Definition of impact fee

An impact fee is a charge or fee levied by a government or local authority on developers or builders of new residential or commercial projects. The fee is intended to pay for the cost of public services and infrastructure, such as roads, schools, parks, and utilities, that are necessary to accommodate the increased demand resulting from new development. Impact fees are typically calculated based on the size and type of the development and are paid at the time of building permit issuance or other specified milestones in the development process. The purpose of impact fees is to ensure that the costs of growth are borne by those who create the demand for new public services and facilities.