Rapid growth in many parts of the country, combined with budgetary pressures at the federal and state levels, has increased the importance of pursuing alternative funding sources for the construction of transportation infrastructure, particularly roads. The belief that development should pay its own way is becoming prevalent in many communities. Transportation impact fees are being used to address both of these issues. An impact fee affects three groups: developers, new residents, and existing residents. Each group has an interest in ensuring that a proposed fee is affecting it equitably. Developers and new residents do not want to pay more than their share of infrastructure requirements and, conversely, existing residents do not want to subsidize growth. A methodology for developing a defensible transportation impact fee must address a number of issues. Among these are: quantifying the benefits that are derived from new transportation infrastructure; identifying the recipients of the benefits; and calculating the size of an equitable impact fee. A methodology is described that employs an equity-based approach utilizing net-present-value techniques and addresses the legal criteria of" rational nexus."