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Impact fees are one-time charges applied to new construction in order to help pay for the increased infrastructure demands that come with community growth and development. As a business owner, understanding how impact fees work and how they may affect your company is important.

What Exactly Are Impact Fees?

Impact fees, also known as development fees or capital contributions, are levied by local governments on new construction projects to help pay for necessary infrastructure improvements. These fees are used to cover increased costs associated with roads, schools, parks, utilities, and other public services required to accommodate growth. The costs are passed onto developers and builders, who typically fold them into project budgets and ultimately pass them on to buyers and tenants.

How Are Impact Fees Calculated?

Impact fees are calculated based on the size and type of the new development. For commercial projects, fees may be assessed per square foot of the new building space. The specific fee amount is set locally based on infrastructure needs and costs within that jurisdiction. The fees collected must go toward infrastructure improvements that benefit those paying the fees.

Who Pays Impact Fees?

While developers pay the fees upfront, the costs are generally passed along to the end-users (in the case of commercial projects, the business owners and tenants moving into the new buildings). As a business owner preparing to construct a new facility or relocate into a newly developed building, you can expect to pay impact fees that have been calculated into the project costs.

How Do Impact Fees Affect My Business?

The exact financial effects depend on the specific fees levied in your area. At a minimum, impact fees add to upfront construction and occupancy costs. As a business owner, you need to factor these fees into your budget and pro formas as you plan the construction of a new facility. Speak with your contractor or real estate agent to learn more about likely impact fees in your jurisdiction. Consider looking for opportunities where fees may be reduced or waived for economic development purposes.

How Can Economic Development Councils Help?

Understanding impact fees and how they work is an important part of planning a commercial construction project. While the added costs may affect your budget, impact fees do serve the vital purpose of funding infrastructure to accommodate new growth and economic development in our communities. Fortunately, an economic development council can help.

According to Urban, economic development businesses and non-profits exist to support existing businesses, encourage entrepreneurship, recruit new businesses, and coordinate the economic development activities of their local governments. Haines City Economic Development Council collaborates with both local and state agencies to provide support for Haines City businesses when they need it, including connecting them with the Polk County Economic Development Impact Fee Mitigation program. This program reduces impact fees for construction projects that meet specific requirements.

To learn more about this program and to determine if you're eligible, visit our Incentives page or contact us today at Haines City Economic Development Council for more information.