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Development Impact Fees: Understanding the Current Law. Presented by Andrew J. McGuire, Esq. Gust Rosenfeld PLC. Alternate Title: Impact Fee Legislation: The Gift That Keeps On Giving. Recent History – Testing the Waters. 2005 – HB 2066 (Striker) Added annual reporting

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development impact fees understanding the current law

Development Impact Fees:Understanding the Current Law

Presented by

Andrew J. McGuire, Esq.

Gust Rosenfeld PLC

recent history testing the waters
Recent History – Testing the Waters
  • 2005 – HB 2066 (Striker)
    • Added annual reporting
    • Added penalty for not reporting
recent history going for a home run
Recent History – Going for a Home Run
  • 2006 – HB 2381 (Striker)
    • Massive attack on DIFs
    • Sweeping changes “to prevent cities from doing stupid things like adopting plans for lakes they have no money to build.”
    • Defined list of public services
hb 2381 continued
HB 2381 continued
  • Linked CIP to DIFs
    • CIP approved long before DIF study
    • Amended easily only for Developer request
  • Linked DIFs to specific improvements
  • Required identity of other non-DIF funds
  • Refunds to PAYOR
  • Direct offsets for sales taxes, HURF, etc.
hb 2381 continued1
HB 2381 continued
  • Introduced indexing (one good thing)
  • Look-back would have invalidated all DIF studies – De facto building moratorium
  • Refund discrepancies within 2 years
  • VETOED by Governor
recent history let s play nice
Recent History – Let’s “Play Nice”
  • 2007 – SB 1423
    • Collaborative cities/HBACA effort to respond to Governor’s veto
    • Major changes for “transparency” and “workability” as required in veto letter
sb 1423 continued transparency
SB 1423 Continued – Transparency
  • “Transparency”
    • New accounting requirement
      • Ensures that impact fees collected for one type of service (e.g. roads) are not spent on another type of service (e.g. parks)
    • New planning requirements
      • Requires adoption/amendment of IIP prior to assessment of a new/modified fee
sb 1423 continued transparency1
SB 1423 Continued - Transparency
  • “IIP” broadly defined to fit within existing procedures:
    • One or more written plans that identify the public service that is proposed for a fee
    • Can be a capital improvements plan
  • IIP must:
    • Estimate public services required by new dev
    • Forecast cost and time to finance and build
sb 1423 continued transparency2
SB 1423 Continued - Transparency
  • IIP released to public 60 days in advance of hearing
  • Public hearing on IIP at least 30 days in advance of adoption
  • Public hearing may address both the IIP and the development fee report concurrently
  • IIP may be amended w/o hearing to allow shuffling w/n category (only 14-day notice of amendment required)
sb 1423 continued transparency3
SB 1423 Continued – Transparency
  • New reporting requirements
    • DIF Reports must:
      • Identify methodology used to calculate fees
      • Explain relationship between fees to be assessed and needs identified in IIP
      • Identify any index for automatic adjustment and timing of adjustments
sb 1423 continued workability
SB 1423 Continued - Workability
  • “Workability”
    • Clarification of DIF Uses
      • Can be used to offset costs of infrastructure, improvements, real property, engineering and architecture, financing, and other capital costs
      • Also for appurtenances, equipment, vehicles, furnishings, and other items associated with public services
sb 1423 continued workability1
SB 1423 Continued - Workability
  • Clarification of DIF Credits
    • Available only for items in the IIP AND for which a DIF was assessed
  • Changes to Time Frames
    • Public hearing 30 days prior to adoption (previously 15 days)
    • Effective 75 days after adoption (prev. 90)
    • 14 days notice prior to IIP amendment without hearing (new)
sb 1423 continued workability2
SB 1423 Continued - Workability
  • Deferred Fees
    • (optional) Allows deferred fee payments in a development agreement
      • Paid no later than 15 days after C of O
      • Only applies to residential units
      • Requires security (bond, LOC, etc.)
    • (mandatory) Establishes 2-year statute of limitations for development fee collections
sb 1423 continued workability3
SB 1423 Continued - Workability
  • Fee Indexing
    • Automatic adjustment of development fees on an annual basis, without a public hearing
    • 30 days notice required for automatic adjustments
    • Adjustment mechanism must:
      • Be based on nationally recognized index
      • Be disclosed in the development fee report
recent history swinging for the fences again
Recent History – Swinging for the Fences, Again
  • 2008 – SB 1406
    • Full laundry list re-emerged
      • Credits for private, on-site amenities
      • Grandfathering of fees:
        • Various dates: date of application; date contract signed; date of subdivision approval
        • Various periods: forever, 10 years, 5 years, 2 years
      • Definition of necessary public services (exclusive lists; brick and mortar only)
