Impact fees are financial payments to a municipality by a developer to provide some or all of the physical improvements needed by a proposed development and its effects on the surrounding community. Fees may be levied for capital improvements—such as sewers, streets, water lines, parks, and schools—or in the form of direct contributions that come in the form of land dedications, construction of facilities, or payment of fees-in-lieu of providing these facilities.

In Pennsylvania, transportation impact fees are a funding mechanism permitted by the state’s Municipalities Planning Code. Fees can be assessed to new development in proportion to its impact on transportation; i.e., the traffic congestion the development is expected to generate during peak commuter periods. The process to develop and calculate fees is often referred to as an Act 209 study. Funds collected are used to improve roadways affected by development-related traffic, enabling Pennsylvania municipalities to provide adequate infrastructure to support economic growth and development. Municipalities need to enact an impact fee ordinance before they can collect any fees.In New Jersey, transportation impact fees can be established through the creation of a Transportation Development District (TDD). To build in a TDD, developers must pay a fee calculated by determining the impact that the proposed development will have on local traffic.

PennDOT’s State Transportation Advisory Committee noted several challenges for transportation impact fees. They can be expensive and time consuming to enact and administer. Impact fee studies can be complex. The revenue generated is highly variable based on market conditions. It can take considerable time to accumulate enough fees to fund improvements, although there are time limitations in which to expend fees collected. Impact fees can increase costs for small businesses and low- to moderate-income housing. Last, highway occupancy permit decisions are sometimes made independently of impact fee planning and implementation and regional planning partners are generally not included in the impact fee process.