City Council Meeting - FINAL

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Meeting Date: 11/03/2020  
From: Tiffany Antol, Planning Director

Consideration and Adoption of Ordinance No. 2020-25: an Ordinance of the Flagstaff City Council amending Flagstaff City Code, Title 3, Business Regulations, Chapter 3-11 Development Fees, by adopting revised Public Safety development fees.
1) Read Ordinance No. 2020-25 by title only for the final time
2) City Clerk reads Ordinance No. 2020-25 by title only (if approved above)
3) Adopt Ordinance No. 2020-25
Executive Summary:
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.  Municipalities are required to update their land use assumptions and infrastructure improvements plan at least every five years.

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 improvement plan including construction, acquisition, or expansion of public facilities.  Development fees may not be used for repair or maintenance of existing or new public services, or for facility expansions.  Also, the statute requires fees must be collected at the time the building permit is issued and cannot be delayed until the certificate of occupancy.  
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, then either to fund increased demand through general fund revenues, or decrease the level of service.
Policy Impact:
The City is in the process of completing the steps required by the State of Arizona to support continuation of the public safety development fee program.  Staff believes development fees provide a consistent and predictable expense for the construction industry and predictable revenue for the City's public safety capital budget.
Connection to PBB Key Community Priorities/Objectives & Regional Plan:
Priority Based Budget Key Community Priorities and Objectives
Safe & Healthy Community
  • Foster a safe, secure, and healthy community.
  • Provide public safety with the resources, staff and training to respond to community needs.
High Performing Governance
  • Enhance the organization's fiscal stability and increase efficiency and effectiveness.
Regional Plan
Goal CD.1 - Improve the City and County financial systems to provide for needed infrastructure development and rehabilitation, including maintenance and enhancement of existing infrastructure.
Policy CD.1.3. -  Analyze the feasibility of expanding development fees within the City of Flagstaff, which may enable future development to provide for adequate off-site improvements and facilities.
Policy CD.1.5 - Require that new development pay for a fair and rough proportional share of public facilities, services, and infrastructure.
Has There Been Previous Council Decision on This:
The City of Flagstaff adopted police and fire development fees in 2008.  Since then the public safety development fees have been readopted twice: in 2011 and in 2014.

The City Council held a work session on the draft Land Use Assumptions (LUA) and Infrastructure Improvement Plan (IIP) on January 7, 2020.  The City Council then held a public hearing on the draft LUA and IIP on February 28, 2020.  The Council agreed with the direction to schedule the adoption of the LUA and IIP for April 7, 2020.  After the adoption of the LUA and IIP, another work session was held with Council on June 30, 2020, to discuss what fees should be adopted.  A public hearing on the proposed development fees was held on September 15, 2020.
Options and Alternatives:
  1. City Council may adopt the Ordinance as presented with an anticipated effective date of January 17, 2021.
  2. City Council may proportionally decrease the fees presented in the Ordinance then adopt as amended with an anticipated effective date of January 17, 2021.  
  3. City Council may reject the proposed Ordinance and allow the impact fee program to sunset on January 17, 2021.
At the January 7, 2020 work session, City consultant TischlerBise provided an overview of the draft Land Use Assumptions (LUA) and Infrastructure Improvement Plan (IIP).  After receiving public input at the February 18, 2020 public hearing, Council adopted the LUA and IIP on April 7, 2020. 

The Land Use Assumptions (LUA) are found in Appendix C (page 22) of the November 3, 2020 TischlerBise report.  The LUA provides demographic estimates and development projections that are used to prepare the IIP and calculate development fees.  Key land use assumptions for the City of Flagstaff development fee study are population, housing units, and employment projections.  During the next 10 years, citywide development projections indicate an average increase of approximately 560 housing units per year and approximately 130,000 square feet of nonresidential floor area per year.  The LUA provides an analysis of single-family and multi-family residential units by bedroom size.  The average person per household increases as the number of bedrooms increase, thus increasing the demand for services.  This methodology provides a more accurate estimate of the demand generated by residential units.

The report also includes the methodology to develop the IIP for both fire and polices services.  Development fees for the necessary public services required for new development must be based on the same level of services (LOS) provided to existing development in the service area.  There are three basic methodologies used to calculate development fees.  They examine the past, present, and future status of infrastructure.  Reduced to its simplest terms, the process of calculating development fees involves two main steps: 1) determining the cost of development-related capital improvements and 2) allocating those costs equitable to various types of development.
Fire fees will be used to fund facilities, apparatus, and communications equipment as well as the cost of preparing the Fire Facilities IIP and related Development Fee Report.  Polices fees will provide for facilities, vehicles, and communications equipment.  The demand for specific services is summarized through the IIP and schedules of Fire Facilities Development Fees (Figure F11, page 17) and Police Facilities Development Fees (Figure P11, page 28) are found in the report.
Key Considerations:
Development fees assessed provide a predictable standard that all developers and builders can plan for as they consider new projects in our community.  Should development fees not be assessed, a similar financial consideration for maintaining current public safety levels may be considered.  However, negotiations with each developer will occur separately which may result in an unequal and inconsistent burden due to the timing and result of each project.
Community Benefits and Considerations:
Development fees assess new development their fair share of the costs to expand services that will maintain the current level of service.  Alternative funding sources would be required to maintain services or a reduction in the level of service to the entire community could be considered.
Community Involvement:
Inform:  The attached report was published on the City's website as is required by Arizona Revised Statutes.  A public hearing notice was published in the Arizona Daily Sun on Saturday, August 15, 2020.

Consult:  Two public hearings have been held in relation to the adoption of public safety development fees.  The first was specific to the adoption of the Land Use Assumptions and Infrastructure Improvement Plan while the second was in regards to the proposed development fee study.  Throughout this last year, staff has made presentations and provided additional information to the Chamber of Commerce, City of Flagstaff Housing Commission and Planning & Zoning Commission, Northern Arizona Building Association, and the Northern Arizona Association of Realtors.
Expanded Options and Alternatives:
  1. City Council may adopt the Ordinance as presented with an anticipated effective date of January 17, 2021.
  2. City Council may decrease the fees proportionately and adopt the Ordinance as amended with an effective date of January 17, 2021. 
  3. City Council may reject the proposed Ordinance and allow the impact fee program to sunset on January 17, 2021.
Ord. 2020-25
LUA, IIP and Development Fee Study


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