(October 12, 2016) – Traditional "Large Lot Zoning" is "Greener" than "Smart Growth" within Urban Growth Boundaries . . . Copyright 2009 – 2016 . . . Tom Lane . . . Photographing California, Arizona, Nevada, New Mexico, Colorado, Utah, Oregon, and Seattle, Washington.
SIGN – Impact FEE HEARINGS – Cave Creek, Arizona
(February , 2012, Tom Lane) 2011 Year in Review – Many smart growth principles of smart growth were canceled in several western states, including Arizona, California, and in both Albuquerque and Santa Fe, New Mexico. However, many aspects of smart growth remain, untouched by various 2011 legislative and judicial actions. Nevertheless, the legislative and judicial actions in Arizona and California slashed funding for smart growth principles in every municipality in the state, even canceling smart growth in cities who embrace the concept.
(For the New Mexico impact fee reductions, click here.)
Arizona Reduces Some Impact Fees
In April, 2011, Arizona Governor Jan Brewer signed SB-1525, sponsored by Arizona State Senate President Russell Pearce (R-Mesa). SB-1525 places strict restrictions on how impact fees may be assessed by local governments. Depending on the city, SB-1525 either cancels impact fees, and/or impact fee rates. In addition, the bill requires public hearings for impact fees, or else a city must cease collecting fees. The bill also prevents cities from assessing additional fees for two years after they approve a development. In addition, SB 1525 places a moratorium on additional impact fee legislation until the 2015 legislative season.
Senator Pearce sponsored this bill since impact fees are a tax on the Arizona homebuyer, raising the cost of housing. Impact fees contribute to unaffordable housing, since developers simply pass the total cost of the impact fee to the homebuyers.
Impact fees are a basic principle of “smart growth.” Many proponents of “smart growth” favor impact fees, since this makes housing too expensive, and this reduces sprawl – forcing more people to rent towering condos, increasing profits for landlords.
Impact fees are yet another “regressive” smart growth tax policy from the Democrat party, who erroneously claims to represent affordable housing for the poor and middle class.
SB 1525 Prevents Use of Impact Fees for Non-Essential Services
SB 1525 prevents the use of impact fees for “non-essential services,” such as art museums, aquariums, aquatic centers, cultural facilities, golf courses, horse ranches, and zoos. The bill also limits the size of libraries to less than 10,000 square feet, limits recreation facilities to under 3000 square feet, and limits the size of parks to less than 30 acres.
SB 1525 allows impact fees for “essential public services,” such as water and wastewater facilities, flood control facilities, libraries under 10,000 square feet, road improvements, fire and police, and parks under 30 acres.
Cities “Addicted” to Impact Fees Complain about S.B. 1525 in the Papers
Impact Fees are certainly an addiction, since once a city starts taxing developers, they’re dependent on the revenue from developers. Many Arizona cities have complained to newspapers about how their development of new public facilities will be affected. The Town of Queen Creek, southeast of Phoenix, in their S.B. 1525 Fact Sheet makes a good point when they point out that the bill “eliminates the ability of locally elected officials to determine what constitutes a necessary public service for their communities, despite recommendations that may be made by citizen committee[s].”
Therefore, I am sympathetic to their position, since I do not advocate statewide or regional laws for smart growth and impact fees. Cities should be able to set their own impact fee rates. And, state law should have no bearing on how much a city charges. Queen Creek continues to strongly advocate for local control of their impact fees:
“As it is proposed, Senate Bill 1525 no longer allows locally elected officials to determine what constitutes a necessary public service for their communities. If the residents of city determine they want infrastructure and are willing to fund it, they have the right to make that decision locally. The Town of Queen Creek currently produces an annual report that spells out how development fees are being spent. This report is required by statute, and we have never been accused of mishandling these “
“Why should developers have control over a community’s infrastructure? Shouldn’t this be in the hands of elected officials, residents, and local business owners? Queen Creek has already formed a development fee working group that includes residents, local business owners, the Chamber of Commerce, representatives from the home building industry, and commercial developers. They serve as an advisory committee to the Council, but it does not put the Town’s future infrastructure needs in the hands of those whose primary interest is to make a profit.”
