Which type of financing mechanism is utilized to fund local infrastructure improvements necessitated by new development?

Development Impact Fees are designed specifically to fund local infrastructure improvements that are necessitated by new development. These fees are typically charged to developers and property owners as a condition of obtaining a building permit or other approvals. The rationale behind this approach is that new developments increase the demand for public services and infrastructure, such as roads, schools, and parks. By implementing these fees, municipalities can ensure that the costs associated with these services are adequately covered by those who are responsible for the increased demand, rather than placing the financial burden on existing residents and taxpayers.

In contrast, subdivision exactions usually involve specific requirements imposed on developers, such as dedicating land for public uses or constructing certain infrastructure items as part of the development process. Tax-increment financing, on the other hand, is a mechanism that allows municipalities to use future tax revenues generated by increased property values in a designated area to pay for improvements. General obligation bonds involve borrowing against the credit of the municipality, typically approved by voters, to finance projects that are often broad in scope and not specifically tied to new developments.