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System Development Fee Update, 2022-2032 Land Use Assumptions & Infrastructure Improvements Plan City Council Conference Room December 4, 2023 Work Session Agenda • System Development Fees background • Program requirements • Fee Category Summary • Report overview • Discussion of each fee category • SDF permit examples: • Fee Structure – Current to Proposed • Remaining Project Timeline SDFs have allowed Chandler to keep taxes low over the years. Provided a capital funding source in lieu of selling bonds. Examples of arterial streets, fire stations, police facilities, libraries, parks, and utilities projects completed with SDFs: Why Charge System Development Fees (SDFs)? One of the 1st cities to implement the full range of SDFs “Impact Fees” in 1997 in an effort to ensure growth pays for growth. SDF’s funded growth related infrastructure through the years, which was and still is paid by developers at the time of permitting. If not for SDFs, Chandler would have had to find an alternative revenue source (e.g. additional bond elections & related taxes, etc.) to fund needed infrastructure as the city grew and continues to grow. Desert Breeze Police Substation; Tumbleweed, Snedigar, Arbuckle, Roadrunner, Chuparosa, and Espee parks, Fire Stations 2-11, Mesquite Groves Aquatic Center, Water/Wastewater Mains, Wells, and Other Infrastructure, and all Major Arterial Street widenings. • SDF process governed by A.R.S. §9-463.05 • Developers pay SDFs during the building permit process • One-time funding for growth-related capital infrastructure • Cannot be used to fund repairs or operations & maintenance • Cannot be used for capital that is not directly attributed to growth • Must be infrastructure that is a necessary public service and that directly provides a beneficial use to the development Background Program Requirements A.R.S. requires the following to ensure transparency and oversight • Complete the LUA and IIP report as a precursor to Fee Updates based on methodology outlined in A.R.S.* • Requires update every five years – legally required by January of 2024 • Last LUA & IIP Adoption - January of 2019 • Includes an updated fee schedule • Public outreach and Council approval process • Prepare an “Annual Report” and post online • Includes actual results for the previous year • Complete Biennial Audit* • Results require a Public Hearing * Must be Prepared by a Qualified Professional Water Fire Reclaimed Water Wastewater Police Arterial Streets Building Permits Parks - Three Service Areas Public Buildings Fees Charged by Equivalent Dwelling Unit (EDU) or SQ FT Fees by Meter Size Fee Category Summary • Infrastructure Improvement Plan (IIP) • Updated growth projects (6/30/2023 CIP), current and future costs • Updated outstanding debt for each fee category – each category carries debt • Land Use Assumptions (LUA) • Updated LUAs reflect changes in average household size, EDU’s compared to prior report, and changes in land classification • City projections updated - EDUs for residential and nonresidential square footage • EDUs increased (table 7, page 20) • Nonresidential square footage decreased (except Industrial, table 10, page 22) Report Overview 2018 2022 Total Residential Existing Average Equivalent Dwelling Units (EDUs) 107K 114K Build-Out Average EDUs 122K 130K Total Non- Residential Existing Sq Ft 74M 85M Build-Out Sq Ft 119M 113M Land Use Assumptions Citywide Comparison • Fee calculations – calculated by fee category & service area • Mix of increases and decreases across fee category and land classification • Fee development methodology – uses the lowest calculated fee of: • Existing cost per EDU • Ten-year cost per EDU • Buildout cost per EDU • The city will collect enough impact fee revenue to cover ALL applicable costs by the last permit Report Overview Pledged Outstanding Internal Debt as of June 30, 2022 Total Outstanding Debt $329.2M Streets $34.5M Parks $8.7M Public Buildings $1.8M Fire $3.6M Police $2.0M Water $113.3M Wastewater $140.9M Reclaimed Water $24.4M Annual SDF Permit Revenue collected fluctuates between $15.5M to $23M over the last 5 years Arterial Streets Arterial Streets - Highlights • Primary function of Arterial Streets is to move traffic within and through the community • This fee considers: Vehicle Miles of Capacity, Vehicle Miles Traveled, Peak Travel Hours, Trip Lengths & Rates, EDUs, and other financial factors such as Fund Balance, CIP, Debt Outstanding, Current and Future Revenue, and related Expenses (Studies & Audits) • No change to methodology • Fees reduced for all land classifications except Office & Public/Institutional Arterial Streets Service Area Future Projects Included: *Alma School: Germann–Queen Creek (2-4 lanes) Frye – Pecos (4-6 lanes) *Chandler Heights: Gilbert – Val Vista (2-4 lanes) *Lindsey: Ocotillo – Hunt Hwy (2-4 lