NAVIGATING THE WORLD OF

IMPACT FEES

ANDREW MCGUIRE, GUST ROSENFELD

SCOTT MCCARTY, TOWN OF QUEEN CREEK

GIC CONFERENCE

OCTOBER 26, 2018

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▪Review Arizona’s Legislative History

▪Case Study: Town of Queen Creek

▪Fee Update

▪Bi-Annual Audit

▪Possible Reform

▪Possible Reform?

PURPOSE OF PRESENTATION

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ARIZONA REVISED STATUTES 9-463.05

Arizona

Legislative

History

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REQUIREMENTS

▪Impact Fees Must be Assessed to ALL

Development Types:

▪Residential

▪Non-Residential

▪Retail

▪Office

▪ Industrial

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REQUIREMENTS (CONTINUED)

▪Land Use Assumptions (LUA) and

Infrastructure Improvement Plan (IIP) Must be

Updated Every 5 Years

▪Projects Must Have a Life Expectancy of 3 or

More Years

▪Project Completion Requirements

▪Non-Utility Projects: 10 years

▪Utility Projects: 15 years

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REQUIREMENTS (CONTINUED)

▪Project Size and Scope Limitations

▪ Parks and related facilities on property not larger than 30 acres excluded unless they prove a direct benefit

▪ Certain parks facilities excluded: Amusement parks, aquariums, aquatic centers, auditoriums, arenas, arts and cultural facilities, bandstand and orchestra facilities, bathhouses, clubhouses, community centers greater than 3,000 square feet in floor area, environmental education centers, equestrian facilities, golf course facilities, greenhouses, lakes, museums, theme parks, water reclamation areas, wetlands and zoos

▪ Also excluded: Library facilities exceeding 10,000 square feet

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REQUIREMENTS (CONTINUED)

▪Requires Advisory Committee or Biennial

Audit

▪Increased Timeline of Study Process and

Effective Date

IMPACT FEE STUDY TIMELINE

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REQUIREMENTS (CONTINUED)

▪“Grandfathering Clause”▪ A new development fee or an increased portion of

a modified development fee shall not be assessed

against a development for 24 months after:

▪ “Final Approval” of Commercial, industrial or

multifamily

▪ The date that the first building permit is issued

for a residential development pursuant to an

approved site plan or subdivision plat

▪ Recommend setting the dates in approval letter

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DEVELOPMENT FEE

APPROACHES

Buy-in

• Backward-looking• Available capacity to

serve new development

• Unit cost of capacity for new development

Hybrid

• Backward and forward-looking

• Current and future facilities

• Combined facilities to serve current and future customers

Plan

Based

• Forward-looking

• Future facilities that add capacity for new development

KEY METHODOLOGICAL

CONSIDERATIONS

▪There is no single right answer to which

method should be used

▪There are pros and cons to each method

▪Fees can be calculated several ways

▪Methods may differ by fee area and category

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IMPLEMENTATION TIPS

▪Use the model ordinance

▪Provides gap-fillers like “direct benefit”

▪Provides procedural processes

▪Understand Level of Service

▪Not historically limited

▪Need to address deficiencies

▪Thoroughly vet IIP with subject experts

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IMPLEMENTATION (CONTINUED)

▪American Furniture Warehouse

▪The Good: Declined, again, to apply Dolan,

etc., esp. after the DIF approved

▪The Unexpected: A.R.S. § 9-500.12

▪Exaction appeal process

▪Modify model language to parallel

▪Insert high-level decision-maker in DIF

determinations

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Town of

Queen Creek

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QUEEN CREEK BACKGROUND

▪Population Expected to Double to 88K in Ten

Years

▪Most of Our Infrastructure Remains to be Built

▪No Secondary Primary Tax

▪Impact Fees Are Critical

▪$20+M Annually

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INFRASTRUCTURE BUILDOUT

Infrastructure

Percent

Complete

Today

Percent

Complete

in 10 Years

Public Safety 100% 100%

Library 100% 100%

Town Facilities 100% 100%

Fire 40% 100%

Wastewater 68% 94%

Transportation 50% 85%

Water 44% 70%

Parks 16% 62%

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INFRASTRUCTURE NEEDS

▪Transportation: $195M (10 Years)

