IDAHO FALLS – A lawsuit filed against the city of Idaho Falls alleges the ordinance implementing impact fees for contractors is unlawful, excessive and detrimental to local businesses.

The Eastern Idaho Home Builders Association, which consists of about 100 business owners and home builders throughout eastern Idaho, filed the suit in October. A spokesperson for the group, who didn’t want to be named over concerns of backlash during a pending lawsuit, tells EastIdahoNews.com the way the ordinance is worded and carried out is illegal and they’re seeking changes to the law.

The purpose of impact fees is to manage growth effectively. In 2022, the city had seen a steady increase in the population and adopted the fees to help fund infrastructure improvement projects.

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Developers are responsible for paying those fees when a building project gets underway, as outlined in Idaho law.

The home builders association says impact fees are being collected during the permit process, which is illegal.

“If you develop and sell lots to anyone who wants to build — whether it’s homeowners or builders — the buyer is paying those fees when they go in to get a permit,” a spokesperson for the group says.

Before adopting impact fees, the city launched an impact study to provide a long-term growth outlook and how impact fees could be applied.

EIHBA members say the city’s 75-page document supporting the fees are flawed, and the fees themselves are not directly tied to the impact of new developments.

Different groups are responsible for paying their fair share to infrastructure costs, which are outlined in a document on the city’s website.

The EIHBA alleges the ordinance imposes disproportionate fees on developers. The spokesperson cites one instance in particular when a group of developers investing in a project were required to pay $1 million in impact fees on top of other expenses. In this case, developers were “caught in the middle.”

That was one of several instances that led the association to take legal action.

“These impact fees are not just a burden on developers; they have a ripple effect throughout our community,” the EIHBA Legal Action Committee says in a news release. “Higher development costs lead to increased rent prices for businesses, which then have to raise prices on goods and services. This affects everyone — from the cost of groceries and dining out to housing affordability.”

The goal of the lawsuit, according to the spokesperson for the group, is not to do away with impact fees entirely. They’re hoping to address the errors with city officials and to work with them “to find a legally sound, equitable approach to managing growth.”

EastIdahoNews.com reached out to the city for a response, and city spokesman Eric Grossarth sent us a written statement on the city’s behalf.

“With the City of Idaho Falls facing explosive growth, there were, and continue to be, significant challenges maintaining the public’s expected level of service for public safety, roads and parks for our residents. In 2022, impact fees were adopted as one of the only tools established by the Idaho Legislature to allow growth to pay for growth, rather than new growth being subsidized by existing taxpayers.”

“The City has great confidence in the judicial system. We intend to respond to the lawsuit from the Eastern Idaho Homebuilders Association through the proper legal channels and trust that the courts can provide a fair outcome for everyone.”

An EIHBA spokesperson says the city has responded to the lawsuit. The case is now headed to mediation, where both parties will try to settle the matter out of court. If mediation is unsuccessful, the case will go to trial.