Looking for a financial incentive to begin development within the next two years? Recently approved House Bill 2008 freezes municipal impact fees, residential or commercial building code changes, and construction contracting tax increases for two years, effective June 29, 2009.
Development Fees. HB 2008, Section 41 establishes a moratorium prohibiting a municipality from imposing any new municipal development impact fees or increasing existing impact fees adopted under A.R.S. § 9-463.05. The moratorium applies only to cities and towns, not to counties. It runs from June 30, 2009 through June 30, 2011. It also appears that the moratorium may apply to automatic adjustments to impact fees based on nationally recognized indices authorized by A.R.S. § 9-463.05(G).
At least three jurisdictions— Casa Grande, Chandler and Gilbert—raised their impact fee rates after the June 29 deadline. Builders or developers who paid the increase should be eligible for a refund of the rate increase only.
Development Fees, Part 2. In addition to the two-year impact fee moratorium that ends on June 30, 2011, HB 2008, Sections 5, 45 and 46 amend A.R.S. § 9-463.05(F) to prohibit municipalities from assessing new or increased municipal development impact fees for two years after a development has received final approval of a site plan or final subdivision plat. The legislation again applies only to cities and towns, and takes effect on January 1, 2010.
This statutory amendment means that beginning on January 1, 2010, a developer who obtains municipal approval of a site plan (for nonresidential or multi-family development), or a final subdivision plat (for any development), may not be assessed any new impact fees or increases to existing impact fees for 24 months after the plan or final plat approval date as long as the developer makes no material changes to the site plan or final plat. During that 24-month period, the developer can begin and complete construction without paying new impact fees or any increases to existing impact fees. The developer may not restart the 24-month clock by renewing or amending the site plan or final plat. This amendment does, however, expressly allow municipalities to automatically “adjust” their impact fees based on a nationally recognized index applicable to the costs of the public services that are the subject of the fees.
Building Codes. HB 2008, Sections 6 and 47(a) create a new A.R.S. § 9-805 which places a moratorium on any changes (including both new and modified provisions) to building codes or related codes for any residential or commercial building receiving final site plan or subdivision plat approval, Planned Area Development (PAD) approval or similar approval before June 1, 2009. Related codes are likely to include construction-related codes such as fire codes, electrical and plumbing codes, residential codes, energy conservation codes, mechanical codes, and fuel gas codes, depending on individual municipal adoptions. The moratorium runs from June 30, 2009 through June 30, 2011, and again applies only to municipalities. The only exception to the code change moratorium is for those code changes required to receive federal stimulus funding.
This moratorium means that a municipality may not apply new or modified building and related code provisions to a residential or commercial (but apparently not industrial) building that received final site plan, final subdivision plat or PAD approval before June 1, 2009. However, buildings receiving final site plan or plat approvals after May 31, 2009, will be required to conform to any new or modified building and related code provisions.
Anecdotally, the building and related code provisions that represent significant cost increases for builders include the 2009 International Residential Code requirement for fire sprinklers in all new single family homes, and certain energy efficiency increases required by the 2009 International Energy Conservation Code. Some estimates predict the fire sprinkler requirement alone may increase the price of a new home by an average of about $3,000.
Construction Contracting Tax. Finally, HB 2008, Section 42 places a moratorium on municipal elections to increase the construction contracting tax rate. The moratorium also runs from June 30, 2009 to June 30, 2011, but does not apply to any tax rates adopted before June 1, 2009. This means that cities and towns may not raise their current construction contracting tax for two years.
This Client Alert was prepared by Lewis and Roca’s Land Use and Zoning Section which regularly advises clients about the impact of development fees, building/construction code changes and transaction privilege taxes on their developments. This publication was prepared for informational purposes only and is not legal advice. Readers should seek professional legal advice on matters involving these issues.
View the entire client alert in PDF format here.