Tucson could lose out on nearly $3 million in fees it charges new developments because it is so far behind schedule in making state-mandated changes to its impact-fee regulations.
The new requirements were enacted three years ago to give cities and counties ample time to meet the August 2014 deadline for having them in place.
City officials don’t expect to have Tucson’s plan in place before Christmas, which means the fees cannot be collected for any new developments that pull permits from Aug. 1 until the plan takes effect.
The city’s loss could turn into an $8,000 or more windfall for people who buy homes during that window of opportunity, if homebuilders choose to pass the savings on to their customers.
Last year the city took in $7 million in impact fees during the 2012-13 fiscal year. If building continues at the same pace, that would mean more than $2.9 million in lost revenue. If building picks up with the economy, the hit to city coffers would be larger.
David Godlewski, president of the Southern Arizona Home Builders Association, said the city should seize this opportunity to attract some of the development it has missed out on over the years.
“They should use this as an economic-stimulus tool and try to recruit builders to come build in the city of Tucson,” Godlewski said. “The resulting sales-tax revenue and the jobs created out of the construction projects would be a positive boost for the city.”
Godlewski said Tucson charges between $7,000 and $8,000 in impact fees for the average 1,800- to 2,200-square-foot new home. For a larger 3,000- square-foot home, the figure jumps to nearly $10,000 .
Cities collect one-time impact fees to offset the strain that new homes and businesses can place on city services. Tucson assesses impact fees for parks, roads and public-safety services.
For years, developers across the state complained that cities were using the fees to pay for items unrelated to actual development impacts such as police helicopters, equestrian facilities or existing buildings where city vehicles are stored and maintained.
In 2011, the Legislature adopted a law forcing cities to change the way they charge impact fees to new developments, a change critics say was a cobbled- together, last-second gift to Arizona’s homebuilder lobbyists.
Andrew McGuire, an attorney with the Gust Rosenfeld firm, said instead of the different groups sitting down and working something out that benefited both cities and developers, the state just copied parts of laws from Texas, Nevada and New Mexico, and pasted them together.
McGuire, who has worked with cities over the past few years on implementing the requirements, said cities invested a tremendous amount of time and effort as they figured out the law’s requirements.
But Godlewski said the law just aligned Arizona with other states in the Southwest.
City Manager Richard Miranda attributed the delay to the law’s complexity.
“The legislation itself is very complex. It’s very detailed. It required a lot of issues that had to be looked at,” Miranda said. “The cumbersomeness of the legislation has required us to take a little bit more time than we expected.”
The City Manager’s Office put Lynne Birkinbine, the city’s infrastructure planning manager, in charge of making the impact-fee changes in September 2013.
Since the city was already behind, Birkinbine fast-tracked the hiring of a consulting firm to perform the state-mandated survey to determine Tucson’s growth patterns and how they might affect services.
The firm was hired in November, and its first report was posted last Friday.
The city must now hold public hearings on the results. The first two are in June and July.
When those are complete, the city will need to hold additional public hearings on the fee changes.
Once the City Council adopts a final plan, state law requires a 75-day waiting period before it can go in effect.
Since the city is still in the early stages of the process, it’s uncertain how developers, business groups and others will view the proposed changes, Birkinbine said.
She said everything is in draft form and is likely to change as folks start weighing in .
Godlewski said his group wants to ensure government fees don’t price some people out of the market.
“We understand the importance of parks and streets,” Godlewski said. “We’re just making sure it doesn’t become an undue burden on developers and, ultimately, the buyers.”
The projected December deadline is a best-case scenario, Birkinbine said. Any objections from developers or others could stall it even longer.
Councilman Steve Kozachik said Tucson will “stick out like a sore thumb” this summer when it misses the deadline.
“We have known the deadline for two years,” Kozachik said. “Beginning on Aug. 1, we can no longer collect impact fees to help pay for public infrastructure because we screwed up and didn’t get the work done in a timely manner.” He blamed the City Manager’s Office for the failure.
Other cities had various experiences with the law change.
Some show it can be a drawn-out process.
Greg Westrum, city of Chandler budget manager, said it took Chandler about 18 months to complete the process.
Chandler’s City Council is expected to vote on a final draft soon, and its plan is to go into effect in late July.
But others had an easier time.
Phoenix cleaned up its impact fee plan shortly after the law changed and had a new one in place on Jan. 1, 2012, said Alan Stephenson, Phoenix’s acting planning and development department director.