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14.A.
         
City Council Meeting - FINAL
Meeting Date: 04/01/2014  
From: Dan Folke, Planning Director

Information
TITLE:
Public Hearing on proposed Public Safety development fees (impact fees).
RECOMMENDED ACTION:
1) Hold the public hearing.
2) Direct staff to prepare ordinance to adopt proposed fees for May hearings.
Policy Decision or Reason for Action:
The City is in process of completing the steps required by the State of Arizona to support continuation of the Public Safety development fee program.  A public hearing on the proposed development fees supported by the February 7, 2014 TischlerBise report is required.  Staff believes development fees provide a consistent and predictable expense for the constuction industry and predictable revenue for the City's public safety capital budget and debt retirement.      
Financial Impact:

Development Fees collected will be used to help fund capital improvements and equipment necessary to meet the demand generated by new residential and non-residential growth.  The alternative to development fees is to identify the impact of each project during the entitlement process and include public safety fees in a project development agreement, fund increased demand through General Fund revenues or decrease the level of service. 

Connection to Council Goal:
Retain, expand, and diversify economic base
Effective governance
Previous Council Decision on This:

The Flagstaff City Council first adopted Public Safety Development Fees in October 2008 and amended the program in 2011 to be consistent with State law.  The current City Council held a public hearing on the Land Use Assumptions (LU) and Infrastructure Improvement Plan (IIP) on December 19, 2013, adopted the LU and IIP on February 18, 2014. 

Options and Alternatives:
1. Hold the public hearing and direct staff to prepare an adoption Ordinance for the fees as proposed.
2. Hold the public hearing and direct staff to prepare an adoption Ordinance for revised fees. 
3. Hold the public hearing and discontinue the Public Safety Development Fee program.  
Background/History:
Arizona Revised Statute 9-463.05, adopted during the 2011 legislative session, significantly amended development fee enabling legislation.  Commonly known as SB1525, this legislation called for:
1. Amending existing development program changes by January 1, 2012.  The City met this condition by adopting the amendment of the existing development program on December 6, 2011; and
2. Abandoning the existing development fee programs by August 1, 2014.  To accomplish the abandonment and subsequent adoption by August 1, the City must follow a prescribed schedule allowing adequate time for public input and Council discussion. 

On February 18, 2014 the City Council adopted the Land Use Assumptions and Infrastructure Improvement Plan.  The next step is to hold a public hearing on the fees and consider adopting the fees by Ordinance in May.  In order to meet the 75-day waiting period required after fee adoption and before August 1, the second reading of the Ordinance will need to be considered at a Special Regular Meeting on May 13.

At the February 18 meeting, City Council had questions about whether impact fees could be waived or reduced as an incentive for affordable housing units.  City Council adopted an Incentive Policy for Affordable Housing in October 2009.  The policy considers a number of incentives including fee waivers and deferments; expedited review; and regulatory incentives such as density bonuses, open space ratios, resource protection plans, and parking.  Reimbursement of impact fees are included in the fee eligibility list found on page 11 of the Incentive Policy.  The Housing Director has explained that impact fees can be reimbursed to the applicant directly after they have paid the impact fee, or the impact fee has been paid on behalf of the applicant.  In both cases the fee is paid from an incentive fund in the Housing budget.  So while the impact fee can be waived, the fund is kept whole by the payment from the incentive fund.  The Incentive Policy for Affordable Housing can be viewed from the City's website at http://www.flagstaff.az.gov/DocumentCenter/View/42650 or by clicking on the Resources/Contacts tab on the Housing page. 
Key Considerations:
Impact fees provide a base standard which allows for predictability and developers can plan for as they prepare development projects in our community.  Should impact fees not be assessed, the same type of financial consideration will need to be attained as part of a project's impact analysis.  This is typically achieved through a development agreement when the cost to mitigate project impacts is determined.  While impact fees are paid at the time a building permit is issued, development agreements may specify payment prior to seeking building permits at the time a project's public improvements are required.   
Expanded Financial Considerations:
The Development Fee Report calculates Public Safety fees supported by projected growth over a ten-year period.  However, the development fees must be re-examined every five years to assure the land use assumptions and proposed capital improvement program are representative of the experienced demand or require an update to meet the current community need.     
Community Benefits and Considerations:
Development fees assess new growth a proportionate share of the cost to provide the services needed to meet the additional calls for service.  Alternatives to public safety impact fees are to identify the cost to provide services and negotiate the payment at the time of entitlement (zoning map amendment or subdivision), to fund the increased service demand through other General Fund revenues or to decrease the level of service.   
Community Involvement:
Inform - Staff has prepared an informational memo on the current process, proposed fees, proposed 10- year capital program and 10-year projected revenues (attached to this summary).  Staff has distributed this memo to the group of stakeholders which includes building industry organizations and neighborhood associations previously contacted about the land use and infrastructure plan.
     
Consult - To date staff has presented the current fees to Northern Arizona Builders Association and the Chamber of Commerce Government Affairs Committee.  The information piece identifies the April 1, 2014 public hearing and encourages participation.  Discussion at these meetings has not been supportive of the proposed increases.  Comments have focused on why do the fees need to be increased?; the additional property and sales tax generated by new growth should be enough to pay for increased calls for service; has the City considered trying to reduce the demand (e.g., response to medical calls) rather than meet the increased demand?; how much is the City spending on consultants and staff time for the small amount of projected revenues?  




Expanded Options and Alternatives:
1. Hold the public hearing and direct staff to prepare an adoption Ordinance for the fees as proposed.
2. Hold the public hearing and direct staff to prepare an adoption Ordinance for revised lower fees.
3. Hold the public hearing and discontinue the Public Safety Development Fee program. 

Attachments
TischlerBise Feb. Report
Public Outreach memo
Projected costs & revenues
Presentation

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