Consideration and Possible Adoption: Development Fee Land Use Assumptions and Infrastructure Improvement Plan

With the adoption of SB1525 the State of Arizona requires cities to adopt Land Use Assumptions (LU) and an Infrastructure Improvement Plan (IIP) prior to considering Development Fees.  The LU and IIP provide the basis for establishing development fees.  The City is considering continuing public safety fees for Police and Fire infrastructure only.   

The adoption of the revised LU and IIP does not have a direct financial impact on the budget, however it is a necessary step prior to considering adoption of public safety development fees which will fund capital improvements and equipment needed to provide police and fire services to new residential and non-residential projects.

1) Retain, expand, and diversify economic base
2) Effective governance

The City of Flagstaff adopted Police and Fire development fees in 2008.  In anticipation of considering new public safety development fees the City Council received a report and held a public hearing on the proposed Land Use Assumptions (LU) and Infrastructure Improvement Plan (IIP) on January 7, 2014. The Council also provided direction to schedule the adoption of the LU and IIP for February 18, 2014.




 

1) Accept the revised LU and IIP and direct staff to finalize the proposed development fees, provide notice of an April 1, 2014 public hearing on the proposed fees, publish the proposed fees on the City website and distribute to interested parties. 
2) Reject the revised LU and IIP, and provide direction to modify the revised LU and IIP for reconsideration.
3) Direct staff to stop the renewal process and allow the current public safety development fee program to end. 

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:
• 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,
• Abandoning the existing development fee programs by August 1, 2014.  To accomplish the abandonment and subsequent adoption by August 1, 2014, the City must follow a prescribed schedule allowing adequate time for public input and Council discussion.

On January 7, 2014 City Council received a presentation and held a public hearing on the Land Use Assumptions and Infrastructure Improvement Plan found in the November 1, 2013 TischlerBise report.  After the January 7 meeting staff prepared a memo for public outreach which summarized the current process and directed the public to the report.  Staff distributed the memo and offered to present the information to a number of business, economic development, and neighborhood organizations.  As of the writing of this summary staff has received no comments or requests from the public.

However, TischlerBise has recommended a change to the proportionate share methodology used to allocate the demand for Fire and Police capital investments between residential and nonresidential development.  ARS 9-463.05(B)(3) states that the development fee shall not exceed a proportionate share of the cost of necessary public services needed to accommodate new development.  The first draft report, consistent with past City Development Fees, only included calls for service (CFS) assigned to residential or nonresidential development at the time of the incident as the determining factor for establishing proportionate share.  As almost half of all Fire CFS, and two-thirds of Police CFS, were not logged to a specific land use (i.e., open space fires, traffic accidents, etc.), using only calls assigned to residential or nonresidential land uses under represents demands placed on the departments. TischlerBise recommends the City change methodologies to use functional population to allocate the cost of Police and Fire facilities to residential and nonresidential development, as functional population has a long history in the professional literature. 

This methodology has been incorporated into development fee methodology since the 1980’s and has been used to equitably spread infrastructure costs by incorporating what the U.S. Census Bureau calls “daytime population.” Using our jurisdiction-specific data on commuting patterns, TischlerBise was able to account for where people live and work (i.e. spend their daily hours). By using a functional population methodology there is a shift in allocating the proportionate share of costs between residential and non-residential from a 56/44% split for Fire demand, and a 46/54% split for Police demand, to a 70%/30% split (residential/non-residential). Total calls for service, in combination with functional population factors, are now better used to allocate the full cost of necessary public services needed to accommodate new development.  As a result of this change in methodology the proposed fees have been revised and are reflected in the revised report dated February 7, 2014 and attached to this summary.

At this time staff is asking City Council to adopt the Land Use Assumptions and Infrastructure Improvement Plan, this should be done with two separate motions.  Once these are adopted TischlerBise will finalize the proposed development fees.  Staff will publish and distribute the proposed fees and solicit questions and comments from interested parties. 

The remaining schedule for adoption is:
February 18, 2014 – City Council Agenda Item
• Adopt LU and IIP

March 1, 2014
• Provide notice of public hearing on development fees
• Publish draft fee report on municipal website

***30 days***

April 1, 2014 – City Council Agenda Item
• Public hearing on development fees

***30 days***

May 6 and May 13, 2014 – City Council Agenda Item
• Council’s final opportunity to approve or not approve Public Safety Development Impact Fees

***75 days***

August 1, 2014
• Updated Development fees are effective
     

Impact fees provide a base standard that all developers are aware of and can plan for as they look to propose development in our community.  Should impact fees not be assessed, this same type of financial consideration will still need to be attained; however, negotiations with each developer will occur separately which may result in an unequal burden due to the timing of a development. 

The study that is provided to calculate the Public Safety Impact fees covers a 10-year growth horizon.  The impact fees themselves, however, are updated every five years to assure the planning and needed services are either confirmed or are updated to match current community needs.

Impact fees assess new development their fair share of cost for the expanded network of service that will need to be provided.

Inform - The Development Fee report was published on the City website on November 7, 2013.  Staff distributed the attached memo to Friends of Flagstaff’s Future, Northern Arizona Building Association, Northern Arizona Association of Realtors, ECoNA, Chamber of Commerce, League of Neighborhoods, Sunnyside neighborhood association, Southside neighborhood association, La Plaza Vieja neighborhood association, Flagstaff architects, and Flagstaff engineers.  Staff has offered to make individual presentations to any interested group.
Consult - A public hearing on the LU and IIP was held on January 7, 2014.  The next public hearing will be held on April 1, 2014 to discuss the proposed fees.  The public will also have a change to comment on February 18, May 6 and May 13 as these are the tentative agendized dates to complete the review of the proposed impact fees.

1. Accept the revised LU and IIP and direct staff to finalize the proposed development fees, provide notice of an April 1, 2014 public hearing on the proposed fees, publish the proposed fees on the City website and distribute to interested parties. 
2. Reject the revised LU and IIP, and provide direction to modify the LU and IIP for reconsideration.
3. Direct staff to stop the renewal process and allow the current public safety development fee program to end.