Introduction

Impact fees are one-time fees used to pay for new facilities and services required by growth. They are not designed to stop development but instead ensure that it pays its own costs. The purpose of mandatory impact fees is to ensure that the costs for new public facilities and services that growth requires are paid by developers, rather than by existing residents and taxpayers. Impact fee rates must be set so they reflect the actual cost of providing those facilities and services, now and in the future.

Calculating Impact Fees

Impact fees are based on calculations of how much a real estate development requires in new facilities or services. They are intended to reflect the actual cost of providing those facilities and services, now and in the future, including interest, while they are being built, appropriate administrative costs, and some margin for error.

Impact fees should be used to pay for capital improvements that benefit an entire community rather than just one property owner (or group of properties). The fees may include payment for public facilities like fire stations or schools, but they may also include non-physical improvements like increased police protection or better park maintenance.

Project Specific

Impact fees are also project-specific. Different types of development require different types of facilities, and as a result, different projects pay different fees. For example, retail is usually more intensive in its use of roads, sewers, and police services than apartment buildings are.

The fees are intended to reflect the actual cost of providing those facilities and services. When you see impact prices listed on a project’s website or brochure, they will be based on calculations developed by an impartial third party such as an engineer or economist who has determined what it would take to provide those new services (such as water mains, sewer lines) and structures (such as fire stations).

Conclusion

This guide has been designed to help you understand the impact fees and how it works. We encourage you to use our Impact Fee directory as a starting point in your research for your real estate project.