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Understanding Impact Fees: A Technical Guide for Development Planning

This comprehensive guide presented by A. Nilgün Kamp and AICPT Indale-Oliver & Associates outlines the fundamentals of impact fees, which are one-time capital charges for new developments. It explains the impact fee formula, components including demand and cost assessments, and credits for future revenues. The guide also emphasizes the importance of updating fees regularly and provides strategies for mitigating impact fees' effects on various development groups, such as affordable housing. Ideal for policymakers and developers, this resource supports effective growth planning.

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Understanding Impact Fees: A Technical Guide for Development Planning

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  1. Impact Fee Basics:Technical StudyPresented by:A. Nilgün Kamp, AICPTindale-Oliver & Associates, Inc. Impact Fee Roundtable September 21, 2004

  2. Impact Fee Definition • An impact fee: • one-time capital charge to new development; • covers the cost of new capital facility capacity; and • implements the CIE and CIP.

  3. Basic Impact Fee Formula Impact Fee = (Demand x Unit Cost) – Credit Impact Fee = New Growth – New Revenue

  4. Defendable Methodology • Study that documents: • need for capital • cost of capital facilities • proportionate share of costs • credits • maximum fee per unit of development

  5. 1 2 3 4 5 6 Components of the Impact Fee Inventory Level of Service Standards Demand Component Cost Component Credit Component Net Impact Fee

  6. Inventory • Capital items such as: • Buildings • Land • Equipment

  7. LOS Standards • Adopt LOS standard • Same standard for existing and new development • Higher standard if financial plan in place

  8. Demand Component • Consumption by land uses • Equitable distribution among land uses

  9. Cost Component • Historical capital expenditures • Replacement value of the inventory • Planned/proposed expenditures

  10. Credit (Offset) Component • Consider future revenue from new development • Consider non-impact fee revenue sources (e.g., sales tax, property tax, etc.)

  11. Net Impact Cost Net Impact Cost = Gross Impact Cost – Credit • Distributed among land uses to determine the impact fee schedule

  12. Revenue Credits Non-Impact Fee Revenue Impact Fee Revenue

  13. Updating & Indexing • Update fees every three to five years • Index to adjust for years between updates • reasonable assumptions • accepted source (CPI, ENR, etc.)

  14. Mitigating the Impact of Impact Fees • Across the board reduction • Phased adoption • Exemptions for various groups (such as affordable housing, redevelopment areas, etc.)

  15. THANK YOU

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