# Council advances proposed developer fees to pay for Lexington's growth. How do they work? **Published:** 2026-06-24T20:35:24.000Z **Source:** [CivicLex](https://news.civiclex.org/council-advances-proposed-developer-fees-to-pay-for-lexingtons-growth-how-do-they-work/) **Republished from:** [CivicLex](https://news.civiclex.org/council-advances-proposed-developer-fees-to-pay-for-lexingtons-growth-how-do-they-work/) (CC BY-NC-ND 4.0) **Canonical:** https://news.civiclex.org/council-advances-proposed-developer-fees-to-pay-for-lexingtons-growth-how-do-they-work/ By Aaron Mudd, [CivicLex](https://news.civiclex.org) · June 24, 2026  As Lexington grows, it needs a way to cover the cost of building new roads, sewers and other expensive infrastructure that supports new development. On June 23rd, Council's Budget, Finance and Economic Development Committee got a closer look at a proposed "privilege fee" system. Essentially, it would allow the initial developers who build out these infrastructure projects to be reimbursed by the future developers who benefit, with the city acting as a middleman. The idea is to get new growth to pay more of its own costs – rather than relying on taxpayer dollars. While committee members had several questions about how the fee would work in practice, they ultimately voted to forward it to the full Council for review. The full Council will review the [draft ordinance](https://lexington.legistar.com/View.ashx?M=F&ID=15611911&GUID=34E5A0B4-EDEF-4FA8-A4D6-82773D773CD4&ref=news.civiclex.org) later this summer as its members continue conversations with Lexington's developer community, At-Large Councilmember James Brown said. ⬇️**Download:****Read and/or download the packet for June 23rd meeting [here.](https://drive.google.com/drive/folders/1Qj6hBw-aamTiUZ64j2uMTXm74tqIHFdj?ref=news.civiclex.org) ## Developer 'privilege fees' could help recover hundreds of millions in infrastructure costs All this stems from Lexington's most recent expansion in 2023. At that time, Council voted to add [five locations](https://civiclex.org/weekly-posts/updates-on-the-comprehensive-plan?ref=news.civiclex.org) around the city to Lexington's Urban Service Area. The Urban Service Area is a line around Lexington that contains almost all new development, leaving the remainder for rural and natural land. It shapes what land can be developed and tends to be a perennial topic for debate and discussion in Lexington. To learn more about the Urban Service Area, check out our [issue explainer.](https://news.civiclex.org/explainer-the-urban-service-area/#what-is-the-urban-service-area)During its latest expansion, Lexington added roughly 2,800 acres to the city's Urban Service Area. As part of the Urban Growth Master Plan, adopted in 2024, the plan recommended the Lexingt0n-Fayette Urban County Government create an infrastructure funding program to help pay for the new development, which will primarily be residential.During the June 23rd meeting, Councilmembers got a closer look at those projected infrastructure costs, which city staff estimated would total roughly $569 million across all five expansion areas. City staff emphasized that figure represents a full build-out across all five growth areas, and that costs would occur incrementally as development happens over years or possibly decades.Over time, privilege fees paid by subsequent developers benefitting from built-out infrastructure could recoup about $345 million of that amount, city officials said.The fee would not be paid by landowners upfront, only when they decide to develop their land. ## How would the privilege fee program work? As outlined in the proposed ordinance, privilege fees: "shall be used to finance, defray, and/or reimburse all or a portion of the costs incurred by the government or a developer for the construction of sewers, roads, and other public infrastructure improvements identified hereunder that serve new development and redevelopment projects."The process works something like this: 1. A developer or the local government builds the shared infrastructure, such as a sewer or road. 2. The local government identifies properties that benefit. They must pay a privilege fee before they can get approval for a future subdivision plan. 3. The shared infrastructure cost is split up between the properties based on their gross acreage. Together, they reimburse the original developer. 4. The local government reviews the project costs and design for compliance.  Notably, the local government would still be responsible for regional growth projects, neighborhood parks, fire and police, and major transportation network improvements. The [proposed funding plan also only covers upfront build-out costs](https://news.civiclex.org/who-should-pay-for-lexingtons-growth-committee-to-consider-new-developer-privilege-fees/) – not the cost of maintaining the new infrastructure, such as repaving roads. ## Councilmembers raise questions According to the [ordinance](https://lexington.legistar.com/View.ashx?M=F&ID=15611911&GUID=34E5A0B4-EDEF-4FA8-A4D6-82773D773CD4&ref=news.civiclex.org), privilege fees accrue simple interest beginning 30 days after the infrastructure is dedicated and until they're either paid in full or 20 years have passed. Shaun Denney, an official with the city's [Planning and Preservation Department](https://www.lexingtonky.gov/government/departments-programs/planning-preservation?ref=news.civiclex.org), said staff initially considered a higher interest rate and term, but reduced both in hopes of containing development costs."We hoped that by addressing that, it would not create a scenario where land becomes so expensive that it does discourage development," Denney said.During the meeting, Councilmembers asked several questions about how the fee would work, including how the cost would be distributed across properties and how privilege fee agreements between developers and the city would work.At-Large Councilmember Chuck Ellinger II questioned what responsibility, if any, property owners would have if they never chose to develop their property. City staff said that it's possible initial developers may never collect privilege fees on property that chooses not to develop, even after building out the infrastructure. ## What's next? The ordinance is expected to return to the full Council after its summer recess.In the meantime, Brown said Councilmembers will continue to consult Lexington's developer community for feedback on the plan. Additionally, Brown suggested the committee could hold a special meeting to discuss the plan further before it goes to the full Council for review.🫵How can you get involved?****Share your thoughts about privilege fees and ongoing infrastructure costs with your Councilmember. Find them [here.](https://www.lexingtonky.gov/government/office-urban-county-council/councilmembers?ref=news.civiclex.org)📺Watch the meeting:** Watch a recording of the June 23rd Budget, Finance and Economic Development Committee meeting on [LexTV.](https://www.lexingtonky.gov/government/departments-programs/chief-administrative-officer/lex-tv?mc_cid=c50b8d4040&mc_eid=bf5625796d&ref=news.civiclex.org) ## Sources - [CivicLex](https://news.civiclex.org/council-advances-proposed-developer-fees-to-pay-for-lexingtons-growth-how-do-they-work/)