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Impact fees are one-time charges that water and wastewater utilities assess new customers in order to provide new or expanded services. Statutes in many states exist that specifically allow for them. Unfortunately, these laws are vague in many cases, thus inviting the legal challenges that have become more prevalent.

It is important for those involved with enterprise fund operations to understand what makes an impact fee system defensible or subject to challenge. In Colorado, the Supreme Court's recent ruling in Krupp v. Breckenridge Sanitation District in February of 2001 set precedence for the criteria under which impact fees are valid. Although this applies most directly to Colorado, its implications are useful in many other states.

The plaintiffs in the Krupp v. Breckenridge Sanitation District case argued that the wastewater impact fees were a constitutional “takings” and were unfairly determined. The Colorado Supreme Court ruled unanimously in favor of the Breckenridge Sanitation District (the District). The District had implemented a “growth pays for growth” policy involving impact fees, as well as a single-family equivalency schedule to convert costs to multi-family and other types of units. In addition, the District hired a utility economics consulting firm to analyze its impact fees. The expert provided a report that confirmed the validity of the customer class distinctions and the equity of the fees. The Supreme Court concluded that the impact fees were justifiable, and the difference in fees between single-family and multi-family units was fair.

The impact fee methodology followed in the expert's report is the Buy-In Method. This method comprises reimbursement and improvement components. A reimbursement fee is a “buy-in” portion for new customers to pay for an equitable share of existing facilities and resources. The improvement fee portion recovers the costs of new facilities needed for growth. Following this methodology indicated that the District's impact fees were within the justifiable and defensible range of fees.
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Document Type: Research Article

Publication date: 2002-01-01

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