A comprehensive and well-maintained transportation network is essential to communities for many reasons. Providing safe mobility to all modes of transportation and goods is vital for a healthy community, as it supports access to essential services such as education and healthcare and creates enhanced economic opportunities for local residents.
Federal, state, and local capital funds are the primary source of funding for transportation improvements, including highways, bridges, local roads, transit, bicycle infrastructure, and a safe pedestrian network. However, at times, public funds are not enough to cover capital improvement programs in fast-growing communities. In these cases, developers are asked or required to fund some transportation improvements themselves, depending on the impacts they have on an area. As construction costs soar and gas tax revenues decline, communities need new ways to fund the transportation infrastructure that new development requires.
Transportation Impact Fees Can Address Funding Shortfalls
A transportation impact fee requires new development to pay a one-time, predetermined fee to contribute to a community’s infrastructure needs that may be impacted by this development. These fees allow local governments to prioritize public health, safety, and welfare of their communities. The impact fee must be tied to the development; for instance, the community must demonstrate how the development directly contributes to the need, and it must be proportionate to the impact created. Once that connection is established, the developer is then required to financially offset the impact.
Within the context of transportation projects, impact fees connect the trips generated by a new development to the transportation capacity needed for the broader transportation system to accommodate those trips. A transportation impact fee is directed toward the external shared infrastructure outside of the development. The fee is paid in addition to the developer’s responsibility to provide transportation infrastructure within a development for internal circulation and mobility.
Without adequate public facilities to keep up with growth and development, negative externalities such as traffic crashes, traffic congestion, increased emissions, and decreased quality of life may occur, ultimately hindering the very growth that brought economic development and opportunities in the first place.
Calculating Transportation Impact Fees
The method for calculating impact fees typically involves projecting the amount and location of growth, correlating new traffic projections, and evaluating future multimodal traffic operations to establish potential needs for new or expanded roadways, transit, trails, and sidewalks over a certain time period. Once this is determined, the total cost of the new infrastructure is estimated, a development community fair-share target percentage established, and this is divided by the projected number of new trips to arrive at a cost per new trip.
The cost per new trip is then applied to trip generation rates by land use and applied as a development impact fee on new development or redevelopment based on the land use proposed. Transportation impact fees may vary by geography to acknowledge that different transportation infrastructure is needed in different areas, depending on the existing infrastructure and residual network capacity.
Typical steps include:
- Establishing a transportation improvement plan based on projected growth. The plan should include all modes and key performance metrics to define desired mobility standards (e.g., vehicle level of service, travel time, bicycle level of traffic stress, and transit ridership).
- Deciding whether to implement the fee uniformly across jurisdictions or through geographically specific fees (such as urban, suburban, and rural) or aligning with comprehensive plans and character zones. Determining the developer’s share of the cost of impacts from new development to pay for new or expanded roads, bridges, transit, trails, and sidewalks. The share cost can vary by geography or land use type (e.g., hotel, commercial, institutional).
- Establishing Transportation Demand Management requirements and incentives for developments to reduce vehicle travel and transportation impact fees, with the ongoing monitoring and reporting of mobility trends on an annual basis.
There is no one-size-fits-all fee for a local agency. Political, economic, and regulatory contexts will help set the appropriate fee and determine the size and type of future transportation improvements required. What is needed in rural Wyoming is not the same as the needs in urban Baltimore City.
Final Considerations
In summary, establishing a transportation impact fee can be a transparent and predictable means to address traffic impacts from growth and development that can help agencies better manage the site development process. This also helps developers better predict the permitting time and costs of development.
The revenue generated for transportation infrastructure funding is proportional to growth, with funding incorporated into development financing up front, allowing transportation improvements to be built proactively instead of reactively in response to traffic concerns.
As inflation and maintenance costs rise, while shrinking gas tax revenues reduce public funding and limit expansion of the transportation network, consider asking if your community needs a transportation impact fee to address development-generated traffic and new transportation needs.
