The state Department of Education is warning that repealing school impact fees — a move now under consideration by lawmakers — could eliminate a critical funding source used to build new schools in growing residential communities across Hawaii.

DOE Deputy Superintendent of Operations Dean Uchida, in a report to the Board of Education’s Finance and Infrastructure Committee on Thursday, said the repeal would severely limit the DOE’s ability to secure land and funding for schools needed to support future housing developments.

Without school impact fees, large residential projects such as Hoopili and Koa Ridge would not be required to set aside land or provide funding for new schools, leaving communities without assurance of the educational infrastructure necessary to accommodate increasing student populations.

Two bills moving through the Legislature would either eliminate the program entirely or exempt certain developers from paying the fees. House Bill 422 would repeal the School Impact Fee law and transfer the unencumbered $19.9 million collected to date to the Hawaii School Facilities Authority, to be spent at its discretion. Supporters of the bill argue that eliminating the fees would help lower housing costs and address the state’s ongoing housing crisis. Meanwhile, HB 1088 would exempt developments by the state Department of Hawaiian Home Lands from paying impact fees — a requirement that was reinstated in 2022 after a previous exemption in 2021.

The DOE opposes both measures, warning that together they would drastically reduce its ability to secure land and funding for schools tied to new housing developments. While the DOE acknowledges the pressing need for affordable housing, officials argue that removing school impact fees would leave communities with new homes but without the necessary schools to serve the families who move in, exacerbating school overcrowding and limiting access to quality education.

Established in 2007, the School Impact Fee Program allows the DOE to collect fees from developers of new residential projects within designated school impact districts. The program replaced an earlier “fair-share contribution” system that required developers to provide land or monetary contributions as a condition of project approval. School impact fees ensure that developers contribute to the cost of public school facilities needed to support the increase in student enrollment generated by new housing.

According to DOE officials, the fees are the only dedicated funding mechanism outside of legislative appropriations available to support the construction of new school facilities to meet the demands of growing residential communities.

Although the program was initially administered by the DOE’s Facilities Development Branch, its operational management and oversight were transferred to the Hawai‘i School Facilities Authority in 2020. There are five school impact fee districts across three islands — Kalihi to Ala Moana and Leeward on Oahu, Central Maui, West Maui and West Hawaii island. However, although West Hawaii island was approved as a district by the Board of Education in 2010, impact fees have not been collected there due to policy conflicts with the County of Hawaii administration.

As of December, approximately $19.9 million in school impact fees has been collected from four active districts. The fees are split between a land component and a construction cost component, with the SFA determining whether developers fulfill their land obligation through land dedication or monetary fees in lieu of land. Construction impact fees are calculated based on a formula approved by the Board of Education in 2007 and are used for planning, engineering, architectural services, permitting, financing, administrative expenses and other capital equipment costs related to educational facilities. The use of fees was expanded to include improvements or renovations of existing structures for school use and temporary or portable facilities, though the fees still cannot be used to expand school capacity unless specific conditions are met.

Developers of residential projects with 50 or more units are required to meet with the SFA to determine how they will satisfy the land component requirement before receiving building permits. Monetary fees in lieu of land may also be used for surveying, appraisals and legal fees, although their use for architectural services and other costs is limited outside of urban Honolulu and designated transit-oriented development zones.

Since January 2011, school impact fees have been collected from developers in Central Maui and West Maui.

In Central Maui, developers pay fees ranging from $5,373 to $5,560 for single­-family units and around $2,400 for multifamily units. In West Maui the fees are $5,778 for single-family units and $2,055 for multifamily units.

Beginning in 2013, Leeward Oahu developers have been charged $5,504 for single-family units and $4,334 for multifamily units. Since October 2018 a flat fee of $3,864 per unit has applied to both single-­family and multifamily units in the urban corridor from Kalihi to Ala Moana.

Although West Hawaii island was designated as a fee district in 2010, fees have not been implemented there due to a lack of cooperation from Hawaii County. The DOE noted that if county cooperation is eventually secured, a new appraisal and analysis would need to be conducted and submitted to the Board of Education before fees could be collected.

Currently, there are exemptions to the school impact fee requirement, including housing that permanently excludes school-age children, developments that pay the transient accommodations tax, nonresidential developments, projects with an existing educational contribution agreement, developments by the Hawaii Community Development Authority and projects exempted under Gov. Josh Green’s emergency proclamations on affordable housing.

According to the report, without school impact fees the DOE would be stripped of its ability to be part of the planning and solution for essential school facilities — leaving communities at risk of overcrowded schools and lacking the infrastructure needed to serve new families.