Top officials across the East Valley say an Arizona homebuilder coalition’s legislative efforts to get a suspension or rollback on impact fees — those fees developers pay to help offset cost of infrastructure like roads, water and sewer lines — would cripple infrastructure development.
There’s no legislative bill yet, but Ken Strobeck, executive director of the League of Arizona Cities and Towns, said he is aware that impact fees are being discussed as part of the state’s 2009-10 budget. He said there may be an effort to add it into an economic stimulus package from the Legislature.
The Home Builders Association of Central Arizona recently made a presentation to the Arizona Chamber of Commerce, said Strobeck, adding that he has heard about the possibility of rolling back fees to 2005 or 2006 levels and suspending impact fees for five years.
“Such a provision would be devastating to cities that depend on this revenue to fund the infrastructure need created by new development,” Strobeck said.
Spencer Kamps, lobbyist for the Home Builders Association, declined to give details about legislative efforts but said the group’s concern is that even though other factors like labor and material prices are going down and builders are adjusting their fees, government costs are “increasing to a point where it’s deterring people from buying homes and others from engaging in economic activity.
“The consequences of cities raising impact fees have caused many subdivisions not to be built out and have hurt construction jobs,” Kamps said.
Developers typically pass the impact fee to homebuyers and businesses.
Kamps also questioned what the impact fees are going toward, considering the number of new subdivisions has slowed considerably.
Impact fees can only be used to pay for capital projects, not city operations.
The League of Arizona Cities and Towns contests claims that impact fees have outpaced construction costs, instead saying costs associated with building water infrastructure, for instance, which is necessary to serve a new development, have escalated.
Municipalities are required to regularly have a survey done based on planned capital projects to figure out impact fee rates that can be charged. It usually takes about a year to determine impact fees.
Queen Creek Mayor Art Sanders recently wrote a Tribune column explaining his concerns for the town, which has witnessed massive growth in recent years.
“Such efforts will throw off our planning and budget,” Sanders said.
Mesa and Queen Creek, for instance, take on bond debt to pay for infrastructure, and then use impact fees to partly pay off that debt.
“Impact fees are one source of revenue, and without that we’d have to pass on the burden to our citizens, which is not fair,” Sanders said.
City leaders contend new growth pays for the additional infrastructure needs they raise, and the rest of the community shouldn’t have to bear that burden.
Mesa Mayor Scott Smith said impact fees are ingrained in the way cities pay for new development.
“Our budgeting would get havocked,” said Smith, describing the scenario as “almost being punished for good planning.”
Smith, a former developer, said impact fees do not stop a development in most cases.
“Are they part of a cost and can developers become more competitive? Yes. Are they the only thing? No,” Smith said.
Strobeck and others say it’s highly questionable whether impact fees influence people’s decisions to buy property.
Kamps said the increasing fees slow down buying, thereby hurting the construction industry.
“The question is, in a down economy, when people are losing their jobs, is it a good idea to create barriers to keep those people employed?”
The builders association contends that if no new subdivisions are being approved, “what infrastructure are impact fees being used for?”
The league maintains that while it is accurate there is limited growth these days, as growth occurs, the infrastructure impacts will need to be addressed.
Mesa, for instance, would collect an estimated $2 million in impact fees from a massive resort and convention center project, if it gets built.
Scott Butler, Mesa’s intergovernmental relations director, characterized the issue as one about “fairness.”
“As you have areas that come in, there’s a responsibility of those homes to shoulder that, so someone in Dobson Ranch shouldn’t have to pay for the new home in northeast Mesa,” he said.
If cities aren’t able to collect the impact fees, they would still have to pay off the bond debt they incur to build infrastructure, which would then have to be taken from elsewhere, like the General Fund. That means less money to pay for public safety, libraries and parks.
In 2007, Mesa increased its impact fees from $5,233 for single-family homes to $8,321.
Queen Creek Town Manager John Kross said the town has budgeted $6.5 million annually to pay for its bond debt through impact fees.
Gilbert Town Manager George Pettit said town policy has always been of “growth paying its own way. The town’s two-thirds built out, but if the Legislature requires it to subsidize growth, then the “existing residents would suffer.”