Update on AZ impact fee bill

Since my last post, I have learned more about SB 1525, the new Arizona impact fee enabling act for municipalities, and I would like to share my current understanding of the bill.  I got a couple of things wrong in my previous blog, due to the fact that I did not have the final version of the bill.  Compared to the earlier version I was reviewing, the final version does not prohibit city-wide service areas, does not require courts to narrowly construe cities’ impact fee authority, does not require that the capital plan be prepared by an Arizona licensed engineer, extends the deadline for the expenditure of impact fees from 5 to 10 years (15 for water and wastewater), provides the option of a biennial audit in place of a developer-oriented advisory committee, leaves the time period for which development approval locks in the fee schedule at 2 years (rather than 5), extends the time for compliance for 2 years (from August 1, 2012 to August 1, 2014), and deletes the odd provision about impact fees after August 1, 2012 being used only for payment of debt.

That said, the final bill still results in an enabling act that is one of the most restrictive in the nation.  While the list of allowed facilities is broader than in some other states, restrictions remain against charging fees for parks over 30 acres, recreation centers over 3,000 square feet, aquatic centers, libraries over 10,000 square feet, and fire and police training facilities and administrative vehicles.

The fact that the revised statute is not worse than it could have been can be credited to some resistance to the original developer-drafted House bill in the state Senate and the efforts of the Arizona League of Cities and Towns.  One of the changes was a provision that parks and libraries above the maximum size can be included in the impact fee calculation if they can be shown to be a “direct benefit” to the development.  At a minimum, this provision could be used to argue that at least the first 30 acres of larger parks and the first 10,000 square feet of a library could be included in the impact fee calculation.  Another useful addition is the grandfathering of fees that were pledged to debt repayment from the revised list of authorized improvements.  Fees pledged to repay debt on general government facilities, community parks or larger libraries can continue to be charged after the January 1, 2012 deadline imposed by the bill until the debt is repaid.  The bill also ends the moratorium on increased fees on December 31, 2011, 7 months earlier rather than the June 30, 2012 date contained in current law.

The League of Cities and Towns is current drafting a model ordinance intended to get Arizona municipalities to interpret the law’s provisions in the same way and prevent developers from using one city’s unusual interpretation as an excuse to further limit municipal impact fee authority.  The governor has indicated that she does not want to see a continuation of annual revisions to the impact fee act, and will veto future bills over the next few years unless they have the support of both municipalities and the development community.  This should hopefully allow municipalities to figure out how to comply with current law by August 1, 2014 before it is changed yet again.

Clancy Mullen, Duncan Associates – posted August 14, 2011

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