• Transportation & Utilities
  • Quality of Life

Key Initiative

Establish an impact fee advisory committee to explore the use of road or park impact fees in Lebanon.

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An impact fee is a one-time, monetary charge imposed on new development by a governmental unit to defray the capital costs of new construction or an expansion of existing infrastructure needed to serve the new development such as roads, parks, and sewers.

An impact fee is established by the legislative body of a community, through an ordinance, that allows the City to collect a fee from new development to pay for all or a portion of the costs to provide or expand public services to the new development.  In Indiana, according to Indiana Code 36-7-4-1311, communities can only enact impact fees for the following public services:   sewer, water, recreation, roads and drainage. 

According to a September 2010 study at Purdue University called A Cost of Community Services Study For Indiana Counties and School Corporations by Larry DeBoerin Boone County, for every $1 collected from residential uses approximately $1.14 was spent on services as compared to commercial & industrial where only $0.22 was spent on servicesMunicipal budgets can be significantly impacted by unplanned development.  Many city departments try to estimate the costs of yearly services to provide input to the Common Council regarding the City’s budget. Thoughtfully planned new development should consider the following areas of impactthe demand for schools; traffic congestion/road capacity along with necessary road maintenance; air and water pollution; water and sewer capacity; emergency services; and stormwater runoff.  These considerations provide valuable information for budget estimations. 

Many communities are finding it more difficult to provide services within their community due to decreasing revenues from property tax caps.  Therefore, communities must investigate new ways to pay for new development to ensure that basic services are provided.  However, that alone is not enough.  In this very competitive market, to attract new businesses and residents, communities have to offer more services to increase the quality of life within a community. 

There are some requirements that communities must meet before an impact fee ordinance is adopted and fees may be collected.  First, the planning department must have an adopted comprehensive plan for the entire jurisdiction.  Second, a completed or updated public service improvement plan (i.e. sewer or water master plan, thoroughfare plan, parks and recreation plan) is needed for the impact zone area.  These improvement plans must include information and analysis of existing public services, current level of services, projected levels of service, capacity levels of service, estimated locations and costs of additional services as design occurs, and general projections of development within the zone for ten years.  Lebanon could have a zone improvement plan for the impact zone rather than a community wide master plan.  Finally, an impact fee advisory committee must also be formed to guide the decisions of the legislative body.  

In establishing an impact fee, an impact zone must be identified.  That impact zone must have a functional relationship to the public service improvements that will be made with the collected fees.  For example, the City could identify the southeast side of Lebanon as an impact zone for sewer impact fee.  If a residential development was to be constructed in this impact zone, the impact fees collected would have to be used in the area to support any sewer improvements, expansions, or upgrades. 

With the establishment of an impact fee ordinance, a schedule stipulating the amount of fees that may be imposed for each type of public service, and a formula stating how these fees are calculated must be included.  This is necessary so that payers can calculate the imposed fees on their development.  There are generally two acceptable practices for developing the formulas for the collection of impact fees: 

  1. flat fee is charged for a provided service or amenity. 
  2. three-part tariff comprises the following: 
    • Costs of the construction or improvement to a new or existing facility. 
    • Costs of delivery of the service based on the distance from the facility. 
    • Actual usage amounts of a larger development versus a single-family development. 

The second method allows for a City staff to choose the locations of their new facilities and how to charge for their uses.  The market then determines where and what types of efficient development would occur based upon the appropriate fee schedules.  Impact fees can be collected in many ways.  The process and rules regarding the collection of fees, fee appeals, reduced rates, and use of fees can be found in more depth in IC 36-7-4-1300 series. 



If implemented, impact fees would:

  • Establish a clear and stable source of revenue to be used for future infrastructure projects. 
  • Ensure the City is being proactive regarding improvements and expansions to the parks system and transportation network. 
  • Direct the financial burden of infrastructure expansion to the source of growth as opposed to existing residents.



  1. Determine support from Council in order to explore an impact fee. 
  2. Identify key persons to serve on committee including builders, developers, realtors, business owners, etc.  These individuals would become the Impact Fee Advisory Committee. 
  3. Determine the impact zone for each type of public service for which an impact fee would be established.   
  4. Update public service master plan or create an impact zone improvement plan. 
  5. Look at impact fees of comparable communities 
  6. Engage financial consultant and engineer or landscape architect consultant to assist with study. 
  7. Conduct Study: 
    • Determine Impact Zone. 
    • Determine to which type of development it will apply. 
    • Develop a zone improvement plan or update an existing utility/roads/park master plan which is a detailed analysis of roads, utilities, or parks. 
      • Estimate the nature and location of new development within 10 years from the tentative effective date of the ordinance. 
      • Determine the level of service for the impact zone.



  1. If an Ordinance is adopted, it will need to be extended every five years to be consistent with Indiana law.


  • Resources
    • Penn State University, Costs and Revenues of Residential Development:  A Workbook for Local Officials and Citizens 
    • Penn State University, Calculating a Cost of Community Services Ratio for Your Pennsylvania Community, 1998 
    • Indiana Code 36-7-4-1300 Series 
  • Organizations:   
    • Common Council 
    • Engineering Department 
    • Parks Department 
    • Planning Department