Colorado Redevelopment Projects Face Impact Fee Exposure: Lessons from Carroll Partners

A recent Colorado appeals court decision clarifies and potentially expands upon when local governments can charge impact fees on development projects. In Carroll Partners LLC v. Board of Commissioners, the court ruled that impact fees are not limited to new construction on undeveloped land or projects that substantially change the use of previously developed land—they can apply to remodels, demolitions and rebuilds on already-developed property, as long as the work requires a development permit.

What Happened in Carroll Partners?

The developer in this case purchased a 6.5-acre property in Pitkin County with an existing home that was built in 1983. They applied for permits to demolish the old house and build a new single-family residence in roughly the same footprint. The county approved the project as a “replacement structure” but required the developer to pay employee housing impact fees (EHIFs) before it would issue a building permit. The developer challenged the fee, arguing first that Colorado’s impact fee statute only applies to new developments on raw land—not remodel or replacement projects, and second, that the fee was not fairly connected to the project’s actual impact on the community. The trial court rejected both arguments, and the developer appealed.

On appeal, the Colorado Court of Appeals ruled against the developer on both counts. On the first issue, the court held that impact fees can apply to any project that requires a development permit—not just new construction on undeveloped land or projects that materially change the use of previously developed land. The court further determined that impact fees may still apply even if a planned development maintains the same use as a previous development on the same land, reasoning that employee housing impact fees exist, at least in part, to help ensure workers who build and maintain local developments can afford to live in the community. That purpose, the court stated, applies whether a project is brand-new construction or a remodel. On the second issue, the court affirmed that the fee was reasonably connected to the county’s interest in affordable housing and proportional to the project’s impact, noting that exact proportionality is not required.

Implications for Future Developments in Colorado

For developers, landowners and project sponsors, the case impacts both planning and financials:

Start impact fee diligence early. Rather than wait until deep into project planning, it will be important to identify potential fee exposure at the outset, such as during site selection and initial feasibility analysis. Depending on the size of the project, among other variables, impact fees could turn a viable project into an unviable one.

The trigger is the permit, not the land. Whether the site is raw land or already developed, if a project requires a development permit, impact fees may apply. This opinion clarifies that fee exposure may turn on the permitting requirement, as opposed to whether the project builds something completely new.

The same footprint or same use does not mean any fees. Even if a remodel or replacement project maintains roughly the same building size, use or occupancy, that alone will not exempt a project from impact fees.

Existing structures do not insulate. Having an existing building or historical use on the property does not protect a project from new fee requirements if the project goes through a fresh approval process. If a new development permit is needed, expect the county to evaluate fees based on current rules.

Bottom Line: Colorado local governments now can cite this opinion to support broad authority to impose impact fees on projects requiring development permits—whether new builds, remodels or demolition-and-rebuild projects. Because of this, it will be increasingly important to budget for potential fees early and to consult with counsel before assuming that any project is exempt.