Investment in infrastructure three pillars of city resilience

Western super-collector, Casablanca, Morocco
Impact Fees: Overview
INVESTMENT IN INFRASTRUCTURE
DESCRIPTION

• Developers are assessed an extra cash charge to compensate the cost of area-wide infrastructure upgrades.
• Per standard scheme, it is a one-time charge applied routinely by a local jurisdiction to real estate development projects contemplated in the area impacted by infrastructure upgrades. The proceeds from the charge finance (or refinance) a portion of the cost of facilities upgrades.
• Such charge is assessed on a formula that considers benefit allocation, intensity of land use, distance to the upgraded infrastructure etc.

KEY REQUIREMENTS / IMPLEMENTATION FACTORS

• Strong planning and analytical capacity at local level needed for planning and costing infrastructure upgrades, along with devising a solid approach in allocation of benefits across different locations / projects.
• Strong execution of public investment plans.
• Transparent and stringent formula for impact fee calculation (allowing developers to credibly project impact fees in development financial pro forms).

Impact Fees: Lessons Learned
INVESTMENT IN INFRASTRUCTURE
OPPORTUNITIES
CHALLENGES

• Relatively straightforward two-way transaction
• Minimal negative fiscal impact (e.g. municipal cash flow is not ring-fenced in any way)
• Efficient tool to redistribute costs of development-enabling infrastructure (avoids overburdening of first-comers and free-riding of followers)

• Extra charges may hinder development activity.
• If applied improperly may become a disincentive to develop land to its highest and best use
• Infrastructure benefits are distributed unevenly. Imperfections in apportioning off-site costs are inevitable
• Works best for hard and basic infrastructure that has direct and quantifiable impact (such as transit or sewer/water upgrades). Less prudent for infrastructure items where short-term impacts are less tangible (e.g. resilience enhancement, “green” infrastructure).