HomeMy WebLinkAbout04/18/2006 Blue Sheet Impact Fee Modifications Public Hearing
TOWN COUNCIL
MEETING
INFORMATION
TOWN OF MARANA
MEETING DATE: April 18, 2006
AGENDA ITEM: J. 2
TO: MAYOR AND COUNCIL
FROM: James R. DeGrood, P.E. Assistant Town Manager
SUBJECT PUBLIC HEARING: Relating to Impact Fees; Development
Impact Fee Modifications for Townwide Parks, Northwest
Marana Roadways and Twin Peaks Interchange
DISCUSSION
On February 10, 2006, the Town of Marana released an Impact Fee Report recommending the
adoption of modifications to the existing impact fees for park development, arterial and collector
roadways in Northwest Marana, and the Twin Peaks interchange project (South Transportation
Benefit Area). The report identified a number of recommended changes listed below.
1. That the impact fees for the South Transportation Benefit Area, Northwest
Transportation benefit Area and the Parks Benefit Area be indexed to the Engineer News Record
20-City Construction Cost Index, (ENR CCI) with fee adjustments taking place on July 1 st of
each year. The index adjustment shall be made between the date of the impact fee report
preparation and the new fiscal year.
It is recommended that the Parks and Northwest Marana Transportation fees be increased by 5.0
percent and that the South Transportation Benefit Area fee increase by 20.4 percent for fiscal
year 2006-2007. The resulting fees will be:
South Transportation Benefit Area
Northwest Transportation Benefit Area
Parks
$2,932/edu
$6,238/edu
$3,028/dwelling unit
2. That impact fees be waived for new housing constructed in the Colonias established in
the Town of Marana by Resolution ofthe Marana Town Council and the Pima County Board of
Supervisors. Where new dwellings are added to the housing inventory, the impact fee funds
should be reimbursed by general fund reserves.
These recommendations were presented to the Town Council in February ih. Copies of the
Impact Fee Report have been available at Town Hall, and have been distributed to developers
and builders working within the Town. A presentation on the new fee proposal was made at the
Southern Arizona Home Builders Association (SAHBA) Land Subcommittee on January 9th.
No comments have been received on the proposed changes to the impact fee ordinances.
Impactfee modifications
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No action may be taken by Council at this meeting. The earliest that this impact fee could be
considered is May 2, 2006. If Council enacted the ordinance at that time, the increased fees
would become effective on August 1, 2006.
ATTACHMENTS
Impact Fee Revisions Timeline; and Annual Report and Recommendation for Impact Fees in
Marana South Transportation Benefit Area, Northwest Transportation Benefit Area, and Parks.
RECOMMENDATION
None required.
SUGGESTED MOTION
None required.
-2-
Impact Fee Revision Timeline
Adoption Timeline
Present Findings February ih
Release Report February 10th
Hold Public Hearing April 18th
Adopt Ordinance May 2nd
Begin Collections August 15t
Annual Report and Recommendations for Impact Fees in Marana
South Transportation Benefit Area
Northwest Transportation Benefit Area
Parks
Town of Marana, Arizona
February 6, 2006
Table of Contents
Executive Summary 1
Impact Fees Collected. 2
Expenditures ofImpact Fee Funds 3
Credits for Eligible Improvements 4
Trends in Construction Costs . 6
Trends in Land Use 8
Affordable Housing 9
Recommendations 10
Executive Summary
The purpose of this report is to provide written documentation in support of increased
development impact fees for the Town of Maran a in accordance with ARS S 9-463.05.C.
The further intent of this report is to provide a review the collections and expenditures of
funds associated with the Town of Marana's development impact fees during calendar
year 2005, as well as to identify trends in construction costs, infrastructure needs, land
uses which may warrant future impact fee report revisions. This report addresses the
commitment made to reporting and transparency in the Town of Maran a's Impact Fee
Report for Northwest Roads and Parks, dated March 17,2005, but is not intended to
satisfy the requirements of ARS S 9-463.05.D
The Town commenced collection of impact fees in 2001, after the adoption of an impact
fee for the South Transportation Benefit Area to fund the construction of the Twin Peaks
Interchange. To date this benefit area has produced $7,778,846. The Twin Peaks
Interchange project is anticipated to go to construction in fiscal year 2007-2008, with
right of way acquisition negotiation anticipated to begin in calendar year 2006.
The most recently adopted impact fees are for the Parks (Town-wide) and for the
Northwest Transportation Benefit Areas. Fee collection commenced July 5, 2005, and to
date $1,299,196 has been collected for Parks and $54,963 has been collected for the
Northwest Transportation Benefit Area.
