Economics

[ysabetwordsmith]

The Impact Fee Illusion

Why “growth paying for growth” often leaves cities weaker, not stronger.

The public discussion usually starts something like this: a new development brings new residents, more traffic, and greater demand for public services. Roads, schools, pipes, and parks don’t build themselves. Someone has to pay for them. Asking growth to pay for growth sounds fair. It sounds prudent. And yet, many cities that rely heavily on impact fees still find themselves financially fragile. They struggle to maintain infrastructure, stretch operations thin, and quietly drift toward insolvency.


To make this work, you would need to calculate the amount of tax required to support all that new infrastructure. People are told that their taxes pay for things like roads and water pipes, but in reality, nowhere near enough goes to those uses. The necessary maintenance fees for a new subdivision would probably discourage most people from wanting to live there, and thus, minimize the number of new ones built. To get yourself out of a hole, first stop digging!

Comments

Illusions

[dialecticdreamer]

Another illusion is that the city, when making their calculations, doesn't seem to include a provision for inflation of costs over a five-year estimate. They also tend to presume "fully occupied" housing developments, with zero homes left empty, nor any put on the market as rentals, which may be occupied only eight months out of a year, or even less if there's a problem with the landlord or a series of bad tenants.

The cities hire accountants with college degrees in the subject, yet the problems crop up so frequently that it's clearly an unwritten assumption which should be WRITTEN DOWN.

The thing that croggles me is that the city building planners are looking FOR people with the kind of income and attitudes which are suited to HOAs, but the HOA itself doesn't have to provide the maintenance that the city is responsible for. That means that the people living in an HOA will be particularly annoyed by "extra" taxes, for any reason.

Re: Illusions

[ysabetwordsmith]

>>Another illusion is that the city, when making their calculations, doesn't seem to include a provision for inflation of costs over a five-year estimate. They also tend to presume "fully occupied" housing developments, with zero homes left empty, nor any put on the market as rentals, which may be occupied only eight months out of a year, or even less if there's a problem with the landlord or a series of bad tenants.<<

Those are all unwise. If I remember right, you want about 5% vacancy in your housing stock so people can move when they need to. Having apartments in a development broadens its range of incomes and makes it easier for families to live close together, because a new adult or a senior can get an apartment in the same neighborhood as a relative's house. Around here it's common to have a small apartment building on the corner of a block.

>>The cities hire accountants with college degrees in the subject, yet the problems crop up so frequently that it's clearly an unwritten assumption which should be WRITTEN DOWN.<<

They just plain keep crooked books, but most people don't realize they are doing it. A critical part of accounting is to track your liabilities, but cities just ... don't. That is why they're all broke.

>>That means that the people living in an HOA will be particularly annoyed by "extra" taxes, for any reason.<<

People have every right to get angry at any extra taxes. They have been defrauded where their tax money is going.