Promoting Sustainable Land Development Patterns Through Impact Fee Programs

Gregory S. Burge, University of Oklahoma

Keith R. Ihlanfeldt, Florida State University

Sustainable urban growth is generally defined as development that meets the need of current residents without compromising the ability of future residents to meet their development needs. Rapid growth can place pressures on local public infrastructure systems, fail to preserve open-space amenities, increase traffic congestion, and degrade local environmental quality. If these problematic outcomes occur, current and future residents bear a burden that is external to the new construction market. Effectively managed economic development is something local and regional governments vigorously pursue, however. We argue that efficient outcomes occur when developers and other decisionmakers face market prices that reflect the full social costs and benefits of their actions. This article outlines the nature of five types of externalities associated with rapid development, describing how each can compromise the long-term sustainability of communities. We advance the idea that properly structured development impact fee programs can internalize dynamic externalities and encourage more sustainable growth patterns. We describe some ways in which local governments already commonly attempt to deal with development externalities, show how impact fee programs have already been used to correct for some of these problems, comment on the ways existing programs could be improved, and outline the most significant obstacles to using impact fee programs in this expanded capacity.