Last year we heard the news about Winnipeg where the impact fee case finally got its decision and the court of queen’s justice has gone against this. The local authorities will always impose the impact fee for police, fire, and other municipal services upgrading. With that visiting said, there has been quite a buzz on the internet regarding what is an impact fee and why it is making buzz around. If you haven’t been on it for a while, here is what do you need to know about the impact fee.
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The Impact Fee
So here is the thing, the local government can charge some amount for the ongoing development project in the city by local developers from municipalities. The North American states such as Manitoba in Canada, and states in the Americas such as a minister, Texas and Carolina have been charging a share of the cost of the project within the city, The purpose of the impact fee is to reduce the burden of the cost of the project from local city authorities that will work to improve and develop new infrastructure that is crucial to develop for a growing population.
How Does Impact Fees Work?
Just like the property tax, the impact fee charged only one time that is implmented by the local government and land developer as per the development project. It has also been proved to be a great alternative to raising the tax for developing new Infrastructure. If there is a new public service required for the area, there can be an assessment tax but people living in the area and own the property often find that fees are paid by the developer instead of having their taxes increased. This is the scenario where instead of taxpayers, the developers will be forced to pay the tax and cover the project cost, be an infrastructure project compulsory for the existing area of the city or to develop new exurbs for the growing population of the city.
However, sometimes, developers aren’t satisfied with the impact fee because they find the overall cost of the project has been increased especially when the project is significantly large. However, the researcher has also seen that these fees are more efficient for municipal projects rather than increasing taxes. They help raise revenue compared with property taxes since property taxes are often insufficient to provide enough funding for municipal requirements.
Impact Fees Vs in Lieu Fees
There has been confusion regarding the impact fee and Lieu Fees. What you don’t know is that the impact fees started for practicing the environmental law alternatively to the lieu fees.
In the terms of environmental law, the lieu fees are paid by developers to build a required infrastructure alternatively such as stormwater ponds or other require elements that results in damaging the environment. For instance, the lieu fees will be paid when there will be a requirement of creating new infrastructure in the land so there can be new wetlands created. The kind of fee was limited to the large-scale projects going to be started on the land and developers should have the option to build the required infrastructure on that site.
On the other hand, the impact will have to be paid on any new project, going to be started within the area, this includes single-family homes, commercial development, and apartments, and fund a wider range of infrastructure. This is why city planner’s often favored the impact fee.
It is a good alternative to increasing the property tax. However, it should be noticed that there should be an alternative to complete the project by city developer without increasing the overall cost rather than implementing the impact fee.