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GOVERNOR SIGNS LEGISLATION
AMENDING DEVELOPMENT FEES STATUTE
On April 24th Governor Napolitano signed Senate
Bill 1423 (Chapter 163) into law, making several
important changes to A.R.S. § 9-463.05 relating
how Arizona municipalities impose development
fees. The changes made by the new legislation
are summarized below:
Written Report. There are additional
requirements for the written report that a
municipality prepares to support development
fees. The report must:
(i) identify the methodology for calculating the
amount of the development fee; and
(ii) explain the relationship between the
development fee and the infrastructure
improvements plan; and
(iii) include documentation that supports the
assessment of a new or modified fee; and
(iv) identify any index or indices to be used
for automatic adjustment of the development fee
and the timing of those adjustments.
Previously a municipality could reduce a
development fee without going through the notice
and hearing process. The legislation now
requires that all modified fees go through the
process.
Hearing. The legislation increases the amount of
time between the hearing and adoption of the
fees to 30 days (previously 14). New or modified
fees are not effective until 75 days after
adoption (previously 90).
Automatic Adjustment of Development Fees. The
legislation permits municipalities to
automatically adjust development fees on an
annual basis without a public hearing if the
adjustment is based on a nationally recognized
index applicable to the cost of the necessary
public service upon which the fee is based. The
adjustment mechanism must be identified in the
written report. A public notice of an automatic
annual adjustment must be given at least 30 days
prior to the effective date of the adjustment.
Infrastructure Improvements Plan. One of the
most significant changes to the current
requirements is the requirement for the
Municipality to adopt an “infrastructure
improvements plan” before any new, modified, or
increased development fee may be implemented. An
“infrastructure improvements plan” is “one or
more written plans that individually or
collectively identify each public service that
is proposed to be the subject of a development
fee and otherwise complies with the requirements
of this section, and may be the municipality’s
capital improvements plan.”
For each necessary public service that is the
subject of a development fee, the infrastructure
improvements plan shall:
(i) estimate future necessary public service
that will be required as a result of new
development and the basis for the estimate; and
(ii) forecast the costs of infrastructure,
improvements, real property, financing, other
capital costs and associated appurtenances,
equipment, vehicles, furnishings and other
personalty that will be associated with meeting
those future needs for necessary public
services; and
(iii) estimate the time required to finance and
provide the necessary public services.
A hearing on the infrastructure improvements
plan must be conducted at least 30 days before
the plan’s adoption and 60 days’ notice must be
given before the hearing. This plan may be
adopted concurrently with the development fee
changes and the actions may be noticed together.
An infrastructure improvements plan may be
amended using the same process as for adoption.
However, the plan may be amended without a
public hearing if the amendment addresses only
elements of necessary public services that are
included in the existing infrastructure
improvements plan. Fourteen day notice is still
required.
Necessary Public Services. The legislation
clarifies but does not limit what “necessary
public services” are. The legislation states
that necessary public services include the costs
of infrastructure, improvements, real property,
engineering and architectural services,
financing, other capital costs and associated
appurtenances, equipment, vehicles, furnishings
and other personalty. This does not appear to
limit the options available to the Municipality;
however, its purpose is also to clarify what
credits a developer may apply for.
Use of development fees. The legislation
requires monies received from a development fee
identified in an infrastructure improvements
plan be used to provide the same category of
necessary public service for which the fee was
assessed.
Agreement to delay payments of development fees.
The legislation permits the Municipality and a
developer to delay the payment of development
fees if agreed to in a development agreement.
Previously, fees for residential development
fees were required to be paid at the time of
issuance of a building permit and as a practice,
development fees for commercial projects were
collected at that time as well. If a development
agreement is entered into to delay the payment
of development fees, the deferred fees shall be
paid no later than fifteen days after the
issuance of a certificate of occupancy. Deferral
must be supported by appropriate security, such
as a surety bond or letter of credit.
Statute of Limitations. The legislation creates
a two-year statute of limitations on civil
actions to collect development fees.
THE FOREGOING IS MERELY A PARTIAL
SUMMARY OF THE CASE
AND IS NOT INTENDED TO BE RELIED UPON AS A LEGAL
OPINION.
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