The Equitable Financing of Growth: A Proportionate Share Methodology for Calculating Individual Development Impact Fees

Abstract

Aggregate development impact fees must be apportioned among developers in a manner commensurate with benefits provided by new infrastructure. We propose a methodology to directly, rather than iteratively, apportion aggregate development impact fees so that all users receive an internal rate of return equal to the municipality's cost of capital. The methodology explicitly recognizes that users may enjoy the benefits of infrastructure for different periods of time. The model provides for proportionate share assessment of impact fees whether infrastructure investment occurs before, during, or after development and is flexible in addressing changes in demand and in the municipality's cost of capital.