      • Level of service identified for all uses
      • Linking IIP more closely to DIF study
sb 1406 continued
SB 1406 Continued
  • Resulting bill included
    • Loose tie-in for fee to be used for benefit of same area in which it is assessed
    • Seemingly unnecessary clarifying language regarding credits
    • Clarifying language regarding determination of offsets in fee calculation; “forecast” replaces “consider”
    • “Other sources of revenue” from property owner, but no list
sb 1406 continued1
SB 1406 Continued
  • IIP Contents clarified
    • Comparison of existing service levels
    • Forecast revenue sources along with estimated time to complete (already in statute)
  • The Big Dog – Grandfathering
    • No new fees or increases for 24 months from “final approval”
    • Indexing still applied; not grandfathered
sb 1406 continued2
SB 1406 Continued
    • DIF Ordinance must be modified to:
      • Establish 24-month grandfathering provision
      • Set forth process for “certification” to be issued
    • Final approval defined
      • Site plan approval for multi-family and commercial, unless no site plan, then plat
      • Final plat for single-family residential
      • Does NOT include renewals or modifications; can’t restart the clock
  • VETOED – fortunate timing
2009 sessions strange days indeed
2009 Sessions – Strange Days Indeed
  • HB 2259
    • Told veto was unlikely
    • Required benefit areas + DIFs collected and spent in same
    • Clarified credits
    • “Consider” to “forecast” (significant b/c of Goodyear result) + include calculation of other revenues w/r/t DIFs
hb 2259 continued
HB 2259 Continued
  • 24-month grandfathering provision
    • Same as in 2008 bill
  • HELD IN COW as legislature adjourns Sine Die
  • Another bullet dodged? Not in the least, as along comes . . . .
2009 sessions continued the nuclear option
2009 Sessions Continued – The Nuclear Option
  • HB 2008
    • Don’t be fooled by the Constitution, apparently a budget bill can alter DIFs
    • Included all of the provisions of HB 2259
      • Benefit areas
        • Still allows single zone
        • Likely to spawn many IIP amendments
hb 2008 continued
HB 2008 Continued
  • “Forecasting” other revenues
    • Still only applicable to extent such revenues are used for capital in IIP
    • Unfortunately, lose some benefit of HBACA v. Goodyear decision
  • Comparison of existing LOS v. new LOS
    • Developers really do believe they are forced to upgrade other neighborhoods
hb 2008 continued1
HB 2008 Continued
  • Forecast sources of revenue to fund IIP
    • Developers convinced that some projects in IIP (and for which DIFs are charged) will never be built (i.e. Town Lake)
  • Grandfathering
    • Increases inapplicable for 24 months after “final approval” – not extended by renewal
    • Written schedule upon request
hb 2008 continued2
HB 2008 Continued
  • Moratoria – 6/2009 – 6/2011 for:
    • Building Codes; federal funding exception
    • Increases to new construction TPT
    • Development fees
      • Not impose new fees
      • Not increase existing
  • Currently law; challenge pending
2010 session what was old is new again
2010 Session – What was old is new again
  • Moratorium not enough for HBACA
    • HB 2249 (Rep. Biggs)
      • Refunds required if facility is not built within 7 years after first DIF collected
        • Exempts water/sewer
        • Ignores developer delays
        • Contains no direction as to how “facility” is determined
hb 2249 continued
HB 2249 Continued
  • Introduced as refund to payor; amended to current property owner
  • Dangerous first step toward tying fees to specific projects
  • Lacks any direction as to how property owner would determine if project built
  • Fails to account for changes to IIP allowed by statute (i.e. developer request)
  • Sailed through committee
2010 session continued
2010 Session Continued
  • HB 2259 (Rep. Biggs)
    • Seemingly redundant language regarding proportionate share
    • LOS limited to existing; if upgraded along with new development, cost of upgrade apportioned to the city’s costs
    • Funds from existing residents must be paid prior to DIF funds used
hb 2259 continued1
HB 2259 Continued
  • Detail in IIP required for sources of funds to pay City share of infrastructure
  • Assigned to one committee; sailed through; ready for caucus
2010 session continued1
2010 Session Continued
  • HB 2397 (various sponsors)
    • Essentially repeals all of the changes over the past five years
    • Repeals moratorium on DIF increases and building codes
    • Triple assigned in committee (the kiss of death)
so where are we now
So where are we now?
  • Apply only indexed increases in fees until 2011 (unless moratorium extended)
  • DIF studies already underway/anticipated
    • Complete studies to avoid waste of taxpayer funds; delayed effective date
    • New studies should be timed for end of moratorium
questions

QUESTIONS?

Andrew J. McGuire

Gust Rosenfeld PLC

201 East Washington Street, Suite 800

Phoenix, Arizona 85004

(602) 257-7664 direct dial

602) 340-1538 facsimile

amcguire@gustlaw.com

www.gustlaw.com