What type of fees are charged to compensate the government for costs associated with new developments?

Impact fees are charges levied by local governments on new developments to cover the costs associated with providing public services and infrastructure required by those developments. The primary purpose of these fees is to ensure that the financial burden of increased demand for public services—such as roads, schools, parks, and utilities—does not fall on the existing taxpayers but is instead allocated to those who create the demand for those services.

When a developer proposes a new project, such as a residential subdivision or commercial building, the local government can analyze the projected impact of that development on public facilities. Based on this analysis, impact fees are calculated and assessed. This practice helps municipalities fund necessary improvements and expansions in services to keep pace with growth, thereby facilitating sustainable development.

Other types of funding or financial mechanisms listed do not serve this specific function. Revenue bonds are intended for financing particular projects or services, unlimited tax general obligation bonds rely on the commitment of general tax revenues for debt repayment, and joint ventures or privatization strategies involve partnerships between public and private entities often for service delivery rather than direct compensation for development impacts. Therefore, impact fees stand out as the most relevant and correct choice in this context.