Had the City of Fate implemented impact fees on developers to address the infrastructure demands of new growth, a $20 million bond—and its associated taxpayer burden—could have been unnecessary. Impact fees, applied strategically, would allow Fate to offset the costs of new public services, roads, water, and emergency services by requiring developers to pay for the added strain their projects place on city infrastructure.
With an informed and experienced council focused on long-term fiscal responsibility, Fate could have positioned itself to harness developer-driven revenue streams. This approach used effectively in cities like Frisco, San Diego, and Fort Collins, has provided critical funding to support growth sustainably, ensuring residents don’t bear the full financial impact of development. By proactively planning for growth in this way, Fate might have avoided the need for a significant bond, creating a model for fiscal efficiency and taxpayer protection. But it’s not too late, the city can offset the cost of the new bond by increasing impact fees immediately.
What Are Impact Fees?
Impact fees are charges that cities levy on developers to cover a portion of the costs associated with public infrastructure demands created by new development. When a new subdivision, shopping center, or commercial area is built, it requires additional public resources—more roads, water, and sewer capacity, and greater public safety coverage. Traditionally, these costs were often shouldered by the general taxpayer. With impact fees, the responsibility for new infrastructure shifts partially or wholly onto developers.
These fees are typically assessed based on the estimated “impact” a development will have on city services. While the structure and application of impact fees vary across jurisdictions, the principle is the same: development should pay for itself, reducing taxpayer burden. The fees can be earmarked for specific projects, such as road expansions, new fire stations, or enhanced public utilities, and are legally restricted for those uses.
How Impact Fees Are Applied
Cities tailor impact fees to meet their unique needs and growth patterns. Some target transportation improvements, while others focus on utilities, public safety, and parks. Texas law allows municipalities to impose impact fees, but guidelines are stringent; fees must be proportionate, directly connected to the development, and justifiable through studies showing the development’s projected impact. This makes impact fees a flexible but carefully regulated tool that, when used effectively, can significantly ease financial strain on local budgets.
Real-World Examples of Impact Fees in Action
To understand how Fate could utilize impact fees, let’s look at five U.S. cities where impact fees have successfully offset infrastructure costs. Each of these cities demonstrates a practical approach Fate could adapt to fund essential services without placing undue burdens on residents.
1. Frisco, Texas: Expanding Services for a Booming Suburb
In the Dallas-Fort Worth metroplex, Frisco stands as a model for proactive growth management through impact fees. Frisco’s development fees are rigorously structured, covering roads, parks, water, and wastewater infrastructure. For residential development, the city imposes impact fees based on lot sizes. For instance:
- Roadway Impact Fees: New residential developments incur roadway impact fees of approximately $8,508 per single-family home lot. For multifamily projects, the fees are about $5,317 per unit.
- Water and Wastewater Impact Fees: For water, Frisco charges around $1.33 per square foot for commercial developments, while wastewater impact fees can add another $0.96 per square foot.
- Parks and Open Spaces: Frisco also assesses fees for parks, amounting to roughly $1,000 per residential unit to ensure parkland and amenities keep pace with population growth.
These fees generate millions annually. For example, in 2022, Frisco collected over $25 million in impact fees, which funded the construction of new roads, utility expansions, and public safety facilities. This approach has allowed Frisco to continue its rapid growth trajectory while maintaining high standards of infrastructure without imposing additional taxes on existing residents.
2. San Diego, California: Transportation and Public Safety
San Diego employs a well-established system of impact fees to fund its regional growth. The city charges developers based on the projected increase in traffic, utility demand, and emergency services. These fees are strategically allocated, with a strong emphasis on expanding roadways, upgrading transit systems, and constructing new fire and police stations. San Diego’s approach ensures that growth directly contributes to maintaining and improving the quality of life for its residents, protecting taxpayers from shouldering the full cost of new infrastructure.
