It is not often that governments voluntarily reduce fees or taxes. So when one does, it is worth taking a closer look.

Last month, the Plano City Council eliminated impact fees on developers building new homes and businesses. The fees were charged based on the size of the water meter for the project, and typically ran from $1,000 to $2,000 for a typical home, but could go as high as $95,000 for the largest meters. The money was then used to build additional infrastructure for the city. But as new construction has slowed in Plano, the city is looking for ways to make it less expensive for people to live in.

Taken by themselves, impact fees could be seen as a user fee, which is one of the better ways for governments to raise money. Use a service, pay a fee. That is what makes toll roads so appealing from a market perspective. But user fees are only good if used instead of general taxation, replacing the tax revenue rather than supplementing it.

I don’t know which route Plano took, but the good news now is at least its city council members acknowledge the fact that fees and taxes make living their more expensive – not for the developers, but for the people who live there and ultimately have to bear these costs.

– Bill Peacock