Developer impact fees and system development charges are another funding option for communities looking for ways to pay for stormwater programs. They are most commonly used for water and wastewater system connections or police and fire protection services but they have recently been used to fund school systems and pay for the impacts of increased traffic on existing roads. Public works projects like the extension of a water line to a new development or the construction of a new sewage treatment facility were once subsidized by federal grants. However, these grants are now low interest loans so more of the cost burden has been transferred to local governments. Faced with the loss of a significant amount of federal funding, local governments have been struggling to find ways to pay for infrastructure needs associated with new development without raising taxes and angering the public. Impact fees place the costs of new development directly on developers and indirectly on those who buy property in the new developments. Impact fees free other taxpayers from the obligation to fund costly new public services that do not directly benefit them. They also can be used to promote smart growth in communities because they subject developers to more of the costs involved in a new project.
Impact fees can be charged to fund new stormwater systems but the amount of money available is dependent on the growth rate of the community. There are also legal constraints that communities must consider when implementing impact fees of any kind. Impact fees have been challenged as takings or illegal taxes in several communities so the fee must be designed carefully to assure that the fee amount is justified and that the people paying the fee are receiving its benefits. Impact fees have also been challenged on the premise of intergenerational equity for requiring new developments to pay their own way while older developments had their infrastructure needs financed by the government.
Impact fees are a helpful funding tool that can be used in conjunction with a stormwater utility or other funding mechanisms. For example, residents of a new development can pay impact fees or system development charges during the construction of their new home or business then remain stormwater utility customers after the building is completed. To ensure equity, the community must eliminate possible overpayments by people moving within the community.
The references on impact fees have been divided into four categories. The materials in the general section cover the subject of impact fees, discuss their effects on the economy of a community, and outline how to determine the fee structure. The impact fee surveys discuss how impact fees have been used across the country. The academic articles provide very in-depth analyses of various topics including the economic impact of the fees and the creation of a legal, equitable development fee. The references in the stormwater specific section discuss how to apply the impact fee idea to stormwater systems and provide more detailed information on how to develop the rate structure and protect the system from legal challenges.
General- Impact Fees
and System Development Charges
Kolo and Dicker discuss the concept of impact fees and review many of the most important court cases concerning the implementation of an impact fee system. They also discuss the advantages and disadvantages of using impact fees and provide readers with guidelines on how to implement impact fees successfully.
Municipal Research and Services Center. (1998). Impact Fee Information Part 1 Sample Ordinances. Seattle, Washington: Author. [Online] Available: http://www.mrsc.org/library/compil/cpimpact1.htm.
This compilation contains impact
fee ordinances from selected Washington state communities.
The ordinances are organized by impact fee type into categories for
multiple capital facilities, schools, transportation, community parks and roads,
and park and recreation facilities. The
compilation is partially available online at http://www.mrsc.org/library/compil/cpimpact1.htm
and the full compilation is available through interlibrary loan to any
Washington state employee or official.
Municipal Research and Services Center.
(1999). Impact Fee Information
Part 2 General Information. Seattle, Washington: Author. [Online]
Available: http://www.mrsc.org/library/compil/cpimpact2.htm.
This compilation contains a listing of publications about impact fees. The publications are divided into three categories: overview articles, ordinances and fee schedules, and rate studies. This compilation is partially available online at http://www.mrsc.org/library/compil/cpimpact2.htm and the full compilation is available through interlibrary loan to any Washington state employee or official.
National Association of Home Builders.
(1997). Impact Fee Handbook.
Washington, D.C.
The National Association of Home Builders published this handbook for developers who are interested in blocking impact fee legislation. The handbook contains information on what impact fees are, why local governments use them, and the weaknesses of many fee structures. This book would be especially helpful to communities interested in implementing an impact fee system because it outlines the concerns of developers and the most convincing arguments against impact fees. The manual also contains case studies and examples of impact fee enabling laws that have been enacted in several states.
Nelson, A.C. (Ed.). (1988). Development Impact Fees. Chicago, Illinois: Planners Press.
This book contains information on the history of system development charges (SDC’s), case studies of four communities that have implemented SDC’s, legal considerations for communities interested in SDC’s, the effect of SDC’s on the local economy, and how to calculate impact fees. The results of several impact fee surveys are reported that could be helpful to communities interested in finding out general trends in the construction of impact fees. Several model impact fee-enabling statutes and ordinances are provided. The book also discusses several of the common concerns related to impact fees including their tendency to place a greater burden on low-income households and their possibly disproportionate burden on residents of new developments. This book contains little information about stormwater impact fees, however much of the discussion can be applied to the stormwater case.
Ross, D.H. & Thorpe, S.I.
(1992). Impact Fees: Practical Guide
for Calculation and Implementation. Journal
of Urban Planning and Development 18(3), 106-118.