But on the other hand, I’m also neutral on this issue, since cities who assess unreasonable impact fees are denying the American dream of homeownership to their residents. For example, the City of Payson, Arizona (northeast of Phoenix) charges $15,000 in impact fees per residential unit, and much higher for commercial establishments. That’s nearly three times the amount in Tucson of $6,500 per residential unit.
Impact fees are even higher than Payson, at $20,000 a year in Gilbert for each residential unit. The new rules will prohibit Gilbert, Arizona from using $63 million in impact fees for ineligible projects under S.B. 1525, including two aquatic centers, a new riparian preserve, and two large parks, since these projects can no longer be paid for with impact fees. Queen Creek had also planned to build tennis courts and large parks with impact fees.
It’s clear that statewide limitations on impact fees in every city is not good public policy. Since house prices vary from suburb to suburb around Phoenix, then it’s best to let local governments “compete” for the most affordable housing, the best incentives for new businesses, and other factors that lead to economic success. Indeed, my extensive research on Bend, Oregon, a place that really wants to grow, indicates that state initiated punitive growth management and an urban growth boundary have destroyed the local housing market, and slowed down the development of commercial and high-tech firms in Central Oregon.
January 1, 2012: Official Date of Compliance with SB 1525 for Local Arizona Cities
The bill requires local cities to comply with SB 1525 by January 1, 2012. On January 1, Peoria, Arizona, NW of Phoenix, impact fees by 7% to 11%, with new fee amounts of $11,000 to $17,000 per residential unit. This occurred with the elimination of two of fourteen impact fees – the solid waste and general government impact fees.
For Tucson, they eliminated the general government impact fee, and reduced the police and fire fees, with no changes to the road or parks fees. The new total of impact fees is $5,716, down by 12%.
Phoenix, Arizona’s largest city, eliminated two of eleven impact fees, the solid waste and equipment repair fees. The city will have to stop acquiring land for its Sonoran Preserve. That’s unfortunate, since Phoenix needs more parks, and has plenty of vacant land that could be converted to parks.
1 – “AN ACT AMENDING SECTION 9-463.05, ARIZONA REVISED STATUTES; RELATING TO CITY AND TOWN DEVELOPMENT FEES. (S.B. 1525)
2 – Town of Queen Creek Senate Bill 1525 Fact Sheet, www.queencreek.org
3 – Prescott Daily Courier, Brewer Signs Compromise Bill http://www.dcourier.com/Main.asp?SectionID=1&SubSectionID=1&ArticleID=93183
4 – New State Law Sharply Limits Impact Fees, Payson Roundup
5 – Tucson Impact Fee Memorandum http://cms3.tucsonaz.gov/sites/default/files/dsd/Online-Services/mand_c_if_memo_1-1-12.pdf
California Cancels Urban Renewal – 400+ Redevelopment Agencies
Due to the state fiscal crisis and 27 billion dollar deficit, Gov. Jerry Brown (D) and the Democrat controlled legislature canceled over 400 local redevelopment agencies. In December, 2011, the State Supreme Court ruled in favor of the law canceling 6 billion in funding for the RDAs. The court ruled that these agencies can no longer exist after February 1, 2012 –
(California Redevelopment Assn. v. Matosantos Assembly Bill 1X 26)
“The dissolution measure, is a proper exercise of the legislative power vested in the Legislature by the state Constitution. That power includes the authority to create entities, such as redevelopment agencies, to carry out the state’s ends and the corollary power to dissolve those same entities when the Legislature deems it necessary and proper.”
