Impact Fee - History

History

Impact fees were first implemented in Hinsdale, Illinois in 1947. To finance a water treatment plant expansion, the Hinsdale Sanitary District president John A. McElwain implemented a "tap-in" fee of $50 per new residential sewer line. The sanitary district was sued by the Illinois Home Building Association, but the district prevailed. The case was appealed to the Illinois Supreme Court and that court ruled that impact fees are legal if used for capital expenditures, but not legal if used for operating expenses.

Impact fees became more widely accepted in the United States in the 1950s and 1960s. First used to help fund capital recovery fees for water and sewer facilities, then in the 1970s, with the decline of available Federal and State grants for local governments, their use increased and expanded to non-utility uses including roads, parks, schools, and other public services. Finally, in the 1980s the impact fee became a universally used funding approach for services and started to include municipal facilities such as fire, police, and libraries. After court cases in states such as Florida and California approved their legal use, many other states enacted laws which approved the use of impact fees by local jurisdictions.

Impact fees have developed as an offspring of in lieu fees but have had a more significant impact on funding infrastructure. In some cases, the use of the impact fee has developed its own phrase of “growth should pay its own way”.