Ross and Thorpe discuss the history of impact fees and outline the legal constraints that communities must be aware of before implementing an impact fee system. They also discuss the advantages and disadvantages of two general methods for impact fee calculation- inductive and deductive calculations. The authors identify 22 types of facilities that can be financed using impact fees and provide suggestions of what type of impact unit to use for each. The article concludes with steps to take toward the implementation of impact fees and recommendations for the success of the program.
Snyder, T. P. & Stegman,
M.A. (1986).
Paying for Growth: Using Development Fees to Finance Infrastructure.
Washington, D.C.
This book reviews several financing alternatives including taxes, user charges, development fees, and special benefit districts. The authors evaluate the equity and efficiency of several different financing options and identify legal, political, and administrative challenges that communities could face with each financing option. The book focuses on development fees and provides information on how to set different types of fees and how to assess their impact on the price of housing. The authors end with a case study of Raleigh, North Carolina’s development fee system.
Surveys Concerning Impact Fees
Moulder,
E.R. (1993). Local Government
Infrastructure Financing, Special Data Issue. Washington D.C.
This is a survey of cities and counties with populations greater than 10,000 that identifies how those communities finance their infrastructure. The 863 communities that responded to the survey answered questions about what forms of financing they use, whether or not they use impact or development fees, what types of fees they charge, and which customers the fees are charged to. The communities also reported whether or not they allowed developers to make non-cash payments in lieu of impact fees, if they employed any cost shifting methods from 1987-1991, which cost shifting methods resulted in the greatest savings, and if the community operated under growth management restrictions. The responses of each community are outlined in table form so that readers can see the responses of each individual community in addition to the summaries.
Simmonds, K. C.
(1993). Impact Fees: A
Method of Paying for Growth in Florida. International Journal of Public Sector Management
6(3), 3-16.
Simmonds begins by discussing the impact fee concept and the legal and political issues related to the implementation of an impact fee system. Next, he discusses the results of several impact fee surveys that were conducted in Florida by the Advisory Commission on Intergovernmental Relations (ACIR). These include information concerning what types of programs are funded by impact fees, what level of government generally imposes impact fees, and how much impact fees increase the price of a single family home.
Leitner, M. L. & Strauss,
E.J. (1988).
Elements of a Municipal Impact
Fee Ordinance, with Commentary. APA Journal 54
(Spring), 225-231.
The authors provide a sample municipal impact fee ordinance and provide comments on the importance of each ordinance section. They reference several important court cases and provide readers with several options to use in the construction of their own ordinances.
Lippai, I. & Heaney, J.P. (2000).
Efficient and Equitable Impact Fees for Urban Water Systems.
Journal of Water Resources Planning and Management 126(2), 75-84.
Lippai and Heany use the n-person cooperative game theory to allocate the costs of the construction of a new water system fairly among current and future users. The research was not done using a stormwater system model but the theory can be applied to stormwater systems by using the appropriate stormwater data.
Nelson, A.C., Frank, J.E.,
& Nicholas, J.C. (1992). Positive
Influence of Impact- Fee in Urban Planning and Development. Journal of Urban
Planning and Development 118(2), 59-64.
This article examines who pays for impact fees- the seller of undeveloped urban land or the buyer. The authors determine that impact fees have a positive effect on the land market because they increase developers’ profits and boost the urban land market, thereby increasing selling prices for undeveloped urban land.
Nicholas, J.C.
(1992). On the Progression of Impact
Fees. APA Journal 58(4), 517-524.
This article discusses possible ways to make impact fee assessments less regressive (more proportional to a household’s ability to pay). Most impact fees are calculated by assigning a portion of the costs of the new infrastructure to each type of housing unit and commercial property in the developing region with no regard for the fee recipient’s ability to pay. Nelson examines three different bases for residential impact fees in an attempt to find a less regressive structure: unit value, number of bedrooms, and square feet of living area. Examples are presented from Sarasota County, Florida’s road impact fee, Broward County, Florida’s park impact fee, and Palm Beach County, Florida’s park impact fee.
Stewart, H.A.
(1988). So You Want to Adopt a
Development Impact Fee Ordinance. APA Journal 54 (Winter),
71-72.
This article is a humorous look at the political struggles involved in the adoption of an impact fee ordinance that is written from the perspective of an attorney who was involved in the ordinance creation process in Orange County, Florida. The author provides an outline of three phases in the preparation of a development impact fee ordinance: the “hell no we won’t pay” phase, the “let’s study this problem” phase, and the “love it to death” phase. The article provides readers with a clear understanding of how the political process will operate when dealing with the impact fee ordinance and would be a helpful wake-up-call for community planners to read before introducing the idea of impact fees to a local government body.
Previous Next HomeThis book contains a chapter on how to calculate charges for stormwater facilities using the regional facilities and fee in-lieu of construction approaches and provides a discussion of six other ways to calculate system development charges (SDCs) that can be applied to other types of impact fees. Nelson also discusses the evolution of SDCs, legal challenges to SDCs, and common concerns related to the implementation of SDCs. The author discusses the rational nexus criteria for the legal implementation of a SDC in detail and references several key court cases concerning impact fees that would be helpful to communities that are constructing their own impact fee systems.