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City Funds, Resources, and Taxation

The City of San Jose must consider fair and calculated impact fees, in line with many other major cities in the Nation. The greatest argument against impact fees is that they will drive away Developers interested in improving a City. I have a difficult time understanding how this argument would apply to San Jose, the Heart of the Silicon Valley.

The American Planning Association (APA) has outlined guidelines regarding the application of Impact fees. These fees are payments required by local governments of new development for the purpose of providing new or expanded public capital. They should follow a methodology and calculation derived from the cost of the facility and the nature and size of the development. As a general matter, impact fees are capitalized into land values, and thus represent an exaction on the incremental value of the land. Some have argued that, under certain circumstances, impact fees will stifle development, raise costs, and discourage investment in a community. There has been little to demonstrate that the imposition of a fee system has had an adverse impact on development.

Local governments throughout the country are increasingly using impact fees to shift more of the costs of financing public facilities from the general taxpayer to the beneficiaries of those new facilities. The fees supplement local government resources that otherwise have decreased because of diminished state and federal transfers of funds. Local governments have also used impact fees to delay or as a substitute for general property tax increases. Impact fees, when based on a comprehensive plan and used in conjunction with a sound capital improvement plan, can be an effective tool.

Numerous standards and guidelines are available to assist local and regional governmental agencies on the planning processes that must be undertaken to develop a legally defensible impact fee program. Approximately half the states have enacted enabling legislation for impact fees, some of which have specifically included language that governs how these programs are to be implemented. To be most effective and legally valid, impact fees must be carefully designed and documented. San Jose continues to be an attractive investment for developers. Shifting the burden from the taxpayer and requiring an investment in the community will not dissuade developers from investing in San Jose.