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An impact fee is a one-time payment made to the political subdivision (city, water or utility district) by a developer of a new development to pay for the cost of construction or expansion of water and sewer facilities located outside the boundaries of the new development and that are needed by new development and its impact on the surrounding community.
Impact fees redistribute who pays for the new or expanded infrastructure. Impact fees shift the burden of system expansion as a result to new development to the new customers. Without impact fees, the expansion of existing facilities or the construction of new facilities (that are off-site of the development) would be paid using water and sewer utility rates, thus placing the financial burden on all existing and new customers.
The process is set out in state law (Texas Local Government Code Ch. 395).
0.5 * Total Cost of capital improvements required to serve new development in the service areaImpact Fee = ___________________________________________________________________________________________ Total number of new service units expected in the service area over the next 10 year period
Determining The Total Cost of Capital Improvements:
The city must update the land use assumptions and capital improvements plan at least every five years.
The process is as follows:
Property owners or developers who: