Definition Of Impact Fee
An impact fee is a charge levied on property developers by local jurisdictions. These fees are instated to account for the new or expanded infrastructure that results from property development. This infrastructure may encompass a city’s water and sewer systems, public facilities like schools and libraries, and public services like police and fire protection.
The goal of impact fees is to alleviate the strain that increased development and population place on the region’s public infrastructure and services. It’s worth noting that these fees can also be collected from individuals or entities whose actions produce external effects within a municipality.
Brief Explanation
In essence, an impact fee serves as a tool for transferring a portion of the cost of delivering new public infrastructure to a community. The payment of impact fees isn’t always restricted to monetary terms; sometimes, land or other resources may be pledged instead. On certain occasions, if the infrastructure costs are lower than the assessed fee, impact fees might be refundable in accordance with local legislation for impact fees.
However, impact fees can be contentious. For instance, if a jurisdiction requires a landowner to relinquish part of their land for public use, this could violate the Fifth Amendment of the U.S. Constitution. Additionally, excessively high impact fees could deter businesses from establishing themselves in the area, thereby taking away potential employment opportunities and their tax base.
How Does Impact Fee Work?
The application of an impact fee comes into effect when a development project, be it residential or commercial, is initiated. The fee is typically assessed at the time of building permit issuance, prior to receiving the certificate of occupancy. It’s a one-time charge that directly corresponds to the extent of the development’s anticipated impact on public facilities and services.
Calculating the Impact Fee
The calculation of impact fees is based on a property’s proportionate share of the cost of public infrastructure and services. The fee varies depending on several factors, including the type of project (commercial or residential), its square footage, and the estimated strain it will place on existing public services. The local impact fee office usually does these calculations.
Types Of Impact Fee:
Impact fees can be segmented into different types based on the specific aspect of public infrastructure or services that they are intended to fund. Here are some common types of impact fees:
1. Transportation Impact Fee:
This fee is charged to the account for the increased traffic and wear on transportation systems that might result from new development. This can include roads, bridges, public transportation systems, and other transportation-related infrastructure.
2. School Impact Fee:
A school impact fee is collected to help finance the construction or expansion of schools. This is especially relevant in areas where new residential development is expected to increase the number of students in local schools.
3. Park and Recreation Impact Fee:
A park and recreation impact fee may be applied when a new development is expected to put added pressure on local parks and recreational facilities. This fee helps fund such facilities’ maintenance, expansion, or construction.
4. Public Safety Impact Fee:
This fee helps cover the costs of expanding public safety services such as police and fire departments, which may become necessary due to population growth from new residential or commercial developments.
5. Wastewater Impact Fee:
A wastewater impact fee might be assessed if a new development is projected to increase the demand for the local wastewater management system. This fee contributes to expanding, maintaining, and upgrading wastewater facilities.
6. Water Impact Fee:
Similar to the wastewater impact fee, a water impact fee is collected to help fund the maintenance and expansion of the local water supply system due to an expected increase in usage.
7. Affordable Housing Impact Fee:
Some regions impose this fee on new developments to fund affordable housing programs. The aim is to ensure that growth and development do not disproportionately displace low-income residents.
8. Library Impact Fee:
It is used to fund public libraries’ construction, expansion, or renovation in response to the increased population from new development. This fee is important in confined spaces, where library facilities may otherwise be overlooked.
Remember, the types of impact fees, their amounts, and when they are assessed can vary greatly from one jurisdiction to another, depending on local regulations and the community’s specific needs.
Example
For instance, a road or transportation impact fee may be levied if a commercial project is expected to increase traffic in the area. A wastewater impact fee might be applied if the development is likely to put added pressure on the wastewater management system.
Structure and Application of Impact Fee
The structure of impact fees often includes specific charges for different types of infrastructure and services. This might include road impact fees, park impact fees, or wastewater impact fees, among others. These additional impact fees are detailed in the local impact fee ordinance.
Typically, an Impact Fee Program is put in place, outlining the Impact Fee Schedules and Forms, providing information on Impact Fee Deferrals, and detailing the process for impact fee payment. Developers must submit an Impact Fee Application before they can obtain a building permit.
In conclusion, while impact fees are essential for ensuring orderly growth and funding public infrastructure, they must be balanced with the potential impact on property taxes and the feasibility of new development. It’s important to assess impact fees fairly and transparently to balance impact fees and foster a conducive environment for residential and commercial development.
