1. Taxing Development: The Law and Economics of Traffic Impact Fees
- Author:
- Edward P. Stringham, Benjamin Powell, and Jack Estill
- Publication Date:
- 12-2006
- Content Type:
- Working Paper
- Institution:
- Independent Institute
- Abstract:
- Should developers be charged fees for negatively impacting residents? New development often uses existing (or requires new) infrastructure including roads, sewers, refuse collection, parks, fire, police, and schools. When developers provide this infrastructure to users for “free,” who should pay? Over the past fifty years governments have increasingly charged new development impact fees for imposing costs on communities. California is one of the leaders in the development of impact fees. The modern Pigovian idea is that government can set a fee at the value of the impact to internalize externalities and encourage the economically efficient amount of development. While developers can often provide the necessary infrastructure within their own developments as part of the construction process, additional impacts from new development may spill over into existing communities that necessitate additional capital improvements. Local government can hypothetically charge the development a fee that is equal to this impact, thereby internalizing this externality. If the exact value of the external impact is known and implemented as a fee, this process can encourage the economically efficient amount of development. Despite the increasing popularity of development impact fees, several issues make the government's “economically efficient” solution easier said than done.
- Topic:
- Civil Society, Development, Economics, and Education
- Political Geography:
- California