SB1525 - 501R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 9-463.05, Arizona Revised Statutes, is amended to read:

START_STATUTE9-463.05. Development fees; imposition by cities and towns; infrastructure improvements plan; annual report; advisory committee; limitation on actions; definitions

A. A municipality may assess development fees to offset costs to the municipality associated with providing necessary public services to a development, including the costs of infrastructure, improvements, real property, engineering and architectural services, financing, other capital costs and associated appurtenances, equipment, vehicles, furnishings and other personalty infrastructure improvements to a development, including the costs of infrastructure, improvements, real property, engineering and architectural services, financing and professional services required for the preparation or revision of the portion of the infrastructure improvements plan necessary for the imposition of a development fee.

B. Development fees assessed by a municipality under this section are subject to the following requirements:

1. Development fees shall result in a beneficial use to the a development.

2. The municipality shall calculate the development fee based on the infrastructure improvements plan adopted pursuant to this section.

3. The development fee shall not exceed a proportionate share of the cost of infrastructure improvements, based on service units, needed to provide infrastructure improvements to a new development.

4. Costs for infrastructure improvements made necessary by new development shall be based on the same level of service provided to existing development in the service area.

5. Development fees may not be used for:

(a) Construction, acquisition or expansion of public facilities or assets other than infrastructure improvements or facility expansions identified in the infrastructure improvements plan.

(b) Repair, operation or maintenance of existing or new infrastructure improvements or facility expansions.

(c) Upgrading, updating, expanding, correcting or replacing existing infrastructure improvements to serve existing development in order to meet stricter safety, efficiency, environmental or regulatory standards.

(d) Upgrading, updating, expanding, correcting or replacing existing infrastructure improvements to provide better service to existing development.

(e) Administrative, maintenance or operating costs of the municipality.

6. Any development for which a development fee has been paid is entitled to the permanent use and benefit of the services for which the fee was imposed and is entitled to receive immediate service from any existing facility with actual capacity to serve the new service units.

7. Development fees shall not be collected unless any of the following occur:

(a) The collection is made to pay for an infrastructure improvement or facility expansion that has been identified in the infrastructure improvements plan and the municipality commits to complete construction and having the service available within a reasonable period of time considering the type of infrastructure improvement or facility expansion to be constructed, but in no event longer than five years.

(b) The municipality agrees to reserve capacity to serve future development and the owner and the municipality enter into a written agreement to do so.

(c) The municipality agrees that the owner of a development may construct or finance the infrastructure improvements or facility expansions and any of the following apply:

(i) The costs incurred or money advanced are credited against the development fees otherwise due from a development.

(ii) The municipality reimburses the owner for those costs from the development fees paid from other developments that will use those infrastructure improvements or facility expansions.

(iii) For those costs incurred the municipality allows the owner to assign the credits from the development fees otherwise due from a development to other developments in the same service area.

8. Projected interest charges and other finance costs may be included in determining the amount of development fees only if the monies are used for the payment of principal and interest on the portion of the bonds, notes or other obligations issued to finance construction of infrastructure improvements or facility expansions identified in the infrastructure improvements plan.

2. 9. Monies received from development fees assessed pursuant to this section shall be placed in a separate fund and accounted for separately and may only be used for the purposes authorized by this section for which the development fee was imposed as shown by the infrastructure improvements plan. Monies received from a development fee identified in an infrastructure improvements plan adopted or amended updated pursuant to subsection D of this section shall be used to provide the same category of necessary public service infrastructure improvements or facility expansions for which the development fee was assessed for the benefit of the same service area, as defined in the infrastructure improvements plan, within in which the development fee was assessed. Interest earned on monies in the separate fund shall be credited to the fund.

3. 10. The schedule for payment of fees shall be provided by the municipality. Based on the cost identified in the infrastructure improvements plan, the municipality shall provide a credit toward the payment of a development fee for the required or agreed to dedication of public sites, improvements and other necessary public services infrastructure improvements or facility expansions included in the infrastructure improvements plan and for which a development fee is assessed, to the extent the public sites, improvements and necessary public services infrastructure improvements or facility expansions are provided by the developer. The developer of residential dwelling units shall be required to pay development fees when construction permits for the dwelling units are issued, or at a later time if specified in a development agreement pursuant to section 9‑500.05. If a development agreement provides for fees to be paid at a time later than the issuance of construction permits, the deferred fees shall be paid no later than fifteen days after the issuance of a certificate of occupancy. The development agreement shall provide for the value of any deferred fees to be supported by appropriate security, including a surety bond, letter of credit or cash bond.

