Impact fees arose because we effectively subsidized growth on the edges for decades. Taxes on new construction did go to the general fund, but they weren't enough and there is a time lag. Taxes paid by older neighborhoods went to pay the bonds, the debt for new roads, bridges, parks, libraries, schools and more to serve those new neighborhoods. As New Urbanists highlighted 30 years ago, we did not reinvest in those older neighborhoods and so let them rot in place. Now, the Great American Ponzi Scheme is becoming obvious to more people and we're struggling to find our way out the huge hole we've dug.
The purpose was to document and depreciate public capital assets as private corporations must. But we had already depreciated our public infrastructure to zero by ignoring it. Has anything changed?
Comprehensive impact fee systems may support incremental development as they were first implemented in Albuquerque 20 years ago. A challenge in comparing a contemporary U.S. city to more compact, historical communities is all the wonderful and convenient infrastructure we've built over the past 80 years and longer - supporting low-density sprawl that still doesn't pay enough for renewal and replacement. Your graph describes the problem. In contrast, the infrastructure of the 19th Century city was vastly less capital intensive than today's. It becomes another burden for some incremental development, almost a tragedy of the commons.
Old houses built to 1950s standards may need upgrades from 60A fused electrical panels to 200A breaker panels; wastewater yard lines need replacing today. Our aging, existing power, water, sewer and gas supply systems may be adequate to support the incremental reinvestment and redevelopment of one or two single-family houses into 4-plexes. But repeat that project 20 times or 100 times and now underground pipes need to be enlarged; pavement replaced. Old transformers and power lines need to be upgraded and more. Individual small projects can't afford large system upgrades.
Impact fees may accumulate enough capital reserves to pay for these improvements at scale, if we are thinking far enough ahead. Of course, some of these replacements and upgrades may fall in the planned programs of preventative maintenance our cities haven't provided otherwise. We'll see what the next remedies look like as YIMBYs simplistically upzone cities across the U.S. in the name of adding "affordable housing" [not].
I could not have said it better myself thank you for such an excellent article. My contention has always been that large development should be self-sufficient in their own mini wastewater treatment plants. The additional expense of pumping new development to our wastewater treatment plant will only cost a taxpayers in the long run. Just maintaining and replacing lift stations downstream of the development will cost hundreds of thousands of dollars in the long run, but nobody wants to talk about that. The list goes on. I will be sending this article to every Commissioner in Manatee County.
Written as if people who use impact fees don’t know all this. But we do. No one I know or work with is under the illusion that impact fees solve the long term problems to which the author alludes. They help build the facilities needed to serve growth. They don’t build anything if there is no growth and are not, therefore, very helpful in many communities. Where they do generate enough revenue to be useful, they help keep user fees reasonable, but are no excuse for not setting fees high enough to maintain the systems. There are cities that don’t, but that’s not about impact fees, that’s about the politics of user fees. It’s not as straightforward when impact fees are used for facilities that generate no revenue, and maybe there are places where no one connects the dots. So, let’s say they don’t. Does that mean the facility isn’t needed? Does it mean that taxpayers who won’t benefit from a facility should pay for it anyway? I appreciate the idea of incremental growth. But I don’t know of anywhere that it could produce enough new dwellings fast enough to meet demand, much less to bring down prices. Everywhere I work, incremental infill is slow and expensive. If we’re going to build a lot of new housing - which we need to - we’re going to have to use impact fees (and lots of other tools) for the infrastructure that serves it. Either that or come up with a new system of municipal finance, which in turn means coming up with very different state legislatures. What makes a strong town, IMO is using all the tools WITH clarity about how they work.
Edward,
Impact fees arose because we effectively subsidized growth on the edges for decades. Taxes on new construction did go to the general fund, but they weren't enough and there is a time lag. Taxes paid by older neighborhoods went to pay the bonds, the debt for new roads, bridges, parks, libraries, schools and more to serve those new neighborhoods. As New Urbanists highlighted 30 years ago, we did not reinvest in those older neighborhoods and so let them rot in place. Now, the Great American Ponzi Scheme is becoming obvious to more people and we're struggling to find our way out the huge hole we've dug.
I had thought that state and local government accounting standards updated by GASB 34 in 1999 would prove we were all bankrupt, but apparently that didn't happen. https://gasb.org/page/pronouncement?pageId=/standards-and-guidance/pronouncements/summary-statement-no-34.html&isStaticPage=true
The purpose was to document and depreciate public capital assets as private corporations must. But we had already depreciated our public infrastructure to zero by ignoring it. Has anything changed?
Comprehensive impact fee systems may support incremental development as they were first implemented in Albuquerque 20 years ago. A challenge in comparing a contemporary U.S. city to more compact, historical communities is all the wonderful and convenient infrastructure we've built over the past 80 years and longer - supporting low-density sprawl that still doesn't pay enough for renewal and replacement. Your graph describes the problem. In contrast, the infrastructure of the 19th Century city was vastly less capital intensive than today's. It becomes another burden for some incremental development, almost a tragedy of the commons.
Old houses built to 1950s standards may need upgrades from 60A fused electrical panels to 200A breaker panels; wastewater yard lines need replacing today. Our aging, existing power, water, sewer and gas supply systems may be adequate to support the incremental reinvestment and redevelopment of one or two single-family houses into 4-plexes. But repeat that project 20 times or 100 times and now underground pipes need to be enlarged; pavement replaced. Old transformers and power lines need to be upgraded and more. Individual small projects can't afford large system upgrades.
Impact fees may accumulate enough capital reserves to pay for these improvements at scale, if we are thinking far enough ahead. Of course, some of these replacements and upgrades may fall in the planned programs of preventative maintenance our cities haven't provided otherwise. We'll see what the next remedies look like as YIMBYs simplistically upzone cities across the U.S. in the name of adding "affordable housing" [not].
I could not have said it better myself thank you for such an excellent article. My contention has always been that large development should be self-sufficient in their own mini wastewater treatment plants. The additional expense of pumping new development to our wastewater treatment plant will only cost a taxpayers in the long run. Just maintaining and replacing lift stations downstream of the development will cost hundreds of thousands of dollars in the long run, but nobody wants to talk about that. The list goes on. I will be sending this article to every Commissioner in Manatee County.
Written as if people who use impact fees don’t know all this. But we do. No one I know or work with is under the illusion that impact fees solve the long term problems to which the author alludes. They help build the facilities needed to serve growth. They don’t build anything if there is no growth and are not, therefore, very helpful in many communities. Where they do generate enough revenue to be useful, they help keep user fees reasonable, but are no excuse for not setting fees high enough to maintain the systems. There are cities that don’t, but that’s not about impact fees, that’s about the politics of user fees. It’s not as straightforward when impact fees are used for facilities that generate no revenue, and maybe there are places where no one connects the dots. So, let’s say they don’t. Does that mean the facility isn’t needed? Does it mean that taxpayers who won’t benefit from a facility should pay for it anyway? I appreciate the idea of incremental growth. But I don’t know of anywhere that it could produce enough new dwellings fast enough to meet demand, much less to bring down prices. Everywhere I work, incremental infill is slow and expensive. If we’re going to build a lot of new housing - which we need to - we’re going to have to use impact fees (and lots of other tools) for the infrastructure that serves it. Either that or come up with a new system of municipal finance, which in turn means coming up with very different state legislatures. What makes a strong town, IMO is using all the tools WITH clarity about how they work.