Playing Smart changelabsolutions.org | kaboom.org 47 general revenue. The funds can only be used to build the type of facility or infrastructure the fee was specifically created to finance. While development fees can be an additional source of funding for infrastructure projects, remember that these fees can only be used for capital improvements in the newly developed area. Fees cannot be used to mitigate preexisting shortages or deficiencies in facilities built prior to the development, nor can they be used to improve or renovate existing infrastructure (except when the new development significantly impacts the capacity or adequacy of these facilities). Impact fees are only levied upon new developments and are one-time payments made by the project developer, generally collected when the building permit is issued. The amount of the fee must be clearly linked to the costs associated with the additional infrastructure necessitated by the development and cannot be set arbitrarily. Even with this requirement, fee amounts vary tremendously according to jurisdiction and state. State laws establish whether or not impact fees may be charged, and if so, what levels of government may levy them and for what purposes.65 Note that while most states allow jurisdictions to levy impact fees to fund parks, only a handful allow impact fees to help finance schools.66 When a jurisdiction is able to collect an impact fee to fund parks, recreational facilities, or schools, sufficient amounts must be collected from each new development to cover the actual costs of creating, operating, and maintaining the sites. To do this, communities should conduct a comprehensive impact fee study to ascertain the real costs of adding infrastructure capacity to meet increased demands of new development. These estimates should be reviewed and updated every five years to reflect changing needs. Development Agreements A development agreement is a contract between a project developer and the city/county; it enables both parties to get something more than either would be able to achieve individually under the standard land use regulatory process and impact fee regime. Development agreements may also be an attractive approach for jurisdictions that lack the authority to impose impact fees on new development. In a development agreement, the developer promises to pay fees for or build a certain type of facility. For example, the developer could promise to dedicate land for a park and recreational facility, build the infrastructure, and provide funding for ongoing maintenance and operational expenses. Through such an agreement, the city or county can receive larger fees or have more land or infrastructure provided by the developer than would be allowable under a regulatorybased development fee structure. This is because the developer has voluntarily entered into an agreement, so neither party is acting under a regulatory framework that has legally mandated limitations. In return for the developer’s legally binding promises, the local jurisdiction agrees to provide benefits to the developer, such as density, zoning, or parking bonuses and allowances. Builders may also get a promise from the city/county that they may build the project regardless of any zoning or other regulatory changes that might go into effect during the lifetime of the project and that might otherwise make it impossible to go forward with the development. Developers use these agreements as a way to gain security and avoid the potential risk of zoning or other changes that might threaten the completion of a multiyear, multiphase, multimillion-dollar project. Local governments can use them to ensure that the public facilities and amenities that made the project attractive will be developed and will not fall victim to external factors such as a failed bond referendum or curtailed capital program. Local governments can also use these agreements to better coordinate a pool of resources from various developers and thus guarantee funding, land set-asides, and infrastructure construction for public improvements. Incentives Local government may choose to implement policies that reward developers for including parklands and playgrounds, sports facilities, land for schools, and other public infrastructure. For example:
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