Substantial changes have occurred in the cost of construction over the past year, with
nearly all recent construction projects exceeding estimated costs. These increases in
costs are partially due to substantial cost increases in concrete, steel, plastics and fuel.
Most analysts suggest that these material cost increases will stabilize in the near term. It
is recommended that the impact fees be linked to the Engineering News Record 20-City
Construction Cost Index (ENR CCI) so that the effects of inflation may be addressed.
Changes are anticipated in the Northwest Marana land use plan as a result of
recommendations made in conjunction with recent Town Core planning efforts. These
land use changes should be evaluated for their impact upon the Northwest Transportation
Benefit Area, both in terms of the new roadways to support the evolving plan as well as
the number of housing units and commercial development now proposed. Upon approval
of these changes in the Marana General Plan, a comprehensive update ofthe Northwest
Transportation Benefit Area Impact Fee Report may be warranted.
The existing inventory of affordable housing is diminishing in Marana as the community
urbanizes. Most new communities being developed do not meet the need for affordable
housing. Affordable housing which is currently being developed is largely occurring in
the existing Colonias within the Town, both through the Town's affordable housing
program and individual efforts. These Colonias are neighborhoods identified as having
inadequate roads, drainage, sewer or water improvements. It is therefore recommended
that a waiver be created for affordable housing in Colonias established within the Town.
1
Impact Fees Collected
Marana has collected fees for three separate impact fee benefit areas during 2005. These
benefit areas are the South Transportation Benefit Area, the Northwest Transportation
Benefit Area and the Parks Benefit Area. The South Transportation Benefit Area was
adopted in 2001, while the Northwest Transportation Benefit Area and the Parks Benefit
Area were adopted in 2005. Collection of impact fees for the Northwest Transportation
Benefit Area and the Parks Benefit Area commenced on July 5,2005.
The South Transportation Benefit Area had a fund balance of$6,303,263 on January 1,
2005. This fund balance increased to $7,881,116 by the end ofthe calendar year, an
increase of $1 ,577,853. This increase in fund balance is attributed to accrued interest
and impact fee contributions.
The North Transportation Benefit Area began fee collection on July 5, 2005. The fund
grew to a balance of$54,963 by the end of2005 through impact fee collections. The
fund growth was modest due to a substantial amount of credit granted for improvements
made on eligible roadways. The credits will be discussed in later sections of this report.
The Parks Benefit Area also began collections on July 5, 2005. The fund balance grew to
$1,299,196 by year's end through impact fee collections. This fund grew at a more rapid
rate than either of the other funds because the fact that the benefit area is town-wide and
the projects receiving credit for public improvements are relatively modest in number.
2
Expenditures of Impact Fee Funds
There were no expenditures of impact fees collected during 2005.
The most mature impact fee fund is the South Transportation Benefit Area, and the Town
has expended in excess of$800,000 to date for design of the benefiting project, the Twin
Peaks Interchange. The Town has been expending funds from other sources to pay for
this design and is conserving the impact fee capital for actual construction and right of
way acquisition. Construction of this project is still anticipated in fiscal year 2007-08.
3
Credits for Eligible Improvements
The Town entered into five development agreements with the builders of master planned
communities. The five communities are Gladden Farms, Rancho Marana 154, San
Lucas, Ironwood Reserve and Continental Reserve. There also are pre-existing
development agreements for the Skyranch and Saguaro Ranch projects which
contemplated impact fees in their original agreements.
Gladden Farms
The Gladden Farms project includes the construction of Gladden Farms Boulevard and
Lon Adams Road, as well as a publicly dedicated park. The project also includes
Tangerine Farms Road, which will be funded by an improvement district applying to the
lots in third phase ofthe project.
For phases 1 and 2, the Northwest Marana Transportation fee was reduced from $5,941 to
$1,773 per equivalent demand unit (edu). Phase 3 will be reviewed upon further cost
development on the Tangerine Farms Road project, however it is anticipated that lots in
this phase will not be assessed a Northwest Marana Transportation fee.
All lots in Gladden Farms equally benefit from the development ofthe Gladden Farms
Park, and from the dedication of additional parkland for future park development. The
Park fee for Gladden Farms was reduced from $2,884 to $822 per new dwelling.
Rancho Marana 154
The Rancho Marana 154 project is responsible for constructing portions of Tangerine
Farms Road and Clark Farms Boulevard as a part of its project improvements. Both of
these roads are eligible for credit, and the value ofthese road projects to the Town
exceeds the impact fee liability for the Northwest Marana Transportation Benefit Area.
