Equity in Infrastructure Finance: When Are Impact Fees Justified?

To the extent that impact fee financing of infrastructure replaces the property tax, it shifts payment from owners of existing property to parties associated with newly developing property. Rapid growth in a community is often cited as justification for this shift. A model of intergenerational equity is proposed based on benefit principle taxation and capitalization of tax costs and infrastructure benefits. The study concludes that rapid growth per se need not burden existing property owners unfairly. Unanticipated rapid growth, on the other hand, can lead to excess tax burdens on existing residents that may appropriately be mitigated through impact fees.