Calculating Equity-Neutral Water and Sewer Impact Fees

Abstract

Abstract Equity-neutral impact fees should equalize the burden of paying for infrastructure facilities on all residents of a community regardless of when they move there. This article demonstrates how the method for computing impact fees determines who bears the cost burden. The article concludes the following: Impact fees, if set properly, can achieve an equity-neutral result. Equity-neutral fees are highly dependent on inflation, financing, and absorption assumptions. Economies of scale must be significant for cost savings at capacity to outweigh the carrying costs during the period in which the excess capacity is absorbed; it may be preferable to build smaller facilities with smaller excess capacity to be absorbed. An equitable approach should include regular adjustments to accommodate differences between the initial assumptions used for setting impact fees and the actual inflation and absorption rates.