Adoption/Renewal of Public Safety Development Fees

Receive Council direction on options for the adoption of revised Public Safety Development Fees.   

As is required by state law the city must update its Land Use Assumptions and Infrastructure Improvement plans every five years and adjust the development fees as necessary.  The existing Public Safety Development Fees were adopted in 2014.  The City Council needs to determine if the City should continue to assess the Public Safety Development Fees and if so at what rate. 

ARS 9-463.05 (B)(3) states that development fees shall not exceed a proportionate share of the cost of necessary public services needed to accommodate new development.  The Fire and Police Facilities IIPs and development fees are assessed on both residential and non-residential development based on functional population (the number of people occupying space in the community on a 24 hour per day, seven-day-per-week basis).  Based on 2015 functional population data, residential development accounts for 67 percent of the functional population, and nonresidential development is responsible for the remaining 33 percent.

The proposed public safety development fees are a significant increase over the existing fees.  A comparison of the City of Flagstaff's existing fees with other similar-sized communities shows that the City of Flagstaff fees are some of the lowest throughout Arizona.  The proposed fees bring the City of Flagstaff in closer alignment with other similar-sized cities in Arizona.  However, the City of Flagstaff only charges development fees for police and fire while most other communities include fees for parks, streets, and stormwater infrastructure.  Attached to this report is a comparison of fees.

The proposed fees are calculated based on the Facilities Infrastructure Plans prepared for the Fire and Police Departments.  Below is a summary of the calculation of those fees.

Fire Facilities Infrastructure Improvement Plan

For the preparation of the Fire Facilities IIP, the Flagstaff Fire Department identified necessary improvements to support future growth.  The total of these improvements was estimated at 13,295,000 of which a portion can be funded by development fees.  These necessary improvements are identified on page 13 of the LUA and IIP.  They include two new fire stations, four apparatus, and 25 pieces of communication equipment.  The portion of these funds that can be supported by development fees based on the projected population increase of 13,412 persons and employment increase of 3,270 jobs by 2029 comes to $6,555,621 broken down as follows:
 

Fee Component	Growth Share	Cost per Person	Cost Per Job
Facilities	$4,076,760	$252.05	$212.91
Apparatus	$2,251,747	$139.17	$117.56
Communication Equipment	$227,114	$14.04	$11.86
Development Fee Report	$22,500	$2.25	$4.54
Total	$6,578,121	$407.51	$346.87

              
Facilities represent the largest portion of the overall Fire development fee but do not fully cover the cost of a new fire station based on the current estimate of $5,135,000.  The development fees can only assist with what is called incremental expansion.

Police Infrastructure Improvement Plan

For the preparation of the Police Facilities IIP, the Flagstaff Police Department identified necessary improvements to support future growth.  The total of these improvements was estimated at 7,540,000 of which a portion can be funded by development fees.  These necessary improvements are identified on page 24 of the LUA and IIP.  They include a metal building on the Commerce site, Dispatch Expansion, LEAF expansion, 10 new vehicles, 4 new motorcycles, and 37 pieces of communication equipment.  The portion of these funds that can be supported by development fees based on the projected population increase of 13,412 persons by 2029 and estimated vehicles trips for nonresidential uses comes to $3,426,662 broken down as follows:
 

Fee Component	Growth Share	Cost per Person	Cost Per Vehicle Trip
Facilities	$2,402,719	$141.05	$43.64
Apparatus	$666,652	$39.13	$12.11
Communication Equipment	$335,041	$19.67	$6.09
Development Fee Report	$22,250	$2.19	$1.29
Total	$3,426,662	$202.04	$63.13

           
Facilities also represent the largest portion of the overall Police development fee but do not fully cover the cost of new or expanded facilities.  The development fees can only assist with what is called incremental expansion.

Options

Option #1 – Adopt the fees as proposed in the adopted Land Use Assumptions (two alternatives)

Alternative One
One fee for all single-family and one fee for all multi-family residential units regardless of unit size or bedroom count.  The current public safety development fees follow this model.  This model is the easiest to ensure that fees are accurately applied to all residential development.  They require less subjectivity in determining the use of rooms within a residential unit.

Alternative Two
Fees adjust based on the number of bedrooms within each residential unit.  The City of Flagstaff has seen an increase in residential units with higher bedroom counts.  While it is not uncommon to have a five-bedroom single-family home the typical single-family home falls in the three-bedroom range.  Previously, it was atypical to see any multi-family units over three bedrooms.  We have seen single-family residential homes with seven or eight bedrooms and multi-family residential units with four, five, or six bedrooms within certain parts of the community.  This alternative is an attempt to shift the cost to dwelling units that contain more residents, therefore, having a potentially greater need for police and fire.  In order to calculate the appropriate fee, a per person ratio is developed.  This model creates complexities that may make it more difficult to assess fees accurately.  It will also require modifying existing software to manage the data differently.  This model could also create disputes over what rooms in a residential qualify as a “bedroom”.

Option #2 – Revise the Infrastructure Improvement Plans for Police and Fire

The highest cost items identified in the Infrastructure Improvement Plans for both Police and Fire are the addition/extension of existing facilities (police) and new facilities (fire).  It could be possible to remove these items from the calculations thereby reducing the total proposed development fee.  Required facility expansions and new facilities would need to be paid for by alternative means.  This could include bonding for these facilities.  In order to accomplish this, the LUA and IIP would need to be amended and readopted which would delay the implementation of update fees by a year.   This option could apply to both Police and Fire or separately. 

Option #3 – Proportionally reduce the current proposed fees

The City Council is not required to adopt the full proposed development fees as identified in the LUA and IIP.  The fees can be proportionally reduced (to ensure everyone is still paying their fair share).  For example, if single-family residential fees are reduced by 50% then all fees must be reduced by 50% in order to maintain the required proportional share of all uses.  The consultant has prepared a fee calculator to show what the development fees would look like at different percentage reductions.  The reductions selected are based on trying to maintain fees as close as possible to existing rates. However, each of the fees is calculated differently.  For example, in order to keep the industrial fees closer to existing fees then all fees would be set at 22% of the proposed fee, whereas for commercial it would be set at 55% of the proposed fees.  Single-family residential comes in at 34% of proposed fees and Multi-family at 39%.

The fee calculator provided shows the proposed fee share at 22%, 26%, 34%, 39%, and 55%.  The table also shows the difference between the reduced fee at each of these rates and the current fees as well as projected revenues for each of the reduced fees.  The remainder amounts are the funds that would need to be made up with alternative sources such as the general fund.