Magazine article Public Management

Development Impact Fees: A Fair Share Formula for Success

Magazine article Public Management

Development Impact Fees: A Fair Share Formula for Success

Article excerpt

A Court-Tested How-To Guide for Local Governments

Development impact fees or exactions have been enacted by local governments across the United States in a variety of forms for more than 30 years. They are viewed by officials as a necessary and viable alternative to taxes and other forms of revenue. Impact fees, however, have proven controversial.

On numerous occasions, the argument over impact fees has resulted in litigation. This usually involves a property developer faced with an ordinance requiring the payment of a fee, a contribution of land, or the construction of public works. The developer objects to the mandate for a fee or for an exaction of some kind, claiming one or more of the following:

* It is not equitable in that owners of undeveloped property are a targeted group.

* It will stifle development.

* It really is a tax.

* The locality has no statutory authority to impose it; nor does it have the authority per the state constitution to impose it.

* The financial burden is too extensive.

* It is a duplication of some other assessment imposed by the local government.

* It amounts to a taking of the land as a form of inverse condemnation.

* It bears no relation to the claimed impact under any established legal test.

Despite the potential difficulty of enacting development impact fees, it is a revenue-raising method worthy of serious consideration, especially where governmental officials favor community growth and want to manage it effectively. Local governments can avoid placing an undue burden on existing residents and businesses while simultaneously accommodating desirable property development.

This article will focus on one community where officials successfully implemented and defended their impact fee ordinance in court.

A Case of Infrastructure Impact

The village of Rochester, Illinois, is adjacent to the capital city of Springfield in the central region of the state. In the late 1980s, the village president and board of trustees were faced with water and sanitary sewer systems that did not meet the state's Environmental Protection Agency (EPA) standards. In particular, the sanitary treatment facilities were not sufficient to process the wastewater, according to the state environmental standards. Water system pressure and volume for fire flow were deficient. Engineers were hired to conduct a study of the utilities.

In the meantime, a moratorium was placed on new development. An amendment to the wastewater facilities plan and a water studies report were completed by spring 1990. The engineers concluded that the system could be upgraded to serve the existing community solely or could be expanded to accommodate potential new development. A no-growth approach would result in a static population of 2,707 per the 1990 U.S. census.

A referendum was conducted in fall 1990 on whether the village should be annexed to the metropolitan sanitary district for wastewater treatment services, and the proposal was adopted, signaling the village board to move toward a policy of managed growth rather than no growth. Board members responded by retaining a planning consultant to assist in the preparation of the community's first comprehensive plan.

This plan, which was completed in 1991, contained information on how and where development could occur in the greater Rochester area and described how a population in excess of 6,400 could be accommodated. Preferred land uses and necessary capital improvements were illustrated. For example, residential and commercial areas were identified for possible annexation into the village. A large-diameter sanitary sewer main also was needed to connect to the sanitary district before the moratorium could be lifted to allow consideration of new property development. Water system needs included new lines and a tower.

Pursuant to the financial reports, members of the village board increased water and sewer fees to cover the increased costs of operations. …

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