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HomeMy WebLinkAboutCouncil Presentation - Funding Growth Impact FeesFunding Growth: Impact Fees Jane Fairall, Town Attorney 3/20/2023 Funding Growth: Impact Fees •Purpose of Impact Fees (DIFs) •Arizona’s Impact Fee Statute Refresher •Impact Fee Challenges 2 Purpose of Impact Fees •To make development pay for itself •Fair share allocation of costs based on the nature and intensity of the development •Basic premise: New development will have a measurable capacity impact on public infrastructure systems and services •The financial impact of the new capacity should be funded directly by the new development •Existing citizens should not fund the cost of new development through higher user rates or taxes 3 A.R.S. §9-463.05 •DIFs based on a proportionate share of the cost of necessary public services needed for the development •Costs must be based on the same level of service provided to existing development •If Town requires/allows developer to construct or finance the necessary public service in the IIP, Town must reimburse developer through credits to DIFS due from developer or from DIFs paid by all development that will use the necessary public service •If Town requires developer to build something that isn’t in IIP, but that substitutes for or reduces the need for facilities in the IIP, we must amend IIP and give developer DIF credits 4 A.R.S. §9-463.05 •Non-discriminatory: must assess DIFs against commercial, residential & industrial development •On written request, Town must refund fees •If the necessary public service isn’t provided to new development •If Town doesn’t complete construction within the time period identified in the IIP, and in any event within 15 years for water or wastewater facilities & within 10 years for all other facilities •Property owner may receive refund if cost to build is greater than 10% less than forecasted 5 SAHBA Decision •“Reasonable Relationship” or “Rational Nexus” between the fee and the burden to the municipality is not enough•Seems to require precise mathematical proportional allocation of costs •No deference given to legislative decisions of the Council •“Most, if not all of the acquired, new, improved, & expanded facilities clearly provide necessary public services” 6 Impact Fee Challenges •DIFs are based on projections and estimates, i.e., guesses •Inflation & cost escalation over the last couple years has caused less certainty about project costs •Booming growth during pandemic vs. slow down now makes LUA projections difficult 7 Impact Fee Challenges •What to include in the impact fee program? What to leave out? Difficult and consequential decision •Include projects that benefit the most people and the largest geographic area •Best case: accurately predict the location and extent of development •Good DIF projects bring a lot of new capacity to an area with a lot of new housing •Existing, badly-needed roadway reconstruction projects are not good for DIF funding if they don’t significantly increase the road’s capacity 8 Impact Fee Challenges •Examples •Twin Peaks Interchange and Twin Peaks (Camino de Mañana): Great DIFprojects -benefited a huge number of people and created all new capacity •Silverbell Road north of Ina: Good DIF project -significantly increased capacity and benefited almost everyone in Marana •Tangerine Farms Road from the Marana TI to Clark Farms Boulevard (currently in IIP): Should be a good DIF project -brings new capacity to an area with a lot of new development •Marana Road (not in IIP): Has been difficult to predict –widening/improving it would provide significant increased capacity, but development has seemed “imminent” for years and has yet to happen 9 Impact Fee Challenges •What to do when a development is required to build infrastructure due to existing rezoning conditions or a DA? •If Town doesn’t include this infrastructure in the DIF program, Town avoids taking on legal obligation of building the infrastructure in the 10 or 15 year time period •But, if the development doesn’t move forward, the improvements aren’t constructed and the Town won’t have DIFs available to pay for construction •If Town includes the infrastructure in the DIF program, must reimburse the developer for building it or providing cash advance 10 Impact Fee Challenges •What if we didn’t have impact fees? •“Infrastructure concurrency” •To be marketable and safe, development needs necessary infrastructure •Without DIFs: •The first developer in an area pays for all of the necessary services •Water lines and wastewater facilities can be reimbursed through protected facilities, but not so for streets and parks •Later developers can avoid paying their fair share of costs 11 12