Critical elements of development impact-fee programs

Development impact fees have become a major source of new capital revenue for local governments. The need for new revenue is occasioned by declining federal public works funds, rising construction standards and costs, and increasing unwillingness of voters to pass tax increases. Communities thus look to new development to pay for its own way in part through impact fees. Impact fees are assessed to raise new revenue for the construction of a wide range of facilities. They are also being assessed by an increasingly large number of communities, some of which have no apparent growth problems. Soon, most communities of modest sophistication will assess impact fees. But courts require that impact fees be assessed in particular ways. This paper discusses the critical elements of defensible impact-fee programs. It includes a review of policy issues, basic legal considerations, general procedures for identifying impacts and assessing impact fees, and principles of administration.