4. The amount of any development fees assessed pursuant to this section must bear a reasonable relationship to the burden imposed on the municipality to provide additional necessary public services to the development.

11. Any construction of, contributions to or dedication of on-site or off-site facilities, improvements or real or personal property with off-site benefits that are not required to serve development, that are in excess of minimum municipal standards established by a previously adopted ordinance and that are required by a municipality as a condition of development approval shall be credited against the development fee otherwise due from new development. The credit shall include the value of:

(a) The dedication or improvement of land, rights‑of‑way, easements and any payments in lieu of that dedication or improvement.

(b) Construction, dedication or improvement of facilities for which development fees are assessed pursuant to this section.

12. As determined pursuant to subsection E, paragraph 7 of this section, the municipality shall forecast the contribution to be made in the future in cash or by taxes, fees, assessments or other sources of revenue derived from the property owner towards the capital costs of the necessary public service infrastructure improvements covered by the development fee and that contribution shall include these contributions in determining the extent of the burden imposed by the development be credited against any development fees assessed on a development.

5. 13. If development fees are assessed by a municipality, such the fees shall be assessed in a nondiscriminatory manner that does not discriminate based on the nature of the development. If a municipality agrees to waive any of the development fees assessed on a development, the municipality shall reimburse the development fee accounts for the amount that was waived and notify the advisory committee of the waiver and reimbursement.

6. 14. In determining and assessing a development fee applying to land in a community facilities district established under title 48, chapter 4, article 6, the municipality shall take into account all public infrastructure provided by the district and capital costs paid by the district for necessary public services infrastructure improvements and shall not assess a portion of the development fee based on the infrastructure or costs.

C. A municipality shall give at least sixty thirty days' advance notice of intention to assess a new or modified development fee and shall release to the public a written report that identifies the methodology for calculating the amount of the development fee, explains the relationship between the development fee and the infrastructure improvements plan, includes documentation that supports the assessment of a new or modified development fee and identifies any index or indices to be used for automatic adjustment of the development fee pursuant to subsection G of this section and the timing of those adjustments of the land use assumptions and infrastructure improvements plan adopted pursuant to subsection D of this section and post the report on its website. The municipality shall conduct a public hearing on the proposed new or modified development fee at any time after the expiration of the sixty thirty day notice of intention to assess a new or modified development fee and at least thirty days prior to before the scheduled date of adoption of the new or modified fee by the governing body. Within sixty days after the date of the public hearing on the proposed development fee, a municipality shall approve or disapprove the imposition of the development fee. A municipality shall not adopt an ordinance, order or resolution approving a development fee as an emergency measure. A development fee assessed pursuant to this section shall not be effective until seventy-five days after its formal adoption by the governing body of the municipality. Nothing in this subsection shall affect any development fee adopted prior to before July 24, 1982.

D. Before the assessment of a new or modified development fee, the governing body of the municipality shall adopt or amend update an the land use assumptions and infrastructure improvements plan for a designated service area. The municipality shall conduct a public hearing on the land use assumptions and infrastructure improvements plan at least thirty days before the adoption or amendment update of the plan. The municipality shall release the plan to the public, post the plan on its website, including in the posting its land use assumptions, the time period of the projections, a description of the infrastructure improvements included in the infrastructure improvements plan and a map of the service area to which the land use assumptions apply, make available to the public the documents used to prepare the assumptions and plan and provide public notice at least sixty days before the public hearing, subject to the following:

1. An infrastructure improvements plan may be adopted concurrently with the report required by subsection C of this section, and the municipality may provide for and schedule the notices and hearings required by this subsection together with the notices and hearings required by subsection C of this section.

2. A municipality may amend an infrastructure improvements plan without a public hearing if the amendment addresses only elements of necessary public services that are included in the existing infrastructure improvements plan. The municipality shall provide public notice of those amendments at least fourteen days in advance of their effective date.

1. The land use assumptions and infrastructure improvements plan shall be approved or disapproved within sixty days after the public hearing on the land use assumptions and infrastructure improvements plan and at least thirty days before the public hearing on the report required by subsection c of this section. A municipality shall not adopt an ordinance, order or resolution approving the land use assumptions or infrastructure improvements plan as an emergency measure.

2. An infrastructure improvements plan shall be developed by qualified professionals using generally accepted engineering and planning practices pursuant to subsection e of this section.

3. A municipality shall update the land use assumptions and infrastructure improvements plan at least every five years. The initial five year period begins on the day the infrastructure improvements plan is adopted. The municipality shall review and evaluate its current land use assumptions and shall cause an update of the infrastructure improvements plan to be prepared pursuant to this section.

