Impact Fees... What Do They Mean for Homebuilders and Homebuyers?
Impact fees are a major source of how local governments finance their infrastructure. Impact fees first appeared in the 1950s as a way to recover the capital costs of building water and sewer treatment facilities. During the anti-tax movement characterized during Ronald Reagan’s term as governor of California impact fees were expanded to a wider range of municipal facilities.
As an example, the list of impact fees charged for a new residence in Marco Island, Collier County Florida include: regional parks, community parks, library, schools, EMS, correctional facilities, roads, police, government buildings, water and sewer. Commercial buildings have additional fees added depending on the type of use.
The intent of the impact fees is that “growth should pay growth.” Therefore, impact fees are typically charged along with the building permit fees for new construction projects. Following through on the Marco Island example, the sum of the fees for a new 2500s.f. home is $53,135. This fee must be paid to receive a permit to construct a new home.
There is some controversy regarding impact fees. Opponents believe that impact fees hinder the development of local economies. This, in turn hurts job growth. In addition, impact fees increase the cost of a new home. Another argument is that impact fees serve as a defacto tax which can also slow development and growth and shift investment to areas devoid of these fees.
In spite of these criticisms, along with legal challenges over the years, impact fees are a fixture in local governments that are likely to remain for the foreseeable future.