Some of these agencies were created in 1945 to eliminate “blight” and have done good work building affordable housing. However, “smart growth” principles were incorporated by many of these agencies, who contracted with the usual smart growth contractors and consultants. Therefore, the entire system became corrupt, and the agencies began building commercial establishments, big box stores, and sports stadia.
Specifically, these RDAs use property taxes to pay developers to build in blighted areas. Due to the fiscal crisis, the Governor and legislature decided to cut funding for the entire program – $6 billion a year – and this money (from property taxes) now goes to schools and public safety. AB 1X26 and AB 1X27 secured funding for “core government services,” including fire protection, police, and schools.
The Supreme Court ruling dissolving the agencies resulted from the redevelopment agencies, various cities, the California Redevelopment Association, and the League of California Cities, filing a lawsuit against the state since Governor Brown signed a bill dissolving the agencies. These agencies claimed that closing RDAs violated California’s responsibility to fund local efforts fostering affordable housing and economic development. Currently, 1.36 billion on property taxes (out of 6 billion for RDAs) funds affordable housing for low wage workers, the elderly, and those on SS and SSI. The ruling stated that the legislature had both the power to create the agencies (in 1945) and terminate them (in 2011).
California Cities Will Face Financial Problems
In many cases, cities loaned money to their RDAs, to avoid the costs of borrowing from private investors (they subsidized city redevelopment with bond payments). How will cities find the money to pay back the RDAs? So, the cities will have to cut spending, somewhere.
Therefore, just as with the Arizona impact fee reduction bill, the cancellation of RDAs will cause problems for local governments. Clearly, state governments should never be involved in construction, planning, or setting impact fee rates. Both California and Arizona cities will be forced to cut spending or raise taxes due to statewide actions.
Affordable Housing? Or, Subsidies for Smart Growth Consultants and Big Developers?
As stated above, 1.36 billion out of the 6 billion that was cut still funds affordable housing. Yes, unfortunately, the Democrat controlled California legislature and governor cut affordable housing for the poor. This is irresponsible and is indicative of “smart growth” Democrats and Republicans who only care about the elite rich, and don’t care about the poor. Indeed, it was Romney a few days ago who said that he doesn’t care about the poor, only the middle class. Why do Americans elect politicians like Jerry Brown and Willard Mitt Romney who don’t care about the poor?
However, the RDAs in 1945 were not meant to pay for big box retailers and auto malls. Unfortunately, Steven Greenhut of the Pacific Reserach Institute writes in City Journal that the RDAs build everything from hotels to shopping malls, even using eminent domain. Greenhut refers to the RDAs as a “secret” and “unknown” government, supported by lobbyists in Sacramento, including lawyers, developers, and bond brokers. RDAs can even take private property with eminent domain – and sell it “for a discount” – to other private parties. The agencies grew substantially since 1978, when Proposition 13 slashed property taxes. More than half of the state’s RDAs formed after 1978.
Greenhut continues by stating that project areas are supposed to expire, but rarely do. Attorneys who specialize in the redevelopment process make sure that project areas never die. And, the size of project areas has grown from 10 to 100 acres 60 years ago, to thousands of acres today (even well over 20,000 acres).
Overall, RDA officials claim that they’re providing economic development, affordable housing, sport stadia, and new jobs, yet all of this is well beyond the original and honorable goal of removing “blight.” Greenhut says:
“The lesson: deregulation and private enterprise work better than central planning. Developers don’t need subsidies and eminent domain to build in older cities; they need relaxation of burdensome government rules and a reduction of taxes, which tend to be higher in urban cores. And, they need the freedom to develop their own plans, rather than blueprints from city hall planners.”
Will RDA controlled Real Estate Be Liquidated?