4. Within sixty days after completion of the updated land use assumptions and infrastructure improvements plan, the municipality shall schedule and provide notice of a public hearing to discuss and review the update and shall determine whether to amend the assumptions and plan.

5. A municipality shall hold a public hearing to discuss the proposed amendments to the land use assumptions, the infrastructure improvements plan or the development fee. The land use assumptions and the infrastructure improvements plan, including the amount of any proposed changes to the development fee per service unit, shall be made available to the public on or before the date of the first publication of the notice of the hearing on the amendments.

6. The notice and hearing procedures prescribed in paragraph 1 of this subsection apply to a hearing on the amendment of land use assumptions, an infrastructure improvements plan or a development fee. Within sixty days after the date of the public hearing on the amendments, a municipality shall approve or disapprove the amendments to the land use assumptions, infrastructure improvements plan or development fee. A municipality shall not adopt an ordinance, order or resolution approving the amended land use assumptions, infrastructure improvements plan or development fee as an emergency measure.

7. The advisory committee established under subsection g of this section shall file its written comments on any proposed or updated land use assumptions, infrastructure improvements plan and development fees before the fifth business day before the date of the public hearing on the proposed or updated assumptions, plan and fees.

8. If, at the time an update as prescribed in paragraph 3 of this subsection is required, the municipality determines that no changes to the land use assumptions, infrastructure improvements plan or development fees are needed, the municipality may as an alternative to the updating requirements of this subsection publish notice of its determination on its website and include the following:

(a) A statement that the municipality has determined that no change to the land use assumptions, infrastructure improvements plan or development fee is necessary.

(b) A description and map of the service area in which the updating has been determined to be unnecessary.

(c) A statement that by a specified date, which shall be at least sixty days after the date of publication of the first notice, a person may make a written request to the municipality requesting that the land use assumptions, infrastructure improvements plan or development fee be updated, and that the municipality may accept or reject the request by following the requirements prescribed in this subsection.

(d) A statement identifying the person or entity to whom the written request for an update should be sent.

9. If, by the date specified pursuant to paragraph 8 of this subsection, a person requests in writing that the land use assumptions, infrastructure improvements plan or development fee be updated, the municipality shall cause, accept or reject an update of the assumptions and plan to be prepared pursuant to this subsection.

E. For each necessary public service infrastructure improvements that is are the subject of a development fee, the infrastructure improvements plan shall include:

1. Estimate future necessary public services that will be required as a result of new development in the area, as defined in the infrastructure improvements plan, within which the development fee will be assessed and the basis for the estimate, including a comparison of the necessary public services provided to existing development and the necessary public services to be provided to new development.

2. 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.

3. Forecast the revenue sources that will be available to fund the necessary public services and estimate the time required to finance and provide the necessary public services.

1. A description of the existing infrastructure improvements in the service area and the costs to upgrade, update, improve, expand, correct or replace the improvements to meet existing needs and usage and stricter safety, efficiency, environmental or regulatory standards, which shall be prepared by a qualified professional engineer licensed to perform the professional engineering services in this state.

2. An analysis of the total capacity, the level of current usage and commitments for usage of capacity of the existing infrastructure improvements, which shall be prepared by a qualified professional engineer licensed to perform the professional engineering services in this state.

3. A description of all or the parts of the infrastructure improvements or facility expansions and their costs necessitated by and attributable to development in the service area based on the approved land use assumptions, which shall be prepared by a qualified professional engineer licensed to perform the professional engineering services in this state.

4. A definitive table establishing the specific level or quantity of use, consumption, generation or discharge of a service unit for each category of infrastructure improvements or facility expansions and an equivalency or conversion table establishing the ratio of a service unit to various types of land uses, including residential, commercial and industrial.

5. The total number of projected service units necessitated by and attributable to new development in the service area based on the approved land use assumptions and calculated pursuant to generally accepted engineering and planning criteria.

6. The projected demand for infrastructure improvements or facility expansions required by new service units for a period not to exceed ten years.

7. A forecast of revenues generated by new service units other than development fees, which shall include estimated state-shared revenue, highway users revenue, federal revenue, ad valorem property taxes, grants, donations, construction contracting or similar excise taxes and the capital recovery portion of utility fees attributable to development in the service area based on the approved land use assumptions, and a plan to credit these contributions against development as required in subsection B, paragraph 12 of this section.

F. Except for adjustments pursuant to subsection G of this section, A municipality's development fee ordinance shall provide that a new development fee or an increased portion of a modified development fee shall not be assessed against a development for twenty-four sixty months after the date of the municipality's final approval of the development if no material changes are increase in the number of service units is made to the site plan or subdivision plat that was the subject of the final approval. If the number of service units increases, the development fee shall be limited to the amount attributable to the additional service units. The twenty-four sixty month period shall not be extended by a renewal or amendment of the site plan or the final subdivision plat that was the subject of the final approval. The municipality shall issue, on request, a written statement of the development fee schedule applicable to the development.

