They recover those fees, and the cost of carrying them, from new homebuyers. Often, a majority of a development's new homebuyers are existing Valley residents. So, in many respects, development fees operate not as a tax on growth, but rather as a tax on moving into a preferred home in a preferred neighborhood. Cities currently impose development fees to recover capital costs for everything from streets to water and wastewater, to fire and police stations, to parks and libraries. The claim is frequently made that these fees do not adequately cover the public costs of new developments, which are therefore a financial drain on taxpayers in established areas.
Studies produced on the subject come to various conclusions.
As a general rule, investors are willing to lend money to growing cities at a lower rate than to ones that aren't growing. If growth were truly a financial drain, it would be the reverse. Moreover, the implications of making development pay for itself are seldom thought entirely through. Let's assume development fees are imposed that capture all of the public costs of new residential areas. The court decision on school impact fees was clear and sensible.