FINANCING THE LOCAL PUBLIC COSTS OF GROWTH (EXACTIONS, DEVELOPMENT FEES, SPECIAL ASSESSMENTS, INFRASTRUCTURE, CAPITAL BUDGETING)

Over the past decade there has been a dramatic change in the way cities finance infrastructure that serves new development. Cities have shifted much of the cost of public infrastructure from the city at large to developers through the use of exactions, development fees, and special assessments. This dissertation addresses the question of how infrastructure that serves new development should be financed. It discusses traditional methods of financing infrastructure and the theory underlying such financing. It also describes recent trends, examines why they have occurred, and analyses such issues as equity, efficiency, and legal, administrative and political feasibility of various methods of financing infrastructure.;In addition it is shown that contrary to popular opinion, there are few situations when developers can pass infrastructure costs onto buyers of new homes. It is also shown that current legal reasoning which focuses on issues of intergenerational equity is based on misconceptions about the effects of growth on current residents of a city, and it is shown that many of the claims that developer financing of infrastructure promotes economic efficiency are without merit. Long-term budgetary and political consequences of developer financing of infrastructure are often ignored, yet they are perhaps some of the most important long-run considerations.;A model is developed to analyze the effects of growth and development on various methods of financing infrastructure. The model is used both to explain recent trends in financing new infrastructure and to analyze issues of intergenerational equity. It is shown that city-wide financing of infrastructure places an excessive fiscal burden on current residents of a city when the city is growing rapidly and when the city does not finance its infrastructure on a true pay-as-you-use basis. It is also shown that developer financing of the full cost of infrastructure that serves new development results in a windfall for current residents and is based on static analysis that does not consider how existing infrastructure was financed. This leads to an alternative method of determining developer responsibility that considers both the dynamics of intergenerational responsibility and the effects of growth.