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HomeMy WebLinkAbout04/18/2006 Coucil Supplement Impact Fees in Marana, South Transportation Benefit Area, Northwest Marana Transportation Benefit Area 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