- Briefing Room
Development impact fees (or mobility fees as they are known in Florida) are one-time charges levied by local governments on new development. They are charged to developers to help municipalities recover growth-related infrastructure and public service costs. They differ from other forms of value capture including special assessments and negotiated exactions, in that impact fees can be used to pay for off-site services such as local roads, schools, or parks. Development impact fees are typically determined through a formulaic process, rather than through negotiations as done for developer contributions. Development impact fees are used by local governments throughout the United States to fund transportation improvements. 1
There are two common methods for calculating the impact fees for infrastructure improvements. 2 The inductive method involves identifying the capacity and cost capacity of a generic facility, such as a road or fire house, and then using those figures to calculate the cost of expanding infrastructure capacity as required by new development takes place. With roads, for example, additional lane capacity would need to be added as certain population or square footage and land use thresholds are reached, with the new development paying its pro-rata share of the additional infrastructure.
The deductive method calculates the impact fee in a more tailored fashion. It determines the additional demand that population growth and/or new commercial and industrial development will place on infrastructure systems based on the amount and type of development that is specified in master plans, or facility plans for the development in question. Independent engineering analysis determines what new infrastructure systems are needed and the costs are then distributed across the base of undeveloped property. The impact fees calculated by the deductive method reflect the specific costs of the infrastructure to be developed and are based on local geography and required levels of service. For this reason this method requires much more detailed informational inputs compared to the inductive method.
The Rational Nexus Test
Development impact fees began to be widely used throughout the United States in the 1970s and 1980s, particularly in regions with high population growth rates. They are most prevalent in places with resistance to using general revenue sources to pay for growth related costs. The legal foundation for impact fees (as well as negotiated exactions) rests on the "rational nexus" test. This test involves demonstrating that the amount of the impact fee is commensurate with the new infrastructure provided by the fee. There must be a rational link between the new services and the fees the developers are being asked to pay.
Once impact fees are collected, they should be spent in a timely fashion on the new infrastructure improvements. Impact fees are often combined with other revenue sources to implement improvements, but by law they cannot generate excess revenue beyond their apportioned cost of the improvements they fund.
1 Noncompliance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended and its implementing regulations in 49 CFR Part 24 can jeopardize federal funding.
2 Ross, D.H. and S.I. Thorpe. "Impact Fees: Practical Guide for Calculation and Implementation." Journal of Urban Planning and Development, September 1992.