▪Water: $105M (15 Years)

▪Wastewater: $110M (15 Years)

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QC’S IMPACT FEES (CURRENT)SINGLE FAMILY HOME

Fee Type Amount %

1.Wastewater $5,082 32%

2.Water $4,014 25%

3.Parks and

Recreation

$3,681 23%

4.Transportation $1,263 8%

5. Library $723 5%

6. Fire $490 3%

7. Town Facilities $470 3%

8. Public Safety $167 1%

TOTAL $15,890 100%

THE PROCESS

General

Plan

How will

the Town

Manage

Growth?

Master Plan

What is the

Town’s

Level of

Service?

Infrastructure

Improvement

Plan (IIP)

What

Projects

Must be

Built to

Achieve the

Level of

Service?

Financing

Plan

How will

the IIP be

Paid For?

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TOWN COUNCIL DIRECTION

▪Update All Impact Fees Together▪Originally Transportation Only

▪Create a Stakeholders’ Focus Group▪Not the Statutory Allowed Advisory

Committee

▪Meetings Facilitated by Outside Consultant

▪Detailed Communication Strategy▪Website Created

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FOCUS GROUP OBJECTIVES

▪Provide a Forum to Communicate the

Collective Interests of the Stakeholders to the

Town Council

▪Balance the Needs and Expectations of

Stakeholders

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FOCUS GROUP MEMBERS

▪Members (Stakeholders) Include:

▪ Land Owners

▪Developers (Residential and Non-Residential)

▪Homebuilders

▪AZ Homebuilders Association

▪ Town Boards and Commissions (Current

Residents’ Interests)

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FOCUS GROUP

CONTRIBUTIONS

▪Reinforced the Idea of Updating All Fees at

Once

▪Assisted with Answering: Where and When

Will the Town Grow?

▪Growth Projections

▪Project Sequencing

= CIP

Project

= 20 Existing

Population

= 20 Future Population

TRANSPORTATION PROJECTS: $195M

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FOCUS GROUP

CONTRIBUTIONS (CONTINUED)

▪Impact of Fee Increases on New Home

Market

▪Identified Comparative Entities

▪Perspective of All-In-Costs

▪Building / Permit Fees

▪ Impact / Capacity Fees

▪Sales Taxes

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PENDING ISSUE

Revenue Credit

▪ Statutory Requirement

▪ Determine Net Amount Received from New Development

▪ Legal Requirement to Reduce Impact Fees by New Revenues Generated from New Development

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REVENUE CREDIT (CONCLUDED)

▪Determining Revenues from New

Development is Difficult

▪“Generally Accepted Outcomes”

▪ Residential Development is a Net Negative Impact

▪ Retail Development is a Net Positive Impact

▪Hire a Consultant to Assist with this Analysis

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Bi-Annual Audit

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BI-AUDIT REQUIREMENTS

▪Review Land Use Assumptions

▪How does actual development compare to

projections?

▪Review of Infrastructure Improvement Plan

(IIP)

▪Have the identified projects been completed

as anticipated?

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AUDIT REQUIREMENTS (CONCLUDED)

▪Comparison of Revenues and Expenditures

▪ Were expenditures made on items identified

in the study report?

▪Level of Service Review

▪Permit Sampling

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BI-ANNUAL AUDIT - HOT TOPICS

1. 24-Month Grandfathering Provision

▪ First Permit Issued: July 1, 2017

▪Date of Fee Increase: July 1, 2019

2. Level of Service

▪Matter of timing

3. Identification of Credits

4. What constitutes significant enough deviation to update LUA and IIP?

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Possible

Reform?

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POSSIBLE REFORM?

▪Possible Changes

▪ Extend Buildout Timeframes to 20 Years

▪ Reduce Timeline to Implement New Fees

▪ Grandfathering Requirements

▪ Combine Police and Fire Fees

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Comments

and

Questions