What is It

A Growing Revenue Source

Before 1960 only 10 percent of localities imposed exactions; by the mid-80's some 90 percent did.

Cities and towns use developer exactions as a strategy to offset the burdens of new development on the community. Exactions contribute to regional equity by ensuring that a new development pays a fair share of the public costs that they generate.

Exactions consist of a developer's payment of "impact fees." These fees are used to fund new schools and parks; construction or maintenance of the public infrastructure directly connected to the new development; and off-site improvements and services. Exactions are levied on developers in exchange for the approvals to proceed with a project.

Cities across the country have increasingly turned to exactions as a means to meet new infrastructure and public service needs. in California, reliance on exactions has intensified since the passage of Proposition 13 in 1978. Proposition 13 caps property tax available to localities and therefore hinders their ability to tax new residential development sufficiently to cover increased demand for services.

Last Updated: February 2002