Impacts of Development and Infrastructure Financing

The effects of growth generated by development impact a community in a number of ways. Increases in population and commercial activity place additional requirements on the infrastructure and service capabilities of a community as well as increasing revenues. These requirements increase operating expenditures and often require significant capital outlays. Frequently, additional staff must be added to maintain or increase service levels. New infrastructure must typically be built to meet water treatment, wastewater treatment, and other needs. Identifying these requirements early in the development process is the key to ensuring an adequate public sector response. Local governments must be able to estimate the magnitude and timing of these impacts if they are to plan adequately. This paper describes models developed to analyze the fiscal impacts of development and meet the information needs of local governments. The use of impact fees to fund capital outlays are also addressed, and a model to calculate defensible impact fees is described along with a discussion of the salient issues that should be considered when implementing such fees.