An article at The Conversation proposes “development impact fees” intended to “support infrastructure in the neighborhoods that need it most”. Here’s how the fees are structured:
Impact fees are one-time charges assessed on new real estate development. They reflect the cost of expanding public facilities to meet the development’s new demands. For example, municipal revenue from fees might be spent on new schools to alleviate student overcrowding problems or new parks that serve the new residents.
Most states have legislation that enables impact fees. The fees are common in many rapidly growing areas, particularly in the southern and western U.S.
Most impact fee programs assess all new development according to the average cost of facilities that will serve it, regardless of the actual location of the new development. However, this approach is flawed. For example, we know centrally located residents have much shorter commute times than those who live further from the city center. By definition, the high-cost area for the cities’ transportation needs is the fringe property.
Under the everyone-pays-average-cost system, centrally located urban areas will tend to pay more than their proportionate share of new infrastructure costs. This extra burden discourages the exact type of development that mitigates urban sprawl. By contrast, more remote high-cost areas receive an implicit subsidy and pay less than their total costs. Even though they need extensive infrastructure investments, they pay only average costs.
At the margin, this reduces development in low-cost areas, but subsidizes development in high-cost areas. In urban jurisdictions, impact fees can distort the distribution of new development to be inefficient. New infrastructure goes to places where it’s less valuable than it might be elsewhere.
I have pretty serious reservations about such a plan as applied to the city of Chicago. I think it would tend to subsidize the wealthiest Chicagoans to the detriment of the poor. Here’s the authors’ graph of the incidence of their plan in Albuquerque:
Translated to Chicago “core” would be the Loop, “interior” would be the Near West Side or South Loop, and “fringe” would be Austin. The area least in need of subsidization is the Loop and the most in need is Austin. Our problem isn’t just urban sprawl; it’s actually the least of our problems. Our graver problem is excessive focus on the Loop while ignoring the underdeveloped areas like Austin or Englewood.
That’s a strategy that was openly and actively pursued by the late Mayor Daley. His never-realized Cross-Town Expressway was intended to further establish that pattern.
Politically, the plan strikes me as nearly impossible. Chicago already dominates Cook County and it already concentrates resources on the Loop (here it’s done via an arcane artifact called the “tax multiplier”). DuPage has no interest in cooperating with Cook and vice versa. The state is so focused on Medicaid and paying employee wages and pensions it doesn’t have any attention left for anything else.
