Arizona Revised Statute 9-463.05, allows a municipality to 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, as well as financing and professional services required for the preparation or revision of a development fee, including the required land use assumptions and infrastructure improvements plan. Development fees assessed by the City are required to result in a beneficial use to the development and may not exceed a proportionate share of the cost of necessary public services to the development.  Development fees can only be used for public services identified in the adopted infrastructure improvements plan, including construction, acquisition or expansion of necessary public services or facilities.  Development fees may not be used for repair, operation, or maintenance of public services or facility expansions.

Necessary public services that can be supported by a Development Fee include the following:

• Water facilities, including the supply, transportation, treatment, purification and distribution of water, and any appurtenances for those facilities.
• Wastewater facilities, including collection, interception, transportation, treatment and disposal of wastewater, and any appurtenances for those facilities.
• Stormwater, drainage and flood control facilities, including any appurtenances for those facilities.
• Library facilities of up to ten thousand square feet that provide a direct benefit to development, not including equipment, vehicles or appurtenances.
• 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, traffic signals and rights-of-way and improvements thereon.
• Fire and police facilities, including all appurtenances, equipment and vehicles. 
• Neighborhood parks and recreational facilities on real property up to thirty acres in area, or parks and recreational facilities larger than thirty acres if the facilities provide a direct benefit to the development. 

The City hired TischlerBise in 2005 to complete a study for a development fee program.  This study examined the City's needs for infrastructure improvements to support the development policies contained in the Flagstaff Area Regional Land Use and Transportation Plan (The Region Plan prior to the currently adopted Plan.)  The consultant's Infrastructure Improvement Plan and Development Fee Study examined the City's future needs related to Library, Parks & Recreation, Opens Space and Trails, Police, Fire, Public Works, General Government, and Transportation.  The study identified the needs for facilities and services for various residential and commercial uses.  This study identified costs allowable under state law during that time frame. The study concluded that for a single-family home, the cost of providing all needed facilities would be approximately $15,199.  That total included the following breakdown:

• Library $896
• Parks & Recreation $5,590
• Open Space and Trails $587
• Police $261
• Fire $444
• Public Works $1,195
• General Government $353
• Transportation $5,872

The consultant's study identified the cost of facilities needed to support new growth.  One method of paying for these needs is development fees.  The current method used, except for Police and Fire, is exactions.  Under this method, the City and the developer negotiate the developer's contribution to facilities critical to support that development.  These obligations are often required as a condition of the development approval process or in a development agreement.  Items such as vehicles and equipment are often not included in this method.  The required exactions for public improvements may be a proportional share fee dedicated to the improvement or may require the construction of the improvement.  For example, if street improvements are required they may be constructed and in place at the time the development opens.   

Development fees are an organized, predictable method of paying for facilities and services needed to support new developments.  Developers would know their costs upfront.  The City would know that it would receive funds to support the expansion of facilities and services to support new growth.  The City is required to construct the necessary improvements and may not be in place at the time a project opens. 
 
In 2008, the City adopted the first development fees for Police and Fire only.  Since that time the fees have been readopted/revised in 2011 and 2014.  Both times were due to changes in state statute.  A breakdown of the adopted fees is as follows:

Residential Development Type (per dwelling unit)	Combined Fee per Ordinance No. 2008-28	Combined Fee per Ordinance No. 2011-32	Combined Fee per Ordinance No. 2014-10
Single-Family	$705	$675	$548
Multi-Family	$559	$536	$512
All Other Housing	$679	$651	Removed

 

Nonresidential Development Type (per square foot)	Combined Fee per Ordinance No. 2008-28	Combined Fee per Ordinance No. 2011-32	Combined Fee per Ordinance No. 2014-10
Comm/Shopping Center 25,000 sq. ft. or less	$2.12	$2.00
Comm/Shopping Center 25.001-50,000 sq. ft.	$1.68	$1.73
Comm/Shopping Center 50,001-100,000 sq. ft.	$1.53	$1.45
Comm/Shopping Center 100,001-200,000 sq. ft.	$1.31	$1.24
Comm/Shopping Center over 200,000 sq. ft.	$1.11	$1.05
Office/Institutional 10,000 sq. ft. or less	$0.78	$0.73
Office/Institutional 10,001-25,000 sq. ft.	$0.62	$0.59
Office/Institutional 25,001-50,000 sq. ft.	$0.54	$0.51
Office/Institutional 50,001-100,000 sq. ft.	$0.45	$0.43
Office/Institutional over 100,000 sq. ft.	$0.39	$0.37
Business Park	$0.43	$0.41
Light Industrial	$0.21	$0.23
Warehousing	$0.17	$0.16
Manufacturing	$0.13	$0.12
Hotel (per room)	$192	$182
Commercial			$0.88
Office			$0.34
Industrial Flex			$0.11