FERNDALE - For the second time in less than a year, the City Council must decide how much to charge developers for the added traffic they bring to the city.

The decision comes at a time when Ferndale and other cities have reduced traffic and other impact fees to encourage development. But city officials say the simple notion of discounting impact fees to benefit developers may no longer make sense as Ferndale faces more than $100 million in road projects over the next two decades, and little or no promise of outside help to pay those costs.

When Ferndale administrator Greg Young presented an option for a new traffic impact fee at a Feb. 1 Finance and Administration Committee meeting, he showed council members a "maximum" fee scenario of about 150 percent more than the current fee.

Developers now pay $2,300 for every new evening peak-hour trip their projects generate, whether they are single-family homes, major retail stores or something in between.

Staff has not yet recommended a specific fee to council; Young has only informed its members the fee can vary anywhere from zero to somewhere north of $3,500.

Depending on how it's calculated, the fee could go even higher. At a Feb. 6 council study session on traffic impact fees, Community Development Director Jori Burnett said the fee could go as high as $6,000 per trip.

"You would not want to be going up to that point regardless," he said, because the cost would become prohibitive to developers.

The current $2,300 fee covers roughly a quarter of the cost of planned improvements. Cities typically collect 50 to 60 percent of the cost of road improvements through traffic impact fees, Burnett said

Ferndale's fee is relatively low because council members decided in May 2011, when they adopted the $2,300 fee, that they would not fund an expensive Thornton Road overpass replacement. Some council members also were inclined to keep the fee low at the urging of developers.

Future fee decisions, however, will be made with the knowledge that state and federal grants for local road projects may be drying up.

The state Department of Transportation asked city officials to change statements in their planning documents implying that future road projects would get state support.

"The state currently has no funding for projects on I-5 in Ferndale, nor is there any expectation of funding," a DOT official wrote in a recent comment to the city's planning commission.

Other nearby cities have reduced traffic impact fees to encourage development. Blaine exempted developers from paying its $755-per-trip fee for applications submitted after the exemption was approved, in late 2009.

Bellingham has reduced its fee slightly over the past two years, to $1,912. The Bellingham City Council voted additionally to offer a discount of up to 50 percent to environmentally friendly developments that encourage the use of buses.

Burnett said in an email that Ferndale has had some positive results in its growth through carefully chosen fee discounts and quicker turnaround times on permit applications. But Ferndale officials have learned that impact-fee discounts are not magic bullets that help new developments "pencil out."

"What we've found is that ... a jurisdiction can't create a market for itself just by reducing fees," Burnett said.

Ferndale's traffic impact fee was changed less than a year ago but must be reviewed again in light of a proposed 443-acre "planned action area" of accelerated development around the Main Street interchange of Interstate 5.

City officials are planning for the area to draw an additional 900,000 square feet of retail space, 50 more residences and additional office and hotel space by 2034 - all beyond normal projected growth.

At the Finance Committee meeting, Young showed council members they could charge about $3,540 in that area and $3,360 in the rest of the city to come closer to the maximum developers may be asked to pay for traffic improvements.

Upon approval of the planned action area, which the council could consider as early as March 5, the cost of road improvements anticipated over the next 22 years would increase from $70 million to $109 million.

Council members will discuss the fee during their regular meeting Feb. 21, after they know the results of a Feb. 14 ballot measure asking for a sales tax increase to fund road fixes.

The council may vote on the new fee March 5.