G. A municipality may automatically adjust a development fee 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 that is the subject of the development fee and the adjustment mechanism is identified in the report required by subsection C of this section. The municipality shall provide public notice of those adjustments at least thirty days in advance of their effective date.

G. Before the adoption of proposed or updated land use assumptions, infrastructure improvements plan and development fees as prescribed in subsection D of this section, the municipality shall appoint an infrastructure improvements advisory committee, subject to the following requirements:

1. The advisory committee shall be composed of at least five members who are appointed by the governing body of the municipality. At least forty per cent of the members of the advisory committee must be representatives of the real estate, development or building industries, and at least twenty per cent of the members of the committee must be from the home building industry. Members shall not be employees or officials of the municipality.

2. The advisory committee serves in an advisory capacity and shall:

(a) Advise and assist the municipality in adopting land use assumptions and determine whether the assumptions are in conformance with the general plan of the municipality.

(b) Review the infrastructure improvements plan and file written comments.

(d) Every year file reports with respect to the progress of the infrastructure improvements plan and report to the municipality any perceived inequities in implementing the plan or imposing the development fee.

(e) Advise the municipality of the need to update or revise the land use assumptions, infrastructure improvements plan and development fee.

3. The municipality shall make available to the advisory committee any professional reports with respect to developing and implementing the infrastructure improvements plan.

4. The municipality shall adopt procedural rules for the advisory committee to follow in carrying out the committee's duties.

H. An owner of real property is entitled to a refund of a development fee or any part of a development fee that is not spent if:

1. On the request of an owner of the property on which a development fee has been paid, the municipality refunds the development fee if existing facilities are available and service is not provided or the municipality has, after collecting the fee when service is not available, failed to complete construction within a reasonable period of time considering the type of infrastructure improvement or facility expansion to be constructed but in no event later than five years after the date of payment.

2. Any part of the development fee is not spent as authorized by this section within five years after the date of payment.

3. On completion of the infrastructure improvements or facility expansions identified in the infrastructure improvements plan, the municipality recalculates the development fee using the actual costs of the infrastructure improvements or facility expansion. If the development fee calculated based on actual costs is less than the development fee paid, including any sources of funding not anticipated in the infrastructure improvements plan, the municipality shall refund the difference if the difference exceeds the development fee paid by more than ten per cent, based on actual costs.

I. A refund shall bear interest calculated from the date of collection to the date of refund at a rate pursuant to section 44-1201, subsection A. All refunds shall be made to the record owner of the property at the time the refund is paid. If the development fee is paid by a governmental entity, the refund shall be paid to the governmental entity. The owner of real property on which a development fee has been paid or a membership organization representing the owner of real property or a governmental entity that has paid a development fee has standing to sue for a refund.

J. A development fee that is in place on the effective date of this amendment to this section shall be replaced by a development fee imposed under this section on or before August 1, 2012. Any municipality having a development fee that has not been replaced under this section on or before August 1, 2012 is liable to any party who, after the effective date of this amendment to this section, pays a development fee that exceeds the maximum permitted under this section by more than ten per cent for an amount equal to two times the difference between the maximum development fee allowed and the actual development fees imposed, plus any reasonable attorney fees and court costs. Any development fee monies in the development fee accounts collected before August 1, 2012:

1. Shall be used towards the same category of infrastructure improvements as authorized by this section.

2. If development fees are in a fund for a purpose not authorized by this section, shall be distributed evenly among the categories of infrastructure improvements authorized by this section.

K. A moratorium shall not be placed on development for the sole purpose of awaiting completion of all or any part of the process necessary to develop, adopt or update development fees.

L. Any person or governmental entity that has paid a development fee, or membership organization representing a person that has paid a development fee, has standing to sue under this section. In any judicial action interpreting this section, all powers conferred on municipal governments in this section shall be narrowly construed.

H. M. Each municipality that assesses development fees shall submit an annual report accounting for the collection and use of the fees for each service area. The annual report shall include the following:

1. The amount assessed by the municipality for each type of development fee.

2. The balance of each fund maintained for each type of development fee assessed as of the beginning and end of the fiscal year.

3. The amount of interest or other earnings on the monies in each fund as of the end of the fiscal year.

4. The amount of development fee monies used to repay:

(a) Bonds issued by the municipality to pay the cost of a capital improvement project that is the subject of a development fee assessment, including the amount needed to repay the debt service obligations on each facility for which development fees have been identified as the source of funding and the time frames in which the debt service will be repaid.

