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Rate shock

Council approves higher water impact fees; area builders might sue

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Posted: Tuesday, September 9, 2008 11:00 pm | Updated: 8:01 am, Thu Mar 24, 2011.

With one vote in opposition, the Oro Valley Town Council has tripled the town’s levy for water development impact fees.

At its Sept. 3 meeting, the council also approved a series of new impact fees to pay for parks, police, libraries, transportation and general government functions.

All together, the new and increased fees total $11,385.

Mayor Paul Loomis cast the lone opposing vote. Councilman Al Kunisch was absent.

“At this time, with the economy, now is not the time to add additional charges to new residents,” Loomis said.

The town charges the fees to homebuilders, the returns from which fund public projects and capital expenses.

Fees for water would help pay for water lines, reclaimed water systems and the eventual construction of Central Arizona Project water delivery and treatment facilities.

Town leaders want to have the impact fees in place if a proposed annexation of 14 square miles north of town goes through. The much-discussed Arroyo Grande annexation could bring about the construction of 15,923 new homes. With new impact fees in place, construction of those homes in an annexed Arroyo Grande could bring in an estimated $222.16 million in residential impact fees. That figure is based on impact fees totaling $13,952 that will be charged for each new home.

Higher fees sparked some anger in the homebuilding and business communities.

“It just seems like this council wants to send the message that we don’t want any businesses and we don’t want any new homes,” said builder Steve Solomon, who owns Cañada Vistas.

Councilman Bill Garner called the reaction from builders “rate shock” because impact fees changed little in almost a decade.

“We can no longer afford to do business like that,” Garner said.

Councilman Barry Gillaspie disputed the claim that Oro Valley has become hostile to businesses and developers. He pointed to the town’s dwindling water resources as part of the reason for the new fees. The councilman said that it costs money to build the needed water infrastructure, especially the CAP delivery and treatment systems. New development has to pay to accommodate new growth that benefits developers, Gillaspie said.

Some builders accused the council of not honoring a agreement to phase in water fee increases over five years.

The town council and the Southern Arizona Home Builders Association struck the agreement in June 2007. Last Wednesday, the council bypassed the annual increases in favor of implementing the peak water fee amount of $5,182.

Under the agreement, homebuilders would not have paid that much until 2011.

A separate water impact fee of $2,567 to fund infrastructure needs also was approved in June 2007.

“What has changed?” Solomon said. “Why does this council want to renege?”

Council members and Town Manager David Andrews maintain that the homebuilders and SAHBA failed to uphold their end of the bargain.

“This town doesn’t trust the agreements that we had,” Gillaspie said.

The alliance began to crumble earlier this year when a SAHBA-backed bill that would have changed how local governments impose and collect development impact fees moved through the state legislature.

Town officials claimed that authors of the bill, including SAHBA, wanted to nullify the phased increases with a two-year moratorium.

SAHBA representatives deny the claim. Previously, they have said that the bill was meant to keep impact fees constant during construction projects. Group representatives said such constancy would prevent local governments from changing the fees halfway through projects.

SAHBA officials also said they would consider suing Oro Valley if the council imposed the new fees.

In an Aug. 28 letter to the council, SAHBA President Ed Taczanowsky wrote that the group’s lawyers think the proposed fees violate state law.

A study on impact fees by town consultant TischlerBise failed to account for potential offsets to the fees, Taczanowsky contends. Town officials based the new impact fees on recommendations from the TischlerBise report.

Oro Valley should have looked to use state-shared revenues, bed taxes and other funding sources as a way to lessen the burden on new-home buyers, Taczanowsky said.

Councilwoman Paula Abbott defended the council’s move to increase fees and the conclusions in the TischlerBise study.

“It’s legally defensible,” Abbott said. “If it wasn’t, they wouldn’t have proposed it.”

Impact fees

The Oro Valley Town Council voted last week to raise water impact fees and launch new fees for new home construction. New fees for single-family homes are:

• $2,699 for parks and recreation

• $694 for libraries

• $513 for police

• $389 for other government needs

• $1,908 for transportation projects

• $7,749 for water*

• Total: $13,952

*Includes two categories of water-related fees. The figures represent the cost for a single-family home with a 5/8-inch water meter. More than 80 percent of Oro Valley Water Utility customers have that size meter. The existing water fees totaled $4,283 for a single-family home.

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