Thompson’s subdivision would pay the excise tax when they started new homes.
The council changed to requiring the tax with the preliminary plat because it was much easier to administrate and the front–loaded payment allowed the city to better stay ahead of street improvements needed to handle the traffic a subdivision added to city streets.
The council was warned if it went ahead with the second Thompson request, it should be prepared for the developers of the city’s other active subdivisions to ask for a refund for a portion of the excise tax they paid.
City Attorney Patrick Reavey said like any other tax, the council couldn’t simply excuse or delay collection of the tax once it was on the books. Furthermore, he said to do so would make the tax vulnerable to future court challenges from a developer.
City staff was asked to study the consequences of the second request more thoroughly before the Jan. 21 council meeting.