(b) Monies advanced by the municipality from funds other than the funds established for development fees in order to pay the cost of a capital improvement project that is the subject of a development fee assessment, the total amount advanced by the municipality for each facility, the source of the monies advanced and the terms under which the monies will be repaid to the municipality.

5. The amount of development fee monies spent on each capital improvement project that is the subject of a development fee assessment and the physical location of each capital improvement project.

6. The amount of development fee monies spent for each purpose other than a capital improvement project that is the subject of a development fee assessment.

I. N. Within ninety days following the end of each fiscal year, each municipality shall submit a copy of the annual report to the city clerk and post the report on the municipality's website. Copies shall be made available to the public on request. The annual report may contain financial information that has not been audited.

J. O. A municipality that fails to file the report and post the report on the municipality's website as required by this section shall not collect development fees until the report is filed and posted.

K. P. Any action to collect a development fee shall be commenced within two years after the obligation to pay the fee accrues.

Q. Development fees collected after August 1, 2012 are used solely for the payment of principal and interest on the portion of the bonds issued before December 31, 2010 to finance construction of the facility.

L. R. For the purposes of this section:

1. "Dedication" means the actual conveyance date or the date the improvement, facilities or real or personal property is placed into service, whichever occurs first.

2. "Development" means:

(a) The subdivision of land.

(b) The construction, reconstruction, conversion, structural alteration, relocation or enlargement of any structure that adds or increases the number of service units.

3. "Facility expansion" means the expansion of the capacity of an existing facility that serves the same function as an otherwise new infrastructure improvement in order that the existing facility may serve new development. Facility expansion does not include the repair, maintenance, modernization or expansion of an existing facility to better serve existing development.

1. 4. "Final approval" means:

(a) For a nonresidential or multifamily development, the approval of a site plan or, if no site plan is submitted for the development, the approval of a final subdivision plat.

(b) For a single family residential development, the approval of a final subdivision plat.

5. "Infrastructure improvement" means any of the following facilities that have a life expectancy of ten or more years and that are owned and operated by or on behalf of the municipality:

(a) Water facilities, including the supply, transportation, treatment, purification and distribution of water.

(b) Wastewater facilities, including collection, interception, transportation, treatment and disposal of wastewater.

(c) Street facilities located in the service area, including arterial or collector streets or roads that have been designated on an officially adopted plan of the municipality and rights‑of‑way and improvements thereon.

(d) Fire and police facilities, including all appurtenances for those facilities. Fire and police facilities do not include a facility or portion of a facility that is used to replace services that were once provided elsewhere in the municipality, vehicles and equipment used to provide administrative services, helicopters or airplanes or a facility that is used for training firefighters or officers from more than one station or substation.

(e) Park and recreational facilities on real property not larger than thirty acres in area. Park and recreational facilities do not include amusement parks, aquariums, auditoriums, arenas, arts and cultural facilities, bandstand and orchestra facilities, bathhouses, boathouses, clubhouses, community centers greater than three thousand square feet in floor area, environmental education centers, equestrian facilities, golf course facilities, greenhouses, lakes, museums, swimming pools, theme parks, water reclamation or riparian areas, wetlands, zoo facilities or similar recreational facilities.

(f) Any facility that was financed and that meets all of the following requirements:

(i) Was included in a previously adopted infrastructure improvement plan.

(ii) Development fees were pledged to repay debt service obligations that were used to construct the facility.

(iii) Construction was completed on the facility before december 31, 2010.

2. 6. "Infrastructure improvements plan" means one or more a written plans that individually or collectively identify plan that identifies each public service infrastructure improvement or facility expansion 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.

7. "Land use assumptions" means projections of changes in land uses, densities, intensities and population for a specified service area over a period of at least ten years and pursuant to the general plan of the municipality.

8. "Qualified professional" means a professional engineer, surveyor, financial analyst or planner providing services within the scope of the person's license, education or experience.

9. "Service area" means any specified area within the boundaries of a municipality in which development will be served by infrastructure improvements or facility expansions and within which development is served directly and benefited by the infrastructure improvements or facility expansions as prescribed in the infrastructure improvements plan. Service area does not include any area that makes up the entire area of a municipality, except for municipalities with a population of less than ten thousand persons.

10. "Service unit" means a standardized measure of consumption, use, generation or discharge attributable to an individual unit of development calculated pursuant to generally accepted engineering or planning standards for a particular category of infrastructure improvements or facility expansions. END_STATUTE