What are impact fees in Texas and how are they set?

A Texas political subdivision may not impose an impact fee unless it has first adopted a capital improvements plan, and the fee it charges must be tied to that plan. That requirement comes from Local Government Code Chapter 395, and it is the reason a developer has standing to ask a city hard questions about a number on a fee schedule. An impact fee is not a general revenue tool. It is a charge on new development to pay for capital improvements or facility expansions that the new development itself necessitates, and the statute builds an evidentiary trail the city has to be able to produce.

What has to exist before a city can charge you anything?

1. Land use assumptions. Projected changes in land use, densities, intensities, and population in the service area, adopted by the political subdivision.
2. A capital improvements plan. Adopted under Subchapter B, covering the improvements the fee will fund.
3. A capital improvements advisory committee. Appointed on or before the date the adopting order, ordinance, or resolution passes, composed of not fewer than five members appointed by majority vote of the governing body, with not less than 40 percent of the membership drawn from the real estate, development, or building industries and not employees or officials of a political subdivision or governmental entity.
4. Written advisory committee comments. Filed before the fifth business day before the date of the public hearing on imposition of the fees.
5. A public hearing and an adopting ordinance, order, or resolution. The fee exists only because a specific enacted instrument created it, and that instrument is a public record.

The advisory committee composition rule is worth reading twice. The legislature required that a defined minimum share of the committee reviewing the fee come from the industry paying it, and that those members sit outside government. If you build in a city and you are not on that committee or talking to someone who is, you are opting out of the only structural voice the statute gave you.

What must the capital improvements plan contain?

Local Government Code §395.014 sets the contents. The plan must project changes in land uses, densities, intensities, and population in the service area over at least a 10-year period, and it must contain a specific enumeration of:

• a description of the existing capital improvements within the service area, and the costs to upgrade, update, improve, expand, or replace them to meet existing needs and usage and stricter safety, efficiency, environmental, or regulatory standards;
• an analysis of total capacity, current usage, and commitments for usage of capacity of those existing improvements; and
• a description of all or the parts of the capital improvements or facility expansions and their costs necessitated by and attributable to new development in the service area.

That last clause is the whole argument. Chapter 395 draws a line between what a city already needed and what your project causes. Deficiency correction — the cost of bringing existing infrastructure up to current standards for existing users — sits on one side of that line, and new-development impact sits on the other. When you disagree with a fee, that boundary is where the disagreement almost always is, and the plan is where the city has to have shown its work.

How often does the city have to refresh it?

Under §395.052, a political subdivision imposing an impact fee must update the land use assumptions and the capital improvements plan at least every five years, with the initial five-year period running from the day the plan was adopted. §395.0575 provides a route by which the governing body may determine that no update of the land use assumptions, plan, or fees is needed. Either way, there is a dated record. A city collecting on a plan whose five-year cycle has lapsed without either an update or a §395.0575 determination has a documentation problem, and asking about it is a fair question rather than a hostile one.

What is the impact fee in Frisco, Prosper, Celina, or McKinney?

We do not publish per-city impact fee amounts, and you should be skeptical of any brokerage page that does. Schedules are set city by city and, within a city, service area by service area and often improvement category by improvement category — water, wastewater, roadway. They change when the plan updates. A number quoted on a marketing page and repeated for two years is worse than no number, because it will be used in a proforma.

The correct source is always the adopting ordinance and the current fee schedule published by that city, pulled directly from the city, dated, and re-pulled before you close on the land. If a fee figure matters to your deal, get it in writing from the city's development services or engineering department and note who gave it to you and when.

What should a developer request from a city?

Every item on that list is a public record. Requesting them is ordinary practice, and a development services department that treats the request as adversarial is telling you something useful about how the rest of the project will go.

Where impact fees break a proforma

1. Assuming one number across a city. Service areas exist because the infrastructure need is not uniform. Two tracts four miles apart in the same city can carry materially different fees.
2. Modeling at the wrong unit. Schedules are expressed against defined units — meter size, service unit equivalents, dwelling units — and a per-lot assumption applied to an attached product misprices the phase.
3. Ignoring the collection point. Whether a fee lands at plat, at building permit, or at meter set changes when cash leaves, which changes your carry even when the total is right.
4. Missing an update mid-project. A five-year cycle that closes between land closing and vertical start can move the number under you. Ask where the city is in its cycle.
5. Treating credits as automatic. Infrastructure you construct and dedicate may be creditable against the fee, but the mechanism is a city policy and a negotiated document, not a default.
6. Confusing impact fees with district assessments. A Chapter 395 impact fee is not a MUD tax and not a PID assessment. A tract can carry all three, and they are disclosed under different statutes.

Impact fees are one line, not the line

An impact fee is a municipal charge tied to a capital plan. It sits alongside the entitlement schedule, the district load, and the tax picture, and none of the four can be underwritten alone. Our page on plat approval timing covers the 30-day statutory clock that determines when a fee even becomes payable, and MUD and PID disclosure covers the district charges that are assessed and disclosed under an entirely different set of statutes.

Upstream of all of it is the land. Our land due diligence checklist is the sequence we run before a tract goes under contract, subdividing land in Texas covers the division mechanics, and rollback taxes covers what a change of use costs on land carrying an open-space valuation — a three-year lookback with no interest for a change of use on or after June 15, 2021, which is a smaller number than most published sources still quote.

How we sourced this

Written from Texas Local Government Code Chapter 395, including §395.014 (capital improvements plan contents and the 10-year projection period), §395.050 and §395.058 (advisory committee composition and written comments), §395.052 (five-year update requirement), and §395.0575 (determination that no update is needed), together with Subchapters B and C generally. Verified August 2026 and current as of that date. No city's fee amount is stated here by design; fee schedules are adopted locally, vary by service area, and must be pulled from the adopting ordinance of the city in question. This is general information, not legal or tax advice.

The Agency Dallas is independently owned and operated by Damon & Megan Williamson. Damon Williamson, Broker-Owner · Licensed Real Estate Agent, State of Texas. Dallas, Dallas County, Texas 75225. Equal Housing Opportunity. Texas Real Estate Commission Information About Brokerage Services and Consumer Protection Notice are available at trec.texas.gov. This is not intended as a solicitation of property currently listed for sale.