Infrastructure Fees: A New Tool For Developers

Dec 6, 2018

Customers of the Walmart in The Pavilion at Durbin Park in St. Johns County will see a different kind of fee on their receipts if they buy taxable goods.

As the receipt explains, it’s a public infrastructure fee of 0.50 percent and it pays for the development’s public improvements.

It’s relatively new in Florida, as is retail development in northern St. Johns County, according to our Jacksonville Daily Record news partner.

“Durbin Park is in a new growth area where it was extraordinarily expensive to develop, in an area that did not have the infrastructure to support a development of this magnitude, thus the structure we chose was necessary,” said Bobby Bennett, chairman of the community development district that administers the fee.

Other retailers opening in Durbin Park also will be required to charge their customers the fee. 

Walmart is the first retailer to open as part of the first phase of Durbin Park, which will include about 650,000 square feet of retail space. 

The northern St. Johns County development is planned for four phases and has entitlements to build up to 2.4 million square feet of retail, 2.8 million square feet of office space, 999 multifamily units and 350 hotel rooms.

Calculated Like A Sales Tax

PIF, the public infrastructure fee, is calculated like a sales tax, as well as adopted by a government entity.

It is listed on Walmart sales receipts as PIF under Tax 1, which is the county’s 6.5 percent sales tax.

PIF tools are being used around the country, particularly in Colorado, and appear only recently to have made their way to Florida.

In this case, the “special-purpose government entity” created for the Durbin Park development is the DP1 Community Development District. The St. Johns County Commission approved its formation on July 24, 2017.

The five members of the board of directors were appointed by the Durbin Park landowners and include employees from the two commercial developers that partnered on Durbin Park - Gatlin Development Co. and Gate Petroleum Co.

The board unanimously voted in favor of adopting the fee at its Sept. 5, 2017, meeting.

Bonds were issued to pay for the public improvements, including roads, utilities, and water and sewer lines. 

Public documents from the district’s website say the anticipated cost to install all of the infrastructure is $25 million.

“The final number will be calculated based on the total expenditures made by the CDD,” said Bennett in an email. “As of this date just over $8 million has been spent.”

These fees are still rare in Florida, with only a few commercial developments using them. 

The Daytona Beach News-Journal reported that a PIF is being used in three retail centers in Volusia County. Media outlets throughout the nation, with many in Colorado, have reported about the emergence of the fees.

Bennett said the fees are “relatively” new but have been used in Florida in some capacity over the past 10 years.

More familiar to many Northeast Florida residents are the community development district fees paid by homeowners in subdivisions. There are many in St. Johns County, including Nocatee and Beachwalk.

With those, a property owner pays the fee to repay a residential developer for building the neighborhood’s infrastructure. 

But those are flat annual fees, as opposed to a variable PIF used in retail developments. PIFs are dependent on how much a customer spends at a retail shop.

“It is important to point out that this kind of alternative financing through issuance of municipal bonds through a CDD, makes a project like Durbin Park possible,” Bennett said. 

Fees And Taxes

Bennett said the board chose 0.5 percent because when the fee is added to the 6.5 percent sales tax rate charged by St. Johns County, customers are paying an amount equivalent to the 7 percent sales tax in neighboring Duval County.

“Keep in mind this only applies to items subject to state sales tax and for every $100 of applicable expenditures this would only be 50 cents,” he said.

Many northern St. Johns County shoppers drive to Duval County for big-box stores, restaurants and other retailers.

St. Johns County executives said previously residents had limited options for entertainment and retail experiences, making Durbin Park an option for shopping within the community.

The receipt also explains that the fee is not a tax and is charged in addition to the sales tax. 

The fee, it says, becomes part of the sales price and is subject to sales tax.