California Proposition 13 Case Study

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Development impact fees, or exactions, are an essential tool for local governments to mitigate the impacts caused by new development on public services, infrastructure, and facilities. California Proposition 13, enacted in 1978, increased local government’s reliance on exactions. Proposition 13 limits the tax rate and assessment increase for homes, businesses and farms, and thus dramatically reduced local government property tax revenue. To compensate for lost local revenue, many jurisdictions increased the amount of concessions exacted from developers in order to pay for the public facilities and services associated with the new development. This was the beginning of excessive exactions that became burdensome for many property owners and developers.

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