Arizona homebuilders will receive some relief from the imposition of impact fees beginning in 2012 as a result of the Arizona Legislature’s passing of SB1525. Impact fees are imposed on new home development by cities and towns in order to fund the development and expansion of new and existing public infrastructure and services necessitated by the new development. Such impact fees are typically assessed on a per-unit basis and can raise the cost of a new home anywhere from hundreds to tens of thousands of dollars. For years, homebuilders have expressed concern regarding the increased implementation of such impact fees and whether the fees are being properly utilized. SB1525, which takes effect January 1, 2012, looks to address those concerns by narrowing the allowable uses of impact fees and requiring that cities and towns meet certain requirements before imposing such fees on new development.
Examples of the limitations going into effect under the new law include:
- Narrowing the definition of “necessary public services” to limit the infrastructure and services for which impact fees can be assessed, including prohibiting the use of impact fees for city halls and court buildings, as well as implementing size limitations on libraries and parks
- Requiring that residents be refunded any impact fees paid after July 31, 2014, for public infrastructure not completed within the statutorily required timeframes and/or any excess impact fees paid above the actual cost of the constructed facilities
- Necessitating that cities and towns create more detailed infrastructure improvement plans, including disclosing existing facilities, necessary upgrades, applicable offsets, projected impact fees, and professional studies establishing the basis for such fees
- Barring the use of impact fees to repair existing facilities or increase the level of service provided to existing residents and requiring that impact fees assessed against a developer be limited to that development’s attributable share of the cost of the new infrastructure
- Setting certain restrictions regarding the implementation of new impact fees prior to January 1, 2012, and requiring most such fees be replaced prior to August 1, 2014
- Obligating cities and towns to implement detailed public notice and hearing procedures by no later than August 1, 2014
- Prohibiting any additional material legislation on impact fees until the 2015 legislative session
- Ending the current freeze on existing development fees as of December 31, 2011
The restrictions and clarifications set forth under the new law cause significant changes to the current impact fee structure and will likely raise many questions and legal issues going forward. If you have questions regarding SB1525 and its impact on new development, please contact Titus Brueckner & Levine PLC at 480-483-9600.