When we talk about Development Impact Fees, we use many terms which sound similar to each other, but often mean quite different things. The following is a selection of commonly used terms, accompanied by real-world examples and explanations.
Fee Calculations
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Capital Facilities
This term refers to buildings, systems, equipment, or land required for provision of a public service. For example, capital facilities for water may refer to a transmission pipe, or booster station, or pressure reducing valve. The term "infrastructure" is often used interchangeably with "capital facilities." -
Equivalent Demand Unit (EDU)
This term is utilized so that all types of uses - apartments, retail, industrial, etc. can be measured against the base standard of one EDU, which is one standard single-family home. So if a shopping plaza is said to have 45 EDU's, it means that the plaza places the same demand on infrastructure as 45 single-family homes. -
Net Impact Fee
This is the amount actually charged to the customer, and is equal to the Gross Impact Fee minus any applicable Offsets. However, if credits apply, the amount charged to the customer will be further reduced. -
Gross Impact Fee
This term refers to the impact fee amount before applicable Offsets are subtracted, which is generally NOT the same amount that the customer is actually charged. However, in the few cases where no Offset applies, the Gross Impact Fee will then be the same as the Net Impact Fee. -
Offset
An amount of money which is subtracted from the Gross Impact Fee to avoid double payment for the same capital facilities. In other words, if part of a new fire station is also being paid for by property taxes, a property tax offset will be estimated and subtracted from the Gross Impact Fee before the fee is charged to the customer. -
Administrative Charge
This is an amount of money charged in addition to the impact fees, to pay for administration of the impact fee program. This fee is always charged, even if impact fee credits result in a $0 fee payment. The charge is equal to 1% of the Gross Impact Fees.
Credit and Credit Agreement
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Credit
The more correct term is "Impact Fee Credit." This term is used to describe an amount of money which is subtracted from the Net Impact Fee to compensate for capital facilities (or other payments and dedications) built by a developer which would have otherwise been financed by Impact Fees. The City and the developer(s) of a subject development must enter into a Credit Agreement in order to obtain an Impact Fee Credit. -
Preliminary Credit Agreement
A written agreement between the City and the developer(s) of a subject development which only allocates estimated values of impact fee credits to a development. No credits are issued until a Final Credit Agreement is executed. -
Final Credit Agreement
A written agreement between the City and the developer(s) of a subject development that determine the total value of credits to be issued to a subject development once an improvement is complete and accepted by the City.
