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Thread: Effect of Impact Fees on Economic Development

  1. #1

    Effect of Impact Fees on Economic Development

    Has anyone run across any current research as to the effect of impact fees on economic development, specifically trying to attract new businesses?

    Our community will try to tweak the current impact fee program in order to reduce fees for new commercial and industrial development in order to attract more jobs. It seems to me that a corporate headquarters would not want to move to a community that has any impact fees because the fees may be seen as a growth control measure where new housing or needed neighborhood commercial is being broadcasted "need not even apply."

  2. #2
    Cyburbian Cardinal's avatar
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    The effect of impact fees is something that would be hard to quantify, as it will be highly variable according to characteristics of the business and the neighborhood. Some locations are so desirable that businesses will locate there regardless of the high cost. In other instances, the business will pay those costs for internal reasons, such as the need to be in close proximity to a client. The trick is to figure out the point of equilibrium.

    I am not aware of any examples of studies on the effects of impact fees, however, there has been some study of the impact of local property taxes on the locations of firms. Michael Peddle did a study some years ago, in the Chicago MSA, that found that local variation in property taxes had no statistically significant impact on the location of businesses. I think it was published in Land Economics. Hope this helps.

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    If impact fees were a significant obstacle to economic development, places like Carlsbad, CA and Park City, UT (both have per dwelling fees over $20,000) would be ghost towns. But they are in fact rapid growth communities, so desirable to live in or near that they have serious affordable housing shortages. As current events make clear, capitalism is a no-nonsense system. If your community is desirable (and being desirable includes having a sound infrastructure that impact fees can help pay for), people and businesses will come. Reasonable regulations and fees won't stop them. Alternatively, if your community can't offer a desirable quality of life, the only businesses you will attract will be ones you don't want. I don't know of any systematic studies that support this observation. As with any other "rule" there are probably exceptions, but simple observation makes it clear that regulations and fees are not ordinarily significant factors in the dynamics of where people decide to live and invest (the mining industry is an exception, but they go where the resource is).

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    Forums Administrator & Gallery Moderator NHPlanner's avatar
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    Originally posted by Lee Nellis
    If impact fees were a significant obstacle to economic development, places like Carlsbad, CA and Park City, UT (both have per dwelling fees over $20,000) would be ghost towns. But they are in fact rapid growth communities, so desirable to live in or near that they have serious affordable housing shortages. As current events make clear, capitalism is a no-nonsense system. If your community is desirable (and being desirable includes having a sound infrastructure that impact fees can help pay for), people and businesses will come. Reasonable regulations and fees won't stop them. Alternatively, if your community can't offer a desirable quality of life, the only businesses you will attract will be ones you don't want. I don't know of any systematic studies that support this observation. As with any other "rule" there are probably exceptions, but simple observation makes it clear that regulations and fees are not ordinarily significant factors in the dynamics of where people decide to live and invest (the mining industry is an exception, but they go where the resource is).
    I'll echo Lee's comments. QOL is the biggest factor for quality economic development, IMHO. We have several impact fees, and yet we still were able to keep property taxes level this year while passing a 10.4 million dollar bond for a police station, renovated town hall, and open space preservation. Location, location, location!
    "Growth is inevitable and desirable, but destruction of community character is not. The question is not whether your part of the world is going to change. The question is how." -- Edward T. McMahon, The Conservation Fund

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    Cyburbian donk's avatar
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    I'll comment from the other end of the spectrum.

    We have no impact fees and insanely low building permit fees, yet can't attract some things due to the lack of QOL.
    Too lazy to beat myself up for being to lazy to beat myself up for being too lazy to... well you get the point....

  6. #6
    Cyburbian Cardinal's avatar
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    Originally posted by donk
    I'll comment from the other end of the spectrum.

    We have no impact fees and insanely low building permit fees, yet can't attract some things due to the lack of QOL.
    What? No Tim Hortons?

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