Impact Taxes: The Opportunity in North Carolina

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Stroud, Nancy E.
- Other Affiliation: Joint Center for Urban and Environmental Problems, Ft. Lauderdale, FL

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Municipalities need better ways to allocate the costs of new growth to the appropriate people. New residential construction frequently places a great demand on existing municipal services and facilities, burdening city finances when inflation and increased expectations about the quality of services have already stressed municipal resources. Capital expenses such as roads, water and sewer lines, and new buildings particularly drain existing revenue sources. So do increased expenditures for police and fire protection, recreation, schools, and library service. Cities have traditionally dealt with such demand by raising property taxes, increasing their bond indebtedness, or instituting benefits charges such as special assessments and subdivision exactions. But increased property taxes are increasingly unpopular and in some ways unfair. To the extent that increased local costs are generated by new residents, older residents are penalized when property tax revenue is used to finance new services. Bond debts paid from general tax revenue cast a similar burden on old residents; they pay the taxes but have no need for the services occasioned by new growth. Benefits charges are attractive because they shift the burden of costs to the users and beneficiaries of the facilities and services. However, traditional benefits charges may be limited by state law to specified purposes and thus are not a totally satisfactory fiscal solution.

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