New Developments Importance of New Developments Importance Essay

  • Length: 10 pages
  • Sources: 5
  • Subject: Economics
  • Type: Essay
  • Paper: #26953047

Excerpt from Essay :

New Developments

Importance of New Developments


The major housing boom contributed to the economic growth in U.S. In between 2003 till 2008. The U.S. government received revenues from the development impact fees. Researches have shown that new developments greatly support the local economies in U.S.. Also the government plays an important role in providing the required resources and solutions to these new developments. The objective of writing this essay is to compare and contrast the cases of new developments that affect the environment and the development impact fees on the market. Also the environmental impacts will be evaluated in detail.


The economic growth of U.S. greatly increased due to contribution from major housing boom that occurred in between 2003 to 2008. The government charges a development impact fee in order to generate revenues. Every new development has some positive and negative impacts. Local economies in U.S. earn profit from all the new developments. These developments include construction of new buildings, highways, dams and etc. This essay is based on the analysis of the impacts of these new developments on the environment and how the government can provide resources required by these new developments. This essay will focus on different kinds of new developments and their affects on economy and environment.

Before digging deep into the effects and impacts of the new developments, let's understand what is meant by the Development Impact Fees? Development Impact Fees (DIF) is used for financing public facilities required to service new growth and it has gained acceptance and importance in the past few years. The widespread use and practice of using Development Impact Fees are asymmetric in the U.S. Many developers, public officials and also general public are unaware of the requirement of Development Impact Fees. There are many important legal issues and policies involved in understanding the effects of DIF on the economy. "Development Impact Fees are one time charges applied to new developments. Their goal is to raise revenue for the construction or expansion of capital facilities located outside the boundaries of the new development that benefit the contributing development" (Carrion & Libby 2008). The Impact fees are dedicated and assessed principally for provision of sewer systems and additional water, libraries, parks, roads and recreation facilities. This is necessary for all the new residents.

In simple words we can say that development impact fee is a financial exaction. The terminology of this kind of fee varies from one place to another. It is also called as impact fees, connection charges, benefit assessments or user fees. It is a financial tool that reduces gap between needed resources and improves the ones that have been provided earlier. Basically a development impact fee is the money used for providing all the facilities to the residents living in a particular area. The impact fees became very popular in U.S. when the voters started to resist property taxes. Hence a decline was observed in the federal revenues. The government of U.S. had to abandon the traditional financing ways for public services and infrastructure.

The use of Development Impact Fees follows some important policies. It affects the costs of the infrastructure and total services. The local communities (economies) have to make a decision; they have to decide whether only new residents will be charged or the cost should be charged equally from all the residents. An important point to highlight here is that if only the new residents will be charged then the old residents will get a chance to enjoy new facilities without paying for them.

The financing method of an infrastructure directly affects the pattern of development of urban areas. Considering an example of a densely populated residential area that is located at a certain distance from a sewer or water treatment plan. The residents have to pay the costs of water and sewer services. Two approaches can be used for determining cost of any kind of new development. These two approaches are marginal-cost pricing and average-cost pricing. Here marginal-cost pricing will be in three-part tariff form. Adopting this approach, one part of tariff can pay for facility of sewer and water services. Second part of tariff can pay for delivering of the services; here by delivering we mean costs of extensions or connections. The third part of tariff can pay for short-run costs; actual production of the sewer and water services.

The goal of the public officials should be to determine location of all the central facilities. Those facilities can then be priced according to the use. Efficient and appropriate land use patterns will then be dedicated by the market. Any new development has to pay for full marginal cost. This is because all the facilities are provided and the marginal cost can accommodate the economic growth. Burden of incremental infrastructure provision can become easy by the adoption of impact fees. The costs of future infrastructure can be shifted onto new residents. The local government can finance all the improvements in the construction if a comprehensive plan well implements for the right use of development impact fees. To guarantee adequate infrastructure and to facilitate economic growth, the impact fee should be used as an effective tool. The substantial infrastructure costs can be eliminated by adopting impact fee scheme.

There has been a rise in house price in U.S. And in other parts of the globe. Researches show that residential property rose by thirty trillion dollars since 2000. What actually is a housing bubble? Housing bubble is a term characterized by very fast speculation in values of house until it reaches relatively sustainable levels. One of those fundamentals is ratio of the rental house prices. Any housing market can easily return to the fundamental values by three means. Either there is a rise in rents or a fall in house prices or both. "There is always a limit on the increases in rent. During a house-price boom there is a substantial increase in real activity as investment in new houses increases. There are more jobs in housing and the investment generate more economic activity" (McKibbin & Stoeckel 2006)

Local economic development is also supported by universities. Now the universities are contributing to the innovation processes of local industries in order to support the local economic development. At present universities are focusing on technology transfer. They are licensing and patenting intellectual property to the local firms.

"The 'one-size-fits-all' approach to economic development pursued by so many universities, with its focus on patenting, licensing, and new business formation, should be replaced with a more comprehensive, more differentiated view of the university role" (Lester 2005). The following statistical analysis (Clarke & Evans 1999) shows the impact fee exemptions for new developments.

The figure shows clearly that new residents in any local area require facilities such as security, education, parking and housing affordability. The development impact fee paid by the residents generates a lot of revenue for the government. Yet there is lack of services, quality education and high property taxes. Therefore it is not easy to plan moving into a new house. The government should take effective steps in order to cover up the lack of services despite of the fact that the residents are paying the development impact fee. The second option is to reduce the impact fee.

The developer funds for a part of the services that are provided by local government. Eighteen states of America have passed legislation. They have authorized that development fees will be adopted by the local governments. Taking example of Florida; for the last several years, it has been using the development fees and did not enable the specific legislation. There was no state legislation and yet the government was exercising its power to use the development fees. For big cities, there is generally no specific schedule. The local governments should analyze the entire infrastructure cost and then the percentage of development fees should be decided in order to recover that cost. Various new development projects begin in different cities therefore the development fee various from one city to the other. The fee adoption has some effects on the investment of local government. Local governments make capital investments that are greatly affected by the development impact fee. Let's look into the process of use of the development impact fees in U.S. Three major states of U.S. namely: Florida, California and Colorado were the first states to adopt development impact fees. The major contributors to fiscal stress in these states were environmental concerns and limitations increased by the property tax. The fiscal stress forced the local governments for finding new funding sources. The impact fee is adopted by ordinance. This complies with any of the enabling legislation. This legislation has to be passed by the state. There are two types of exactions that are considered for this process such as off-site exactions and on-site exactions. In the case of on-site exactions the payment is made on…

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