Reprinted with permission from Building Together: Investing in Community Infrastructure (National Association of Counties, National Association of Homebuilders, Government Finance Officers Association, and Urban Land Institute).

Source Characteristics

FINANCING SOURCE PROVIDES FUNDS REPAYMENT ADVANTAGES DISADVANTAGES
Taxes Immediately By all taxpayers immediately Preserves borrowing capacity; saves interest cost Funds may be insufficient; may not relate payment to benefits received
Special Assessments and Special Districts Immediately By assessed customers at time of construction. If bonded, over 10-30 years Makes funds available immediately; matches payments and benefit Requires legislative approval; may seriously impact assessed customers
User Charges Immediately By rate payers immediately Eliminates need for borrowing or reserves Impractical for large projects; may make rates erratic from year to year
Reserves In future By rate payers each year until reserve is adequate Eliminates need for borrowing; improves financial stability of system Can be politically difficult; difficult to “protect” reserves for intended use; impractical for large projects
Negotiated Exactions or Impact Fees (hookups, systems development or capital fees) Immediately By developers or customers immediately Requires new customers to pay for impacts they place on system Political problems (viewed as “anti-development”); ineffective where there is little or no growth; affects housing affordability
Grants Immediately No repayment needed Source of free money Reporting and administration may be burdensome, may not be in accordance with county priorities
Public-Private Ventures Varies By private investors and by taxpayers Total costs to county government are reduced Coordination can be complicated and time-consuming

See also Financing Parks: A Borrowing Guide

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