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16 <br /> <br /> <br />Development Impact Fees <br />Development impact fees are imposed on new construction (like new houses, apartments, shopping <br />centers or industrial plants). They pay for improvements and facilities required to serve new <br />development and to reduce the impacts of new development on a community. <br />Development impact fees (also known as “AB 1600 fees” after legislation adopted that governs such <br />fees) pay for community amenities such as streets, sewers, parks and schools. They may not be used <br />for day-to-day operating expenses. <br />The ordinance or resolution establishing the fee must explain the connection between the development <br />project and fee. For example, a library impact fee must be connected to the demand for library services <br />created by the construction of the development project. <br />The amount of the fee must not exceed the cost of providing the service or improvement that the fee <br />pays for. <br /> <br />Local Debt Financing Tools <br />Local governments borrow money to pay for land, facilities and equipment that may require more <br />funding than current revenues provide. Not a revenue source, but a way to leverage the timing of <br />revenues, debt financing methods are important tools in government finance. Local governments <br />may issue bonds and other debt instruments to finance improvements and services. These loans are <br />paid off through taxes, assessments or fees. A variety of debt financing tools are available: <br /> <br />• General Obligation Bonds. General <br />obligation bonds are essentially IOUs <br />issued by public entities to finance large <br />projects. General obligation bonds are <br />backed by property tax revenue, which is <br />used to repay the bond over a twenty- to <br />thirty-year period. Increasing the property <br />tax to repay the debt requires two-thirds <br />voter approval and may only be done to <br />acquire or improve real property. <br />• Lease-Purchase Agreements. In a lease- <br />purchase agreement, sometimes called <br />“certificates of participation,” the agency <br />leases an asset for a period of years with <br />the option to purchase the land or <br />improvement at the end of the lease. The <br />amount of the lease is equivalent to the <br />principal and interest that would be paid if <br />the transaction were financed as a loan. <br /> <br />• Benefit Assessment and Special Tax <br />Financing. Benefit assessment financing is <br />supported by benefit assessments on the <br />property to fund acquisition of property and <br />improvement of infrastructure and additional <br />facilities of benefit to the property that is <br />charged. Similarly special taxes, such as Mello- <br />Roos taxes, may be financed with bonds <br />to provide public improvements. <br />• Revenue Bonds. Revenue bonds are issued <br />to acquire, construct or expand public projects <br />for which fees, charges or admissions are <br />charged. Because the debt service is paid from <br />income generated by the facility or related <br />service, such debt is considered self-liquidating <br />and generally does not constitute debt of the <br />issuer, subject to constitutional debt limitations. <br />• Tax Allocation (Tax Increment). Tax <br />allocation bonds (sometimes referred to as tax- <br />increment financing) are issued by Enhanced <br />Infrastructure Financing Districts or Community <br />Revitalization and Investment Authorities and <br />repaid from the growth in property tax revenue <br />(i.e., tax increment) and other designated <br />revenues over a certain period, largely as a <br />result of the funded projects in the area. <br />Page 34 of 109