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10000 N. El Mirage Rd., El Mirage 85335 623-972-8116; TDD 623-933-3258 www.cityofelmirage.gov MEMORANDUM TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL THRU: J. CRYSTAL DYCHES, CITY MANAGER FROM: ROBERT NILLES, DEPUTY CITY MANAGER SUBJECT: EXECUTIVE SUMMARY – DEVELOPMENT IMPACT FEE STUDY DATE: DECEMBER 12, 2025 The ten-year Infrastructure Improvements Plan (IIP) identifies approximately $29.4 million in capital needs for Fire, Police, Parks and Recreation, and Streets, plus an additional $5.0 million for wastewater expansion, totaling $34.4 million. If the maximum legally allowable development impact fees (DIFs) were adopted, new development would fund approximately $14 million of these needs. The remaining $17.2 million for General Fund categories and $3.2 million for wastewater would be the responsibility of the City. Police and Streets improvements are fully funded under the DIF model, driven by significant projected nonresidential development in the Land Use Assumptions. Fire and Parks and Recreation would require substantial City contributions even with DIFs in place. Adoption of DIFs also triggers long-term operational commitments that may require expanded staffing and recurring costs not included in the current five-year forecast. Existing developer credits for Microsoft and TI Cold will reduce Streets fee revenue in the early years of implementation. Council may either direct staff to begin the statutory adoption process or conclude the evaluation based on the financial, operational, and competitiveness considerations outlined in this memo. This assessment does not recommend either outcome. Its purpose is to present the implications of each path, supporting informed policy direction. CAPITAL FUNDING OUTCOMES Fire Fire represents the highest expenditure of the General Fund. A second station and apparatus also create new staffing requirements not included in the forecast. • Capital need: $18.6 million • DIF projected revenue: $3.9 million • City funding required: $14.7 million • DIF share: 21 percent Parks and Recreation The youth center component carries a significant General Fund commitment and ongoing operational expenses. The park amenity component can be adopted independently and requires no General Fund capital. • Capital need: $3.5 million • DIF projected revenue: $0.93 million 2 • City funding required: $2.56 million • DIF share: 27 percent Police Capital improvements are fully funded by new development, but personnel required for new patrol units and facilities create recurring General Fund costs. • Capital need: $4.4 million • DIF projected revenue: $4.4 million • City funding required: $0 • DIF share: 100 percent Streets This category uses the buy-in method. Eligible projects will need to be identified. Developer credits from Microsoft and TI Cold may reduce early-year collections. • Capital need: $2.87 million • DIF projected revenue: $2.87 million • City funding required: $0 • DIF share: 100 percent Wastewater The equalization basin is funded through the adopted rate plan. Implementing the fee may allow future rate adjustments. • Capital need: $5.0 million • DIF projected revenue: $1.8 million • Utility funding required: $3.2 million • DIF share: 36 percent Across the General Fund categories, DIFs cover approximately 41 percent of capital needs. The remaining 59 percent would require City funding over the ten-year period. OPERATIONAL AND PERSONNEL IMPACTS Capital construction is only part of the long-term cost. Full implementation of Police, Fire, and Parks components could require as many as 50 additional employees, including firefighters, sworn officers, recreation, and support staff. These recurring costs are not included in the current five-year forecast. Property tax revenue from new development will not significantly offset these obligations. ADMINISTRATIVE OBLIGATIONS If adopted, DIFs require ongoing compliance with ARS 9-463.05. The City must track each fee category, manage reimbursements, apply developer credits, publish required reports, spend funds within statutory timelines, and monitor project delivery. The City must also construct the IIP projects within legally required timeframes, regardless of whether fee collections fully materialize. These responsibilities may require additional staff capacity. COMPETITIVENESS CONSIDERATIONS Commercial and industrial development in the West Valley is increasingly competitive. DIFs ranging from $440 to $6,094 per 1,000 square feet may influence site selection decisions relative to neighboring cities. Wastewater fees apply only in the northern service area, resulting in uneven application across the City and potential impacts on specific locations where infill development is desired. The following table provides 3 projected cost of DIFs on recent or planned developments. Most commercial developments in the city’s wastewater territory would need a two-inch water meter ($6,058 wastewater DIF) while most residential developments would use a ¾ inch water meter ($1,137 wastewater DIF). Residential Fees per Development Unit Development Type Fire Street Parks & Recreation Police Proposed Fees per Developm ent Size (Sq. Ft.) Subtotal Fee Single Family 1,250 to 1,999 $2,814 $1,105 $2,387 $1,492 $7,798 1800 $7,798 Nonresidential Fees per Development Unit (1,000 Sq Ft) Development Type Fire Street Parks & Recreation Police Proposed Fees per 1,000 Sq. Ft. Developm ent Size (Sq. Ft.) Subtotal Fee Industrial – Data Center $137 $120 $21 $162 $440 200000 $88,000 Commercial – Restaurant $1,951 $1,702 $135 $2,306 $6,094 5000 $30,470 Office & Other Services - Clinic $866 $756 $206 $1,024 $2,852 20000 $57,040 Institutional – Hospital, Church $861 $752 $181 $1,018 $2,812 10000 $28,120 PROS AND CONS OF PROCEEDING Pros • Growth contributes directly to the cost of growth. • DIFs fully fund Police and Streets capital needs. • Establishes a structured and legally compliant growth-based capital planning framework. • May reduce wastewater rate pressure. Cons • City contributions exceed DIF revenue in several categories. • Most DIFs require service expansion to maintain level of service. • Operational costs for new facilities and vehicles fall entirely on the General Fund. • Administrative requirements add ongoing workload and complexity. • Potential competitiveness impacts for commercial and industrial development. • Fire and Parks fees cover a small share of project costs. DECISION OPTIONS FOR COUNCIL Option 1: Proceed with the statutory adoption process This initiates the required timeline under ARS 9-463.05. If Council elects to proceed, staff will return with the formal Land Use Assumptions, Infrastructure Improvements Plan, and draft fee schedule to begin the adoption process. 4 Option 2: Conclude the evaluation Under this option, the City would continue to fund capital needs through traditional means such as developer- provided infrastructure, the General Fund, existing rate plans, grants, and prioritization within the Capital Improvement Plan. Both options are viable. The distinction is whether Council prefers a growth-based cost-sharing model that brings both capital benefits and capital and operational obligations, or a traditional model that preserves flexibility but places a larger share of capital costs on the City. NEXT STEPS Two questions need to be answered: 1. Which, if any of these improvements/projects (including operational costs) do you want constructed? 2. Do you want to see growth pay for any portion of the improvements/projects you want constructed? If the answer to these questions is no, staff requests Council guidance to suspend the evaluation process at this point. If the answer is yes to any part of these questions, staff requests Council guidance to proceed with the statutory steps required to implement development impact fees under ARS 9-463.05