While it’s possible that redevelopment could become established again in the California legislature, the RDAs own a lot of real estate. It’s possible that it could be sold to private individuals for redevelopment. Chriss Street in his article quotes Seth Merewitz, Municipal & Redevelopment Law partner at Best Best & Krieger:
“If redevelopment is not reinstated in some fashion by the legislature, then the successor agencies will be charged with meeting enforceable obligations entered into by the redevelopment agency as well as performing many other wind down functions. Moreover, the successor agencies will begin the process of selling off all of the commercial, industrial, residential and even vacant land assets currently held by redevelopment agencies across California. This inventory of property for sale throughout the state will present vast opportunities for investors to pick up real estate assets and trigger future economic development or add more real estate inventory to a flooded and depressed market.”
Land intended for redevelopment remains at risk, and local politicians who know nothing about land use economics may have no clue how to manage it. Chriss street writes:
“Given the speculative nature of real estate development, prospectus for redevelopment bonds were loaded with risk factors; including decline in the value of real estate, failure of the project to generate increased tax increment, and changes in California state law. Given that local cities and counties generally dominate and control the redevelopment districts, local politicians also appear to substantial liability regarding the activities of the districts. Unfortunately, all three risk factors identified in the prospectus have now occurred.”
More Court Battles Expected This Year
A client note from the law firm of Morrison and Forester says there will be more court battles this year. This is a result of the factors that Chriss Street discusses, along with their own list of “unanswered questions,” due to millions of dollars at stake.
“Unanswered Questions. The decision merely upheld the power of the legislature and governor to do away with redevelopment agencies. It scarcely acknowledges critical questions regarding existing obligations and assets and the dissolution process that will play out in the coming months. Some of these include (For their list, refer to the PDF link at the bottom of this section.)
Their note says:
“There has been speculation that there may be an emergency legislative solution to rescue a new form of limited redevelopment, given the far-reaching consequences of completely ending redevelopment activities in the state. However, redevelopment agencies’ political power is at a very low ebb. The governor’s persistent lobbying, the enactment of the bills, the passage of time, and the decision in California Redevelopment Assn. v. Matosantos make revival problematic.”
And, most importantly:
“In the meantime, however, litigation over the implementation of A.B. 1X 26 seems almost certain. With this much money at stake, it’s hard to imagine that cities, developers, or investors will abandon their interests without a fight, or that school districts and counties will let go easily of the redevelopment money that seems right in their grasp.”
Not only that, but the Democrats and the California Supreme Court just turned the lights off for millions of poor and disabled in unaffordable housing projects.
Is the Green Party the Solution?
It’s interesting to note that the “socialistic” green party would probably have done a much better job at handling the RDA issue than California Democrats. Their party platform advocates for smart growth principles, however, they are much better than the other two parties for social justice and equal rights.
Since the Democrats have failed to manage money for affordable housing in California, then I propose that the Green Party take over adjudication of RDA financing in California. Even though I disagree with the Green Party platform about smart growth principles, there is always a need for government built affordable housing since the poor will always be among us. Given the California State budget crisis, The Green Party could and probably would be fiscally responsible, cutting the 6 billion down to the minimum of 1.6 billion that was used for affordable housing. Senate Bill 654 failed to pass the California legislature to save this 1.6 billion a few weeks ago.
1 – Summary of the Court Ruling, California Continuing Education of the Bar (CEB) http://blog.ceb.com/2012/01/11/californias-redevelopment-agencies-are-dead-but-they-may-haunt-us/
2 – More Lawsuits in 2012, following the Dissolution of RDAs, from law firm Morrison and Forester: http://www.mofo.com/files/Uploads/Images/120104-Redevelopment-Agencies.pdf
3 – Chriss Street Column, http://www.chrissstreetandcompany.com/2012/01/california-redevelopment-agencies-start-defaulting/
4 – Stephen Greenhut Column, http://www.city-journal.org/2011/21_2_california-redevelopment-agencies.html
5 – Green Party Platform, http://www.gp.org/committees/platform/2010/index.php
6 – California Legislature Refusal to pass 1.6 Billion for Affordable Housing
7 – California Court Ruling Dissolving RDAs http://www.scribd.com/doc/76732281/CA-Supreme-Court-RDA-Ruling