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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
AMENDED
municipalities; counties; development fees
Purpose
Modifies municipal development fee requirements.
Background
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 and professional services required for the preparation or revision of a development fee. Development fees assessed by a municipality must meet prescribed criteria, including the following: 1) requiring the fee to result in a beneficial use to the development; 2) requiring the fee be calculated based on the adopted infrastructure improvements plan; 3) prohibiting the fee from exceed a proportionate share of the cost of necessary public services, based on service units, needed to provide necessary public services to the development; and 4) requiring the fee's costs for necessary public services made necessary by new development to be based on the same level of service provided to existing development in the service area.
If development fees are assessed by a municipality, the fees must be assessed against commercial, residential and industrial development. The municipality may distinguish between different categories of residential, commercial and industrial development in assessing the costs to the municipality of providing necessary public services to new development and in determining the amount of development fee applicable to the category of development.
A municipality's development fee ordinance must provide that a new fee or an increased portion of a modified fee must not be assessed against a development for 24 months after the date that the municipality issues the final approval for a commercial, industrial or multifamily development or the date that the first building permit is issued for a residential development in accordance with an approved site plan or subdivision plat, provided that no subsequent changes are made to the approved site plan or subdivision plat that would increase the number of service units (A.R.S. § 9-463.05).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Prohibits a municipality, if development fees are assessed, from distinguishing between single-family residential developments on the basis of the size of the residential dwelling unit or number of bedrooms.
2. Specifies that a municipality's development fee ordinance, whether new or modified, may not be assessed against a residential, commercial, industrial or multifamily development for 24 months after the effective date of the development fee ordinance that imposes a new or increased development fee if no subsequent changes are made to the approved site plan or final subdivision plat that increases the number of service units.
3. Allows a municipality to assess development fees on the development of ADUs as follows:
a) for water and wastewater, the water and wastewater development fees assessed for such ADUs must not exceed the incremental increase in demand caused by the development of each ADU whether served by the same water meter as the primary dwelling or by a separate water meter; and
b) for development fees assessed on the development of an ADU for all necessary public services other than water and wastewater, the development fees assessed for such ADU must not exceed the lesser of 25 percent of the total development fees or the proportionate share for those same necessary public services applicable to a single-family home.
4. Prohibits
a municipality engaging in a domestic water or wastewater business from
increasing any water or wastewater rate or rate component, fee or service
charge without adopting
growth-related fees in accordance with statute for a portion of a water or
wastewater fee that is adopted or increased after December 31, 2026, to fund
capital improvements to water or wastewater facilities that serve new growth.
5. Includes, in the definition of service area, the service territory of water or wastewater facilities, whether inside or outside of the boundaries of the municipality, if the municipality provides water and wastewater services.
6. Makes technical and conforming changes.
7. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Removes the development fee requirements specific to detached ADUs.
2. Allows a municipality to assess development fees on the development of ADUs as follows:
a) for water and wastewater, the water and wastewater development fees assessed for such ADUs must not exceed the incremental increase in demand caused by the development of each ADU whether served by the same water meter as the primary dwelling or by a separate water meter; and
b) for development fees assessed on the development of an ADU for all necessary public services other than water and wastewater, the development fees assessed for such ADU must not exceed the lesser of 25 percent of the total development fees or the proportionate share for those same necessary public services applicable to a single-family home.
3. Removes the definition of ADU.
House Action Senate Action
RED 2/19/26 DPA 4-1-2-0 RAGE 3/25/26 DPA 5-0-2
3rd
Read 3/3/26 26-30-3-0-1
3rd Read 3/11/26 31-21-7-0-1
*on reconsideration
Prepared by Senate Research
March 26, 2026
JT/NRG/ci