IPFNA_Policy Analysis Memo_Jan_06

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LEGAL FRAMEWORK Impact fees are one of the most di rect ways for local governments to require new developments to p a larger portion of the costs they impose on the commu nity. In contrast to traditional ÑnegotiatedÒ developer exactions, impact fees are charges that are assessed on new development based on a standard formula and objective characteristics, such as the numb er of dwelling units constructed or vehicle trips generated. The fees are one-time, up -front charges. Essentially, impact fees require that each deve of a new residential or commercial project pay its pr o-rata share of the cost of new infrastructure facilities required to serve that development. General Principles Since impact fees were pioneered in states that la cked specific enabling legislation, such fees have generally been legally defended as an exercise of local governmentÔs broa d Ñpolice powerÒ to protect the health, safety and welfare of the community. Over time, various state courts have developed guidelines for constitutionally valid impact fees, base d on a Ñrational nexusÒ that must exist between the regulatory fee or exaction and the activity that is being regulated. The standards set by court cases generally require that an impact fee or other developer exaction 1)The need for new facilities must be created by new development (first prong of the dual rational nexus test); and 2)The expenditure of impact fee revenues must provide benefit to the fee-paying development (second prong of the dual rational nexus test). A Florida district court of appeal s described the dual rational nex us test in 1983 as follows, and this 2 language was quoted and followed by the Florida Supreme Court in St. Johns County decision: In order to satisfy these requirements, the local go vernment must demonstrate a reasonable connection, or rational nexus, between the need for addition al capital facilities and the growth in population generated by the subdivision. In addition, the government must show a reasonable connection, or rational nexus, between the expenditures of the funds collecte d and the benefits accruing to the subdivision. In order to satisfy this latter requirement, the ordinanc e must specifically earmark the funds collected for use in acquiring capital facilities to benefit the new residents In addition to the dual rational nexus test, impact fees may also need to meet Federal constitutional requirements for developer exactions. The most important recent legal development regarding 3 development exactions is the 1994 decision of the U.S. Supreme C Dolan v. City of Tigard . In Dolan , the Supreme Court expanded upon the rational nex us test, adding to it a requirement that there be a Ñrough proportionalityÒ between the impact of a proposed development and the burden of the exaction imposed on it. While this case involved an ad hoc land dedication requirement and may not 2 Hollywood, Inc. v. Broward County , 431 So. 2d 606, 611-12 (Fla. 4th DCA), review denied, 440 So. 1983), quoted and followed in St. Johns County v. Northeast Florida Builders AssÔn , 583 So. 2d 635, 637 (Fla. 1991). 3 Dolan v. City of Tigard , 512 U.S. 374, 129 L. Ed. 2d 304, 114 S. Ct. 2309 (1994) H Ô C \I N A ÐP A M January 5, 2006 , Page 6 AWAI I OUNTY NFRASTRUCTURE EEDS SSESSMENT OLICY NALYSIS EMORANDUM