Impact Exactions: Economic Theory, Practice, and Incidence

Abstract

The public capital stock, commonly called infrastructure, has been allowed to deteriorate to the extent that its lack of availability frequently constitutes a serious impediment to economic progress. This lack of adequate public capital results in part from a failure to maintain the public capital facilities constructed in the past, and in part from the failure of public capital investments to keep pace with needs brought about by growth. The solution to both maintenance and expansion of infrastructure problems is more fiscal resources. The traditional systems of infrastructure finance for both capital and maintenance projects, however, have been unable to keep pace with need. The result has been the deterioration of the public capital stock, which has been well documented by Choate and Walter.' The focus of this article is the recent approach many jurisdictions are taking to provide more fiscal resources to capital projects. Impact exactions have gained popularity as an alternative to traditional methods of infrastructure finance. Although such exactions do not make any contribution to maintenance of existing facilities, they do constitute available resources.