The City of San Diego collects significant funds through impact fees, with specific fees for residential and non-residential developments based on metrics like average daily trips (ADTs) and gross floor area (GFA). For example, in the Midway-Pacific Highway area, impact fees in 2019 included:
- Mobility Facilities: Fees for road and transit improvements amount to $533 per ADT. With an average of 7 ADTs per dwelling unit (DU), this results in $3,731 per residential unit for mobility improvements.
- Fire-Rescue Facilities: Impact fees are set at $164 per DU for residential and $164 per 1,000 square feet of GFA for non-residential buildings.
- Parks and Recreation: Residential developments are also charged $3,723 per DU to support parks and recreation facilities.
The city collected millions annually from these fees to fund various infrastructure projects, including road, park, fire-rescue, and transit improvements, which are distributed across neighborhoods and specifically tailored to meet the infrastructure needs of each development area. For example, Carmel Valley collected over $332,980 for improvements in one fiscal year, while downtown areas saw over $8 million in fees during the same period.
You can find more details on San Diego’s impact fees and projects in their public records site. Here: San Diego.
3. Fort Collins, Colorado: Public Utilities and Affordable Housing
Fort Collins has used impact fees for years to fund water and wastewater services and other public utility upgrades required by new development. By charging developers impact fees dedicated to expanding these utility networks, the city has effectively managed costs while also considering affordable housing needs. Fort Collins recalibrates its impact fees annually, ensuring they accurately reflect the city’s infrastructure expenses and growth trends. This ensures that new development is contributing to community infrastructure, reducing pressure on general tax revenues.
In Fort Collins, the impact fees are known as Capital Expansion Fees (CEFs)—are applied to a variety of development types to fund critical infrastructure, including public safety, parks, and general government facilities. Specific fee amounts vary based on the nature of the development, with detailed rates per square footage and per acre.
For instance, residential development fees for single-family homes in Fort Collins are structured by dwelling size. A dwelling between 1,201 and 1,700 square feet incurs an approximate fee of $3,537 per unit, while larger homes exceeding 2,200 square feet are assessed at $4,982. These fees incorporate costs across parks, fire, police, and general government services, providing a mechanism for the city to support infrastructure needs created by growth without over-burdening existing taxpayers. Non-residential developments are similarly charged: commercial spaces incur around $1,311 per 1,000 square feet, while industrial developments face lower fees, approximately $309 per 1,000 square feet.
In recent years, Fort Collins has adjusted these fees upwards to more accurately reflect the increasing costs of service expansion, aiming to align impact fees with current economic conditions and projected city growth. This adjustment process has helped Fort Collins maintain a steady influx of funding for infrastructure, with CEFs totaling millions annually.
For more specific financial data on Fort Collins’ impact fees, the city’s development and utility fees documentation is publicly accessible at fcgov.com
4. Charlotte, North Carolina: Keeping Pace with Growth
Charlotte is another example of a fast-growing city that relies on impact fees to manage infrastructure costs. As one of the Southeast’s leading economic hubs, Charlotte has seen significant population growth, and increasing demands on roadways, water, sewer, and public safety services. The city implemented impact fees to ensure that new developments fund necessary upgrades, allowing Charlotte to invest in critical infrastructure and services without significantly raising taxes on existing residents.
Charlotte’s focus is on water and sewer infrastructure. Although Charlotte does not traditionally employ broad-based development impact fees like some other municipalities, it leverages other types of fees to fund necessary improvements. One primary revenue source comes from system development fees, which help cover capital costs for expanding water and sewer infrastructure to support new development. These fees are calculated based on projected infrastructure costs and the level of demand that new developments impose on existing resources, ensuring that the city recoups a portion of its costs directly from developers.
In terms of specifics, recent updates reflect Charlotte’s commitment to expanding these fees to maintain high service levels amidst growing demand. Development fees are calculated per gallon for water and sewer usage based on expected capacity needs of each new project. The fees in Charlotte and Mecklenburg County provide a proportional structure, where the higher the demand created by a project, the higher the fees imposed to cover required expansions, which helps balance growth with the city’s fiscal responsibilities.