This project is also dedicating land for the Barnett Linear Park, and will receive a $500
credit, thus reducing the Parks impact fee from $2,883 to $2,383 per new dwelling.
San Lucas
The San Lucas Project will construct substantial park and road improvements. The
project will construct a new railroad crossing, realign and pave Cochie Canyon Trail, and
extend Adonis Road. These projects are all creditable. These improvements do not fully
develop the roadways to their ultimate configurations, and only partial credit was granted
for improvements. As such, the Northwest Transportation fee reduced to $346 per edu.
The Parks fee is fully offset by improvements.
4
Continental Reserve
The Continental Reserve project is only subject to the Parks impact fee. The developer of
Continental Reserve dedicated an improved park to the Town, and as a result the impact
fee for this community was reduced to $1,323 per dwelling unit.
Ironwood Reserve
The Ironwood Reserve project dedicated a parcel ofland to the Town for a future
trailhead for access into Saguaro National Park West. This trailhead and parking lot site
was not developed. The Parks fee for Ironwood Reserve was reduced to $2,430 per
dwelling unit.
Skyranch
The Skyranch project had a preexisting agreement with the Town for the development of
the Children's Desert Education Center and a corresponding $1,000 per unit contribution.
This contribution is creditable against the Parks fee.
Saguaro Ranch
The Saguaro Ranch project provided a voluntary contribution of $ 1,000,000 and a $1,000
per lot contribution for park improvement by development agreement. The development
agreement supersedes and exceeds the Park fee.
Impact Fee Assessments - Projects Receiving Credits
Proiect Name Parks Impact Fee Northwest Road Fee Twin Peaks Fee
Standard Fee Amount $2,883 $5,941 $2,435
San Lucas (All Blocks) $0 $346 N/A
Rancho Marana 154 (All
Blocks) $2,383 $0 N/A
Continental Reserve (All
Blocks) $1,323 N/A $2,435
Ironwood Reserve $2,430 N/A $2,435
Gladden Farms (Phase 1) $722 $1,773 N/A
Gladden Farms (Phase 2) $822 $1,773 N/A
Gladden Farms (Phase 3)* $822 $0 N/A
Saguaro Springs (Estimated) $0 N/A $2,435
SkyRanch** $1,884 N/A N/A
Saguaro Ranch $1,000 N/A N/A
* Buyers in Phase 3 of Gladden Farms will be subject to improvement district costs for Tangerine Farms
Road
** Buyers in Skyranch are also subject to a $1000 Desert Education Center Fee
5
Trends in Construction Costs
Recent, substantial increases in the cost of construction have been anecdotally reported
widely. The basis ofthe reported increases can broadly be described as increases in raw
materials, land and a competitive environment which has few bidders seeking the
construction contracts being bid.
Material prices have soared recently for concrete, steel, plastics and petroleum products.
This has been due, in part, to high world-wide demand for construction materials, as well
as the impact of governmental tariffs. Short - term shortages of materials have occurred,
further adding to the construction cost due to delays and premium pricing. The cost and
availability of construction equipment has been reported to be a problem for contractors,
and petroleum prices have been volatile, adding uncertainty to those bidding projects.
The Arizona Department of Transportation has studied recent bid trends, and found a
relationship between the number of bidders on a project and the likelihood of the project
low bid being over the project estimate. Many projects which would have attracted 5-10
bidders two years ago are now attracting only one or two bids. Part of this is attributable
to the volume of work available, but it may also be partially due to the fact that most
public work contracts do not typically allow for cost adjustments due to rising or volatile
materials costs. Should materials prices stabilize or should public work contracts be
made more flexible to allow for cost adjustments due to fluctuations in the price of
materials, some of the recent construction increases may be reversed. Nevertheless,
much of the recent construction cost inflation may be permanent.
Since the preparation of the impact fee reports for the South Transportation Benefit Area,
the Northwest Marana Transportation Benefit Area and the Parks Benefit Area, the Town
has embarked on a number of roadway projects. These projects include privately
constructed projects and those in design for the Town. The Town has also seen a
dramatic rise in the cost of raw land, with recent transactions occurring at as much as
$140,000 per acre of raw, unentitled land. As a result impact fee rates will require review,
and should also be considered for indexing to an appropriate construction cost index.
Further evidence of the change in construction costs is the recent increase in the estimate
for the cost of the Twin Peaks interchange. The interchange was initially estimated to
cost $57 Million in 1999. It is currently estimated to cost nearly $70 Million.
