Impact Fees Underwriting Checklist for Developers
Impact fees rarely kill a deal by themselves. They kill deals because sponsors either miss a fee bucket entirely or double-count it across departments, then discover the truth at the worst possible milestone: loan closing, permit issuance, GMP execution, or meter set. This checklist is built to be lender-ready: every fee line tied to a source document, timed to the correct trigger, and modeled with escalation, credits, deferrals, and reassessment risk.
1) Start with a clean taxonomy (what is and is not an impact fee)
Before you chase amounts, get the definitions straight, because “impact fee” is used loosely in municipal conversations. Underwriting should separate true development impact fees from plan check, permit, and utility service charges. They behave differently, they escalate differently, and they often hit different budget silos.
The underwriting rule
Treat “impact fees” as one-time charges intended to fund capital facilities needed for new growth, and treat everything else as regulatory fees or enterprise utility charges. Many jurisdictions publish this distinction explicitly. San Francisco, for example, distinguishes impact fees from application fees and notes that planning impact fees are collected by DBI at issuance of the first construction document, while other fees live in separate codes and registers (SF Planning development impact fees overview).
Your fee universe (minimum buckets to build)
You want a standardized chart of accounts that is consistent across markets. Here is the set that tends to prevent misses and double counts:
- Land use and planning impact fees (often adopted in municipal code or planning code)
- Transportation, mobility, and right-of-way impact fees (sometimes renamed “mobility fees”)
- Parks and recreation impact fees
- Fire and emergency services impact fees
- Police and public safety impact fees (jurisdiction-specific)
- Libraries, cultural, and civic facility impact fees (jurisdiction-specific)
- School impact fees (state-enabled programs vary widely)
- Water capacity or connection charges (often utility enterprise fees, not impact fees, but economically identical)
- Sewer and wastewater capacity charges
- Stormwater drainage and flood control fees
- Traffic signal, frontage, and “fair share” improvements (often conditions, not fee schedules)
- Building permit, plan check, and technology surcharges (not impact fees, but cash timing matters)
- In-lieu fees (open space, affordable housing, art, etc.). Sometimes called impact fees, sometimes not. Underwrite them separately and tie to entitlement conditions.
Why lenders care about the taxonomy
Construction lenders underwrite sources and uses with an obsession over two things:
- Cash timing against the draw schedule (a fee due at permit issuance is effectively day-one hard cost cash)
- What happens if the permit is reissued, the scope shifts, or a category is administratively reclassified
If your model labels everything “impact fees,” you will almost certainly mis-time payments, mis-state contingency, and trip a closing condition when the lender’s third-party cost review (or the GC’s schedule of values) calls the fee by its real name.
For entitlement-heavy projects, it is worth aligning this taxonomy early with your land use counsel and expeditor. This is also where we typically plug in on the advisory side, because fee exposure is inseparable from entitlement pathway and conditions. If you need a second set of eyes on how fee triggers interact with your approvals, start with FOCAL’s Land Use & Entitlement Advisory.
2) Map every fee to the responsible department and the trigger milestone
Most underwriting mistakes are not math mistakes. They are workflow mistakes. Fees sit across planning, building, engineering, public works, utilities, and sometimes school districts or special districts. Each group uses different terms, different forms, and different timing.
A clean underwriting deliverable is a single matrix that answers four questions for each fee: who assesses it, when it is due, what document proves it, and what changes it.
