Transcript No Slide Title

Capital Improvement Planning
Training Program
January 11, 2008
Presented By:
Red Oak Consulting
Pat Walker, Principal Consultant
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Capital and Financial Planning Process
STEP 1
RE-EVALUATE
Evaluate Factors Affecting
Capital Requirements
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Customer Demand
Economic Development
Environmental Regulations
Declining Federal Assistance
Deteriorating Infrastructure
Improved Service Quality
Utility and Community Philosophy
STEP 2
STEP 3
Develop
Comprehensive
Facility Master
Plan
Identify Capital
Requirements and
Evaluate Alternative
Financing Methods
STEP 4
STEP 5
STEP 6
Schedule
Capital
Outlays and
Levels of
Service, Units
of Service
Determine
Financing
Costs
and Calculate
Fees
Project
Revenues
and
Financing to
Meet Goals
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Approved
Plan
Common CIP Funding Sources
 Bonds Pay-as-you Go
 Grants
 Inter-fund Loans
 Impact Fees
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What is an Impact Fee?
A One-Time Charge Assessed To New Development
Designed To Reflect The Proportionate Cost Of Capital
Facilities To Serve That New Development
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"A Rose By Any Other Name…"
Is Still An Impact Fee

Investment Fee

System Development Charge

Capital Recovery Charge

System Expansion Fee

Development Fee
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Impact Fees Can Fund:
 Transportation
 Public Safety
(Police/Fire)
 Utilities
(Water/Sewer)
 Library
 Parks & Open Space
 General Government
 Stormwater
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Arizona Revised Statutes § 9-463.05 Highlights
 Revisions Effective Midnight, September 18, 2007.
 No change to Notice of Intent-60 days prior to Public Hearing.
 Development Impact Fee Study (DIF) must be filed at City
Clerk’s Office with Notice of Intent.
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Arizona Revised Statutes § 9-463.05 Highlights
 DIF Report
 Identify methodology used
 Establish relationship between fee and
demand for service
 Automatic adjustment allowed using national index (ENR – CCI) with
30-day notice
 No public hearing required for automatic adjustment
 Requires 30-day Notice of Adjustment
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Arizona Revised Statutes § 9-463.05 Highlights
 Public Hearing must be held 30 days prior to adoption of new or
modified development fee instead of 14 days.
 Development fee assessed becomes effective 75 days after formal
adoption instead of 90 days.
 Impact Fee Funds must be segregated
 Assessed in a non-discriminatory manner
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Arizona Revised Statutes § 9-463.05 Highlights
 Approval of “Infrastructure Improvement Plan” also known as IIP
 Must use fees collected for projects identified in the “Infrastructure
Improvement Plan”
 Required to adopt IIP before fee modifications
 Includes all costs for fees imposed
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What is an IIP?
 Written plan identifying proposed public
service subject to an investment fee
 City’s capital improvement plan, master
plan or combined
 Estimates future necessities for public
services required as a result of future
development and the basis for the estimate
 Estimates time required to finance capital
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What is an IIP?
 Forecasts the cost of:
 Real property
 Engineering and architectural services
 Financing
 Other capital costs and associated appurtenances
 Equipment, vehicles, furnishings
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Impact Fee
Mythbusters
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Impact Fees
 Discourage Growth?
NO
 Are Always Paid By The Home Owner?
NO
 Can Be Based On Your Neighbors’ Fees?
NO
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Impact Fees
 Can Be Used To Recover Annual Cost Of New Police
Officers?
NO
 Can Be Used to Pay Debt Service?
YES
 Are Collected At The Time A Permit Is Issued?
YES
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Impact Fees
 Must Be Spent Within A Reasonable Time Period?
YES
 Are An Allowable Capital Financing Tool?
YES
 Are Rarely Used By Arizona Cities?
NO
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Capital Financing
in Chandler
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Chandler Profile
 Population 247,000
 64 square miles
 Assessed value over $2 billion
 Average household income $72,357
 Property tax rate third lowest among 7
cities
 FTE per 1,000 pop. second lowest
among 8 cities
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Chandler CIP
 $981 million over 2007-2012
 $366 million in 2007-08
 Street and utility projects represent 64% of
total capital expenditures in 2007-08
 Operating budget impact of $24 million in
General Fund over 5 years
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CIP Funding
CIP 2007-2012 REVENUE SOURCES - (5-YearTotal)
Bonds
39%
Current
Revenue
9%
Grants
4%
System
Dev./Impact
Fees
48%
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Funding Realities
 Dedicated property tax for bonds
 Debt financing spreads and evens out capital
costs
 SDFs make growth pay for itself but those
revenues lag actual spending
 Good credit ratings make GO financing more
attractive for revenue-producing projects
 Pay-as-you largely reserved for economic
development and controversial projects
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Funding in Near Term
 Higher borrowing costs (interest rates)
 Continued slowdown in SDF collections
 Recession will undermine sales and
property tax revenue growth
 Operating budget impact of projects and
operating budget priorities will likely
result in deferred projects
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Questions and Discussion
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