Q: What is an impact fee?
A: An impact fee is a charge on new development to pay for the construction or expansion of off-site capital improvements that are necessitated by and benefit the new development.
Q: How prevalent is the use of impact fees today?
A: According to recent national surveys, about 60 percent of all cities with over 25,000 residents and almost 40 percent of all metropolitan counties use some form of impact fees. In California and Florida, the extent of cities and counties using impact fees is at 90 and 83 percent, respectively.
Q: How do impact fees differ from taxes?
A: Impact fees are authorized through the police power; not the taxing power. They are part of the development approval process. Requiring an impact fee to provide adequate public facilities is similar to meeting site planning and zoning requirements.
Q: How much is the average impact fee?
A: Impact fees vary greatly by region and facility. Highest fees are in California and lowest are in the Midwest. In 2004, the national average road fee per single family unit was just under $1,700 and combined water and wastewater fees were about $4,000. Average park fees were about $1,200 per unit and average pubic safety (police and fire) fees were at about $500.
Q: When is an impact fee usually paid?
A: Most impact fees are paid at the time of building permit issuance. However, some fees are paid earlier at the time of subdivision or plat approval. A few are even paid later at the time of certificate of occupancy issuance. In the case of utilities, impact fees are usually paid at the time of actual connection or hookup to a water and wastewater system.
Q: Do impact fee revenues have to be spent within a certain period of time?
A: Yes, impact fee revenues should be spent within a reasonable period of time (usually six to eight years from collection) or be refunded to the fee payer.
Q: Can impact fee revenues be deposited in a general fund?
A: No, fee revenues must be earmarked and deposited in special dedicated accounts.
Q: How do impact fees benefit existing, as well as new residents?
A: Adoption of impact fees reduces pressure on local residents to raise taxes and fees. And with new development paying for its own capacity-enhancing infrastructure needs, any current funds that have been designated to pay for those projects can be shifted to the more immediate needs of existing residents, such as for facility maintenance and rehabilitation.
Q: Are impact fees a no-growth tool?
A: No. Just the opposite is true. Impact fees facilitate growth by expediting development approvals, increasing the amount of developable lands, and reducing citizen opposition to new growth.
Q: Do any builders and developers support the use of impact fees?
A: Many builders and developers are impact fee proponents because they know that impact fees add predictability to the development approval process and create a "level playing field" between them and their competitors. They also know impact fees replace less fair negotiated exactions.
Q: Who actually pays the impact fee (incidence)?
A: In the short-term, impact fees may cause a slight increase in housing costs if the local real estate market allows the builder to shift the cost forward to the buyer. However, in the long-term it is more than likely that the cost will be shifted backwards to landowners in the form of lower prices that may be bid for undeveloped land.