Comparison table: lender-ready fee matrix (template)
| Fee bucket | Who assesses | Typical payment trigger | What you cite in underwriting | Common gotcha |
|---|
| Planning impact fees | Planning department, collected by building | Issuance of first construction document in some cities | Fee register, planning code section, stamped fee worksheet | Sponsor budgets it at C of O, then scrambles at permit |
| Mobility/transportation | Public works or transportation | Prior to building permit issuance in many counties | Adopted fee schedule + written pre-application estimate | Permit expiration causes reassessment at higher rates |
| Parks | County/city impact fee office | Permit issuance or prior to energizing, depending on ordinance | Clearance sheet or impact fee calculation form | Mixed-use allocation errors |
| Fire | Fire district or county | Permit issuance or prior to energizing | Fire district fee schedule + invoice | Confused with fire flow meter and plan check |
| Schools | School district or city program enabled by state law | Varies widely, sometimes building permit issuance | Education code authority + district fee letter | “Credit” assumptions that are not transferable |
| Water capacity | Utility enterprise | Meter set, will-serve, or connection | Utility rate schedule + will-serve letter | Modeled as impact fee but actually refundable or phased |
| Sewer capacity | Utility enterprise | Building permit, connection, or C of O | Capacity charge schedule + service agreement | Underwritten off GFA, but utility bills off EDU or fixture units |
| Stormwater/drainage | Public works, flood control district | Grading permit or building permit | Drainage fee nexus doc + plan check invoice | Scope-driven changes after civil design |
The point is not that every jurisdiction follows these triggers. The point is that every fee must have a trigger, and the trigger must be evidenced.
Two sources illustrate why timing is non-negotiable:
Underwriting deliverable lenders actually use
When a lender asks “are impact fees included,” what they want is a PDF pack and a model tie-out:
- A one-page matrix like the table above
- Source documents behind each line item (fee schedules, clearance sheets, invoices, calculators)
- A model tab that maps each fee to a month and a draw category (soft cost, hard cost, land, other)
If you cannot show the trigger and the source, expect the lender’s cost consultant to haircut loan proceeds or force a sponsor-held reserve.
3) Source-document discipline: prove each fee with a primary document
The lender-ready version of “impact fee due diligence” is not a phone call with a counter clerk. It is a curated set of primary documents that survive committee, third-party review, and closing counsel scrutiny.
Acceptable sources (ranked)
Use this hierarchy. The lower you go, the more contingency and disclosure you should add.
- Adopted ordinance or municipal code section establishing the fee (and the current fee schedule)
- Citywide fee register or published fee calculator output saved as PDF
- Written fee estimate from the assessing department on letterhead or official email, tied to APN and scope
- Clearance sheet, fee worksheet, or invoice generated from the permit system (best for timing)
- Consultant memo summarizing fees (only acceptable when backed by the above attachments)
San Francisco provides a clean example of what “good” looks like: a centralized register concept and an online calculator, plus citations to the enabling code and related capacity charges (SF Planning development impact fees overview). You should aim to replicate that structure even when the jurisdiction is less organized.
Scope definitions that must match across documents
Most fee disputes are not about the rate. They are about the base.
- Residential is often by unit count, bedroom mix, or heated and cooled square footage. St. Johns County notes residential fees are based on heated and air-conditioned square footage (St. Johns County Impact Fees manual, Section 37.0).
- Non-residential is often by gross floor area, not rentable area. The same St. Johns manual explicitly says “gross floor area, not leasable floor area,” and includes balconies, attached garages, stairs, and similar areas. If your architect and your fee assessor are not using the same definition of GFA, you will blow your number.
Mixed-use and “administrative determination” risk
When your use type does not fit the schedule neatly, many ordinances allow an administrative determination or an independent fee study process. St. Johns County describes both an administrative determination and a process for the feepayer to prepare an independent fee calculation study if they disagree with the assessed fee (St. Johns County Impact Fees manual, Section 37.0).
Underwriting implication:
- If your project is mixed-use, novel (co-living, micro-units, labs, medical), or includes accessory uses, you underwrite a fee classification variance reserve.
- You do not treat the early “planner says it will probably be X” as bankable.
This is also where sponsors accidentally double-count: a consultant includes “impact fees” from a planning code schedule, while the civil engineer separately budgets “public works fees” that are actually the same nexus fee collected by a different counter.
If you want to bring discipline to fee sourcing inside the broader development budget package, this lives in FOCAL’s Development Advisory scope. The win is not just accuracy. It is preventing last-minute re-trading of the GMP and loan proceeds.
4) Model timing, escalation, reassessment, and cash management like a lender
Fees are a line item. But the underwriting risk is duration. If the project slips, expires, phases, or value engineers scope, fees move.
