Brookings: impact fees good for economic development.

• Position: News & Numbers - Paying for Prosperity: Impact frees and Job Growth

Impact fees are a more efficient way to pay for infrastructure than general taxes, increase the supply of buildable land, have complex effects on housing prices, and do not slow job growth. These are the major findings of a new Brookings Institution report that examined the effect of impact fees on employment and the economy generally.

Impact fees are one-time charges against new development that help offset the infrastructure costs associated with that development. Although property tax revenues have traditionally funded the supporting infrastructure for new development, they have proven insufficient, leading many municipalities to lean more heavily on impact fees.

Twenty-two states have now passed enabling legislation to promote the use of impact fees by local governments. The authors attribute the growth of impact fees to three factors. First, since the 1980s the federal and state governments have reduced funding for local construction projects. Second, the federal government has raised the standards on infrastructure, which, in turn, have increased maintenance costs for local governments. Third, popular opposition to local taxes--particularly the property tax--has grown over the last few decades, leading local governments to rely more heavily on alternative sources of revenue.

In this report, the authors examine the relationship between impact fees and economic development to determine whether these fees stifle investment and stunt job growth, as private developers and other opponents have argued. They tested their hypothesis that impact fees do not restrict job growth by comparing communities that are identical in every respect except for impact fees, Their sample included 67 counties in Florida between the years 1993 and 1999, about half of which collected user fees. The data was taken from the Florida Statistical Abstract.

The authors' analysis found a significant positive association between impact fees and job growth. They conclude that impact fees are not a drag on economic development, and suggest that the imposition of impact fees actually results in positive job growth.

The report, Paying for Prosperity: Impact frees and Job Growth is available online at www.brookings.edu.

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