Inflation in construction costs will be an ongoing issue for the Town's impact fees. The
only options available for adjustment of fees is to periodically review and revise the
impact fee ordinances at great effort, or to index the impact fees to a relevant construction
cost index. Given the effort associated with revising impact fee reports and the vast
fluctuations possible in land prices, it would be prudent to plan on adjusting the impact
fee annually using an index measure, and less frequently to address land prices and/or
changes in the scope of improvements to be constructed.
6
Engineering News Record (ENR), a well respected national publication for the
construction industry, has tracked construction costs since 1967 for 20 cities across the
United States. This index, the ENR 20-City Construction Cost Index (ENR CCl) is
available through regular articles in the magazine and on its web site at
www.enr.construction.com. For 2005, the ENR CCl reported a 5.0 percent increase in
construction costs. From the date of adoption of the impact fee for the South
Transportation Benefit Area to the fourth quarter of 2005, the ENR CCl increased 20.4
percent. This compares closely to the estimated increase in the cost estimate for the Twin
Peaks interchange project.
7
Trends in Land Use
The Town is currently considering a major revision to the General Plan for the land uses
in the Northwest Transportation Benefit Area. The revision will likely increase the
residential development densities in this benefit area, as well as increase the
infrastructure requirements within the benefit area. With this overall change in intensity
ofland use, an increase in non-residential land uses can also be anticipated.
Upon approval of the General Plan change for the area, an update of the traffic,
infrastructure requirements and development impact fees will be warranted to ensure both
adequate infrastructure funding and the equitable treatment of buyers of new homes in
the area.
8
Affordable Housing
Housing affordability is an emerging issue in Northwest Marana. Existing low income
housing is being eliminated to make way for new master planned communities, as well as
by relocation programs aimed at removing housing from the flood way of the Santa Cruz
River. The Town also recognizes that the new growth occurring in Northwest Marana
will include retail and hospitality businesses which will employ low to moderate income
wage eamers that will increase the demand for affordable housing. To address this
problem, the town has put into place a low income housing program to develop
additional housing units in the community to address this need.
In 1998, the Town of Marana identified seven existing low income neighborhoods that
qualified for designation as Colonias. These neighborhoods must have existed prior to
1989, and had to have substandard water, sewer, drainage, or roadway infrastructure.
The Town is committed to reinvesting in these neighborhoods, and has made or is
making improvements in all of them. These neighborhoods are also where the Town has
been building homes in its affordable housing program.
The Town and private individuals will continue to build small numbers of new homes in
these neighborhoods. It is estimated that up to 38 new homes could be built in these
existing low income communities, and that 16 homes either have been acquired or are
being sought for acquisition under the Pima County Floodprone Lands Acquisition
Program. A net potential increase in housing within these neighborhoods of 22 dwellings
can therefore be anticipated.
Should the Town propose that new housing within the existing Colonias be given a
waiver from the imposition of impact fees, it will be necessary to ensure that the other
home builders within the benefit area are not burdened as a result. Options to ensure that
this occurs include providing an impact fee credit to builders outside of the Colonias and
using existing accumulated general funds to reimburse the Northwest Marana
Transportation Benefit Area and Parks impact fee funds for waivers granted. The
anticipated maximum amount of reimbursement is $210,000.
9
Recommendations
Based upon the foregoing information, it is recommended that the impact fees for the
Town of Marana be modified for implementation in the beginning of Fiscal Year 2006-
2007:
1. That the impact fees for the South Transportation Benefit Area, Northwest
Transportation benefit Area and the Parks Benefit Area be indexed to the Engineer News
Record 20-City Construction Cost Index, (ENR CCI) with fee adjustments taking place
on July 1 st of each year. The index adjustment shall be made between the date of the
impact fee report preparation and the new fiscal year.
It is recommended that the Parks and Northwest Marana Transportation fees be increased
by 5.0 percent and that the South Transportation Benefit Area fee increase by 2004
percent for fiscal year 2006-2007. The resulting fees will be:
South Transportation Benefit Area
Northwest Transportation Benefit Area
Parks
$2,932/edu
$6,238/edu
$3,028/dwelling unit
2. That impact fees be waived for new housing constructed in the Colonias
established in the Town of Marana by Resolution of the Marana Town Council and the
Pima County Board of Supervisors. Applicable impact fee funds shall be reimbursed by
general fund reserves.
Furthermore, it is recommended that the Northwest Marana Transportation Benefit Area
impact fee report be updated and amended upon revision of the Marana General Plan.
10