By Steve Zurier. The HBA of Mississippi recently filed a lawsuit against the seaside city of Ocean Springs, claiming that impact fees the city passed in January are illegal taxes. Developers and planners say the case will be watched closely statewide because if the city's impact fees stand up in court it could pave the way for other cities and towns throughout Mississippi to follow suit. The Ocean Springs case is also a clear indication that legal fights over impact fees can happen anywhere.

Donovan Scruggs, the city's planning director, says Ocean Springs passed fees of $2,300 per residential unit and $1,686 per multifamily unit to cover water, roads, police, fire, parks, and general services for new communities. Scruggs says the city's population could top 20,000 by 2005--up from 14,500 in 1990 and five years ahead of the city's original estimates.

Steven Smith, the attorney for the home builders, points to an October 2002 ruling by the federal Fifth Circuit Court of Appeals, which rejected a claim by Madison, Miss., that it had the authority to impose impact fees under the state's Home Rule statute.

"The federal court specifically took up this question and said no," states Smith. "The federal court also decided not to send the case back to the Mississippi Supreme Court."