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ARIZONA SUPREME COURT INVALIDATED THE NORTHWEST
FIRE DISTRICT'S "FACILITIES BENEFIT ASSESSMENT"
ON NEW CONSTRUCTION
On June 29, 2007 the Arizona
Supreme Court invalidated the Northwest Fire
District's "facilities benefit assessment" on
new construction. Northwest Fire District v U.S.
Home of Arizona Construction Company,
CV-06-0377-PR. The District relied on A.R.S.
§48-805(B)(14) to impose a special fee on new
construction to recoup property taxes not
collected due to delays in placing property
improvements, such as a new home or commercial
building, on the property tax rolls. The
assessment was necessary to pay “the cost of
developing facilities from which to provide
services to new construction areas.” The trial
court, in striking down the assessment, read the
District’s authority narrowly, and concluded a
fire district could only raise revenue through
taxes, bond elections, and fee schedules “for a
specific service” that reasonably relate to the
District’s purpose. In reversing the trial
court, the Court of Appeals, concluded the
legislature intended to create a broad power to
assess and that the assessment does pay for a
service – a guarantee of adequate facilities to
respond to an emergency.
The Supreme Court treated the “facilities
benefit assessment” as a “special assessment”
against real property related to a benefit
received from a public improvement. Any
evaluation of a special assessment must begin by
reviewing the improvements funded by the
assessment, their estimated cost and comparing
it to the assessment imposed and benefit
received by each assessed property. The
facilities to be built with the funds collected
under the assessment should uniquely benefit the
assessed property and the funds should be
segregated for the intended purpose. Here, the
fire district had adopted no specific plan and
had no cost estimate or specific facilities tied
to the assessment. The Supreme Court indicated
that the district’s interpretation of the
“facilities benefit assessment” would allow it
to circumvent (i) the assessment cap on property
taxes (A.R.S. §48-606(F)), the cap on bonds cap
(A.R.S. §48-806(D)), (iii) electoral approval of
bonds, and (iv) the requirement that bond
proceeds be placed in a separate fund and used
only for a specific purpose. The Court held that
the “facilities benefit assessment” was not the
equivalent of a development fee and cannot be
afforded the same flexibility as a development
fee.
While this case deals with a particular
assessment and bad facts, it also suggests all
special districts should verify their statutory
authority, as well as a clear factual record to
support their fees, charges and assessments.
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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