COLUMBUS — Home builders said an Ohio Supreme Court ruling that struck down township impact fees is a boon for every new home buyer in Ohio.

The high court ruled impact fees imposed by a Warren County township on construction of new homes were illegal. The Supreme Court unanimously agreed the fees are taxes. Hamilton Twp. must return more than $2.5 million it has held in escrow to the builders.

The fastest growing township in Warren County instituted impact fees in May 2007 to deal with the large growth it was receiving in new homes. The Home Builders Association of Greater Cincinnati and a bevy of builders sued within three months.

Common Pleas Judge James Flannery and the 12th District Court of Appeals found the fees were permissible. Since no other township in the state has tested the right to impose the fees, the high court accepted the case.

The township argued since the fees are segregated into four accounts, for police, fire, parks and roads, and can only be used for capital projects or purchases, they are not taxes.

Justice Paul Pfeifer, who penned the opinion, said segregating the funds is not enough to make the fees truly fees.

“The ultimate use of the revenue, places the assessment solidly in the realm of taxation,” he wrote. “The fact that the funds from the assessment are segregated into separate accounts is irrelevant. The fact that revenue is earmarked for police protection, fire protection, road improvement and parks that benefit the entire community is the key factor. The assessments raise revenue for the public’s benefit.”

Dan Dressman, executive director of the home builders association, said if the decision had gone the other way, it would have been devastating.

“We felt that the township’s legislation left unchallenged would have opened the flood gates for other townships throughout the state to follow suit, ultimately having a detrimental effect on future home prices,” he said. “New home affordability would have been dramatically impacted. The HBA, from the very initiation of this tax, believed it was illegal and improper for the township to impose under Ohio law.”

He said new homeowners shouldn’t be “saddled” with the burden of paying for services that all residents of the township enjoy.

Ohio Township Association Executive Director Matthew DeTemple said the decision was disappointing.

“Hamilton Twp. is in one of the fastest growing counties in the state. When you have growth and development like that, it really taxes their infrastructure,” he said. “This impact fee was a kind of a novel way of helping the township to maintain the quality of services that its residents expect.”

DeTemple said there are 26 limited home rule townships in the state including Hamilton Twp. and they have a little “broader authority” to take legislative action, so it was thought the impact fees were permissible. All the other home rule townships were watching the case closely, but DeTemple said “I can’t say if this decision came out the other way, anyone would tomorrow have set about adopting an impact fee.”

Township law director Warren Ritchie said it was too soon to tell what the township’s next move will be.

Ritchie said the $2.5 million held in escrow didn’t have future projects attached to them, except $532,000 of the money was going to be spent on a new park.

“That money is all in jeopardy,” he said. “That’s over a half million dollars that potentially is just vaporized. That’s kind of a sobering thought.”

Contact this reporter at 513) 696-4525 or dcallahan@coxohio.com.