12.1. DEVELOPMENT FEES.

• Jurisdiction: Arizona

12.1. Development fees.

Development fees, or development impact fees, "are charges levied by local governments against new development in order to generate revenue for capital funding necessitated by the new development." Home Builders Ass'n v. City of Scottsdale, 179 Ariz. 5, 875 P.2d 1310 (App. 1993) (quoting J.C. Juergensmeyer & R.M. Blake, Impact Fees: An Answer to Local Governments' Capital Funding Dilemma, 9 Fla. St. U.L. Rev. 415, 417 (1981)), aff'd 183 Ariz. 243, 902 P.2d 1347 (App. 1995), approved in part 187 Ariz. 479, 930 P.2d 993 (1997), cert denied, 117 S. Ct. 2512, 138 L. Ed. 2d 1015 (1997).

12.1.1. Authority of municipalities.

Municipal development fees are governed by A.R.S. § 9-463.05, which was substantially rewritten by Laws 2011, Chapter 243, effective January 1, 2012. It authorizes 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, financing and professional services required for the preparation or revision of a development fee. A development fee that was adopted before January 1, 2012 may continue to be assessed only to the extent it will be used to provide a necessary public service as defined in A.R.S. § 9-463.05(T)(7) and must be replaced by a development fee imposed under A.R.S. § 9-463.05 on or before August 1, 2014. A.R.S. § 9-463.05(K). A municipality may continue to assess a development fee adopted before January 1, 2012, for any facility that was financed before June 1, 2011, subject to restrictions set forth in A.R.S. § 9-463.05(R). An owner of real property for which a development fee has been paid after July 31, 2014, is entitled to a refund under the circumstances set forth in A.R.S. § 9-463.05(H), (I) and (J), including that for water or wastewater facilities, any part of the development fee not spent within fifteen years after the fee has been paid, and for all other necessary public services, any part of the development fee not spent within ten years after the fee has been paid. A.R.S. §§ 9-463.05(H)(3).

Home Builders Ass'n v. City of Apache Junction, 198 Ariz. 493, 11 P.3d 1032 (App. 2000) (former, more permissive version of statute permitting municipality to assess development fees for "necessary public services" did not include fees for the funding of public schools)
Home Builders Ass'n v. City of Scottsdale, 187 Ariz. 479, 930 P.2d 993, cert. denied, 521 U.S. 1120 (1997) (interpreted the former, more permissive version of A.R.S. § 9-463.05 to authorize a development fee that benefits the developer of the property)

12.1.2. Authority of counties.

County development fees are governed by A.R.S. § 11-1102, which was modeled after the municipal development fee statute, A.R.S. § 9-463.05. A.R.S. § 11-1102 was substantially rewritten by Laws 2016, Chapter 326, effective January 1, 2017. Like the municipal development fee statute, it authorizes the county to assess development fees to offset costs to the county associated with providing necessary public services to a development, including the costs of infrastructure, improvements, real property, engineering and architectural services, financing and professional services required for the preparation or revision of a development fee. A development fee that was adopted before January 1, 2017, may continue to be assessed only to the extent it will be used to provide a necessary public service as defined in A.R.S. § 11-1102(V)(7) and must be replaced by a development fee imposed under A.R.S. § 11-1102 on or before January 1, 2021. A.R.S. § 11-1102(M). A county may continue to assess development fees adopted before January 1, 2017, for any facility that was financed before June 1, 2016, subject to restrictions set forth in A.R.S. § 11-1102(T). An owner of real property for which a development fee has been paid after December 1, 2020, is entitled to a refund under the circumstances set forth in A.R.S. § 11-1102 (J), (K) and (L), including that for water or wastewater facilities, any part of the development fee not spent within fifteen years after the fee has been paid, and for all other necessary public services, any part of the development fee not spent within ten years after the fee has been paid. A.R.S. § 11-1102(J)(3).

12.1.3. Statutory limitations on development fees.

As of 2017, municipalities and counties are subject to substantially the same restrictions. In the following list, the A.R.S. Title 9 references are to the municipal statutes, and the A.R.S. Title 11 references are...