ABSTRACT

This chapter summarizes the legal considerations involved in applying the rational nexus criteria to system development charges (SDCs). It begins with the evolution of impact fee law resulting in the rational nexus approach. The chapter reviews the critical elements of rational nexus criteria as generally applied to water and wastewater SDCs. SDCs are merely another name ascribed to a group of non-tax revenues generally called "development impact fees". Although nexus tests are intimately entwined with constitutional considerations, the nexus concept is dealt with separately from the constitutional discussion. To complete the rational nexus test, new development must be shown to benefit from the fees it pays. This involves two considerations: assuring substantial benefit and certainty of benefits. Rational nexus criteria assure that new development will not be paying twice for the very facilities financed first by the SDCs it pays, and again by taxes or rates it also pays; but avoiding double payment is only one concern.