Impact fee

An impact fee is a fee that is imposed by a local government within the United States on a new or proposed development project to pay for all or a portion of the costs of providing public services to the new development. Impact fees are considered to be a charge on new development to help fund and pay for the construction or needed expansion of offsite capital improvements. These fees are usually implemented to help reduce the economic burden on local jurisdictions that are trying to deal with population growth within the area.

History

Impact fees were first implemented in Hinsdale, Illinois in 1947. To finance a water treatment plant expansion, the Hinsdale Sanitary District president John A. McElwain implemented a "tap-in" fee of $50 per new residential sewer line. The sanitary district was sued by the Illinois Home Building Association, but the district prevailed. The case was appealed to the Illinois Supreme Court and that court ruled that impact fees are legal if used for capital expenditures, but not legal if used for operating expenses.