For further details on how Charlotte calculates and applies these fees, including specific fee schedules and supporting data, you can review their infrastructure planning and fee schedules in their fiscal and planning documentation Charlotte Future 2040.
5. Phoenix, Arizona: Balancing Growth with Infrastructure Needs
Phoenix, a city known for its expansive urban growth, has long used impact fees to finance infrastructure expansion. Fees in Phoenix help fund transportation improvements, water resources, parks, and public safety facilities in growing areas. This allows the city to maintain an orderly expansion without straining existing infrastructure or local budgets. The city’s fees are periodically reviewed and adjusted to align with changes in development patterns and infrastructure needs, ensuring a fair contribution from new projects.
In Phoenix, impact fees are structured to ensure that new development contributes significantly to the infrastructure required to support it. Fees are assessed differently across nine specific impact fee areas within the city, with variations based on the infrastructure needs and density of each zone. For instance, in Paradise Ridge, developers of single-family homes pay $16,824 in total impact fees, while in areas like the Northeast and Northwest, fees for similar developments are approximately $15,092 and $15,169, respectively. Each area has tailored fees to meet its unique requirements, which are recalculated and updated periodically by the city to stay aligned with growth and service demands.
For multi-family, commercial, and industrial projects, Phoenix calculates impact fees based on specific project characteristics, such as building size, location, and water meter requirements, making these assessments more variable. These funds are allocated directly to dedicated accounts and are earmarked strictly for infrastructure that serves each impact area, following city policy to ensure that the cost of growth does not fall on existing residents but is absorbed proportionally by new developments.
More information on Phoenix’s impact fees, including detailed rates by area, is available from the City of Phoenix’s official planning and development department City of Phoenix.
Over a recent period, the city collected over $191 million in development impact fees to support capital facility expansion across various zones, which are strategically divided to ensure that the fees benefit specific areas within Phoenix.
Why Impact Fees Matter for Fate
As one of Texas’ fastest-growing cities, Fate faces the challenge of maintaining quality public services without significantly increasing taxes. With every new subdivision or commercial building, demand rises for road capacity, water and sewer services, and public safety coverage. For a city that aims to uphold fiscal responsibility and quality of life, impact fees present a viable tool. Applying these fees to new developments could allow Fate to:
- Expand Public Safety Facilities: New developments increase the need for police and fire services. Impact fees could help fund the construction or expansion of DPS facilities, ensuring the city maintains safe response times and effective emergency coverage.
- Improve Road Infrastructure: More development inevitably means more traffic. By using impact fees, Fate can plan and execute road improvements, expansions, or upgrades without relying on existing taxpayer funds.
- Bolster Water and Utility Systems: To accommodate the growth in residential and commercial areas, Fate’s water and sewer systems will require upgrades. Impact fees allow the city to invest in these essential systems proactively, protecting both residents and businesses from potential service issues.
- Preserve Open Spaces and Parks: Impact fees could also be allocated to developing and maintaining parks and recreational areas. This aligns with Fate’s desire to maintain an “old-town” feel with communal spaces that enhance residents’ quality of life.
A Strategic Next Step for Fiscal Responsibility
Implementing impact fees is a decision that requires careful planning, transparency, and community involvement. However, as illustrated by Frisco, San Diego, Fort Collins, Charlotte, and Phoenix, when managed effectively, impact fees allow cities to balance growth with fiscal responsibility.
For Fate, impact fees could relieve taxpayer burden and diminish the cost of the DPS bond that just passed by a vote of the people, enabling continued growth while safeguarding the services and infrastructure on which the community relies. As Fate evaluates options for funding its future, impact fees may provide the critical bridge between growth and quality of life, ensuring that the costs of new developments are borne by those who benefit most directly—developers and future residents—while protecting the financial interests of current taxpayers.