Timing model (what your spreadsheet should do)
At minimum, build a “fees cash flow” tab with:
- Fee line item
- Amount
- Trigger milestone (permit issuance, first construction document, grading permit, energizing, meter set, C of O)
- Scheduled month of payment (linked to your entitlement and construction schedule)
- Draw category (soft cost vs hard cost vs other)
- Funded by (loan, equity, fee deferral, reimbursable)
- Notes on reassessment and escalation
Then tie it to your monthly sources and uses. If the fee hits pre-first draw, lenders will expect it to be equity-funded or escrowed.
Reassessment risk is real and underwritten
Hillsborough County’s notice is blunt: fees are assessed prior to permit issuance, remain valid for the life of the permit, and if the permit expires, the mobility and impact fees are reassessed at current rates when the permit is reissued (Hillsborough County impact fee timing and reassessment notice).
Underwriting implications:
- If your schedule has any path where a permit could lapse (financing risk, litigation, redesign), assume you may pay a higher fee later.
- Carry a specific “permit lapse fee escalation” allowance, separate from general soft cost escalation.
- Add a closing condition checklist item: confirm permit strategy (phased permits, extensions, “keep alive” inspections) and document who is responsible for maintaining validity.
Escalation mechanics (do not guess)
Impact fee schedules can change annually, biannually, or by ordinance update. Some utilities index capacity charges. Some cities apply CPI increases by formula. You do not need to predict the next ordinance. You do need to:
- Identify the stated update cadence or indexing method (if any)
- Assign a conservative escalation factor for any fee not locked by assessment
- Disclose what is locked versus floating
When the lender’s third-party cost review asks “are these fees fixed,” your answer should be: “These three are assessed and locked upon permit issuance per the jurisdiction’s published policy. These two are not assessed until meter set and are escalated at X% per year assumption pending utility confirmation.”
Contingency interaction (avoid double counting)
A common trap: sponsors put impact fees in “hard costs” and then carry a hard cost contingency that is sized as a percentage of the hard cost subtotal that includes those fees. Many lenders do not want contingency applied to pass-through fees. It inflates the budget and sometimes compresses proceeds.
If you need a clean framework for lender expectations on contingency and how it is applied, align your fee structure with your contingency logic and the GC contract type. See How to Size a Construction Contingency for Lenders and make sure your cost review package matches that logic.
5) Credits, deferrals, waivers, and refunds: underwrite the legal right, not the rumor
Every sponsor has heard some version of: “You will get credits,” or “We can defer those fees,” or “The prior use will offset a lot.” Sometimes it is true. Often it is not transferable, not automatic, or not financeable.
Credits and offsets (the underwriting standard)
A credit is only underwritable when you can show all three:
- The credit is authorized by ordinance or written policy
- The project qualifies based on objective criteria (prior permitted use, demo square footage, lane improvements installed, etc.)
- The credit is documented in a clearance sheet, fee letter, or executed agreement that survives permit issuance
Do not underwrite a credit based solely on prior assessor conversations. Lenders will not.
Deferrals (cash timing is not the same as savings)
Deferrals matter because they change peak equity requirements and can change the loan sizing narrative. A deferral still needs documentation and it can carry strings:
- “Pay prior to electrical energizing” deferrals (common in some counties) can push cash out, but can also create a critical path risk if the certificate of occupancy depends on energizing and the equity is not available.
- Affordable housing programs sometimes provide statutory or policy-based deferrals. Underwrite the compliance and administrative steps that make the deferral real.
The MRSC overview for Washington jurisdictions is useful as a general reference on impact fee authority and typical categories, and it also covers topics like exemptions and deferrals at a high level (MRSC impact fees overview and statutory references). Even if you are not building in Washington, the framework is a good reminder: impact fees are governed and constrained, so you need to cite the authority and document the exception.
Refunds and expenditure deadlines (rarely modeled, occasionally material)
Some states and ordinances require refunds if fees are not expended within a defined period or if the project does not proceed. In practice, refunds are slow and political. For underwriting:
- Treat refunds as upside, not a base-case source
- If you are acquiring a project with prior fee payments, diligence whether those payments are refundable, creditable, or stranded
- If your capital stack assumes a refund, expect the lender to exclude it from sources unless the refund is legally obligated and time-bound
The most common “credit” trap: prior use offsets
Offsets for existing use can be real, but they are not always a simple subtraction. Some jurisdictions only credit the same use type, some only credit within a time window, and some require the prior structure to have been legally occupied and permitted. If you are doing a teardown and rebuild, underwrite the documentation burden:
- Certificates of occupancy for the existing structure
- Prior permits showing square footage and use classification
- Utility billing history if the jurisdiction uses “existing service” as proof
Without that, your “credit” becomes a hope, and hope is not a lender source.
6) What to do next: pressure-test fees against your GMP and loan terms
A serious sponsor treats impact fees as a financeability topic, not just an entitlement topic. The handoff between entitlement, budgeting, GMP negotiation, and lender closing is where fees blow up.
A practical pressure test you can run this week
Build a one-page “fee risk memo” to attach to your lender package and your GMP exhibits. It should include:
- A fee matrix with triggers and sources (table format)
- A list of fees that are assessed and locked today, versus those that will be assessed later
- A reconciliation that proves no double counting between:
- Civil budget allowances
- Utility company allowances
- Permit and impact fee lines
- Offsite improvement allowances and conditions of approval
- A sensitivity showing what happens if:
- Permits slip by 6 months
- The permit must be reissued
- Unit count, bedroom mix, or GFA changes by 5-10%
Impact fees routinely show up in closing conditions and covenants:
- Evidence that all fees due at permit have been paid or escrowed
- A requirement that the guaranteed maximum price includes all known fees and taxes
- Limits on change orders tied to fee increases (especially if a redesign changes use classification)
If you are actively sizing debt, tie the fee timing to your construction interest carry and peak cash needs, then sanity-check the result with your lender or advisor. FOCAL’s Capital Markets & Debt Advisory team often sees deals where the fee issue is not the total dollars. It is that the fee hits before the first eligible draw, creating an avoidable equity crunch and a closing delay.
If a jurisdiction cannot produce a written estimate tied to your parcel and scope, you should underwrite a fee reserve and push for clarity early. Fees that are “to be determined” are not harmless placeholders. They are the line items most likely to become a lender holdback, a GMP carve-out, or a sponsor-funded overage.
The checklist is simple in concept: identify every bucket, cite the primary source, model the trigger, and underwrite the change mechanics. The execution is where discipline pays. Done correctly, impact fees stop being a late-stage surprise and start becoming just another controlled input in your entitlement-to-closing workflow.
Frequently Asked Questions
When are impact fees typically due on a development project?
Impact fee payment timing depends on the ordinance and the assessing department, but common triggers include permit issuance, first construction document, electrical energizing, or meter set. A lender-ready budget assigns each fee a specific trigger month tied to the project schedule.
What documents do lenders accept to support impact fee numbers?
Lenders typically accept primary sources such as the adopted ordinance or code section, the current published fee schedule or register, and saved calculator outputs. The strongest support is a jurisdiction fee letter or permit system clearance sheet tied to the parcel and scope.
How should developers underwrite permit expiration and fee reassessment risk?
Permit expiration can trigger fee reassessment at current rates when the permit is reissued, so underwriting should include a separate allowance for permit lapse fee escalation. The model should also track a permit strategy such as extensions, phased permits, or actions that keep the permit valid.
Can I underwrite impact fee credits or deferrals as a source of funds?
Impact fee credits or deferrals are only underwritable when the authority is documented in an ordinance or written policy and the project qualifies under objective criteria. Lenders generally require proof in a clearance sheet, fee letter, or executed agreement, not verbal guidance.
About FOCAL
FOCAL is an independent, principal-led commercial real estate investments and advisory firm headquartered in Beverly Hills, California. Through FOCAL Investments and FOCAL Advisory, the firm arranges debt and equity financing starting at $1 million for sponsors nationwide, and provides development consulting spanning land use and entitlements, owner’s representation, development advisory, and asset management.
FOCAL works across all major commercial asset classes, with deep roots in Southern California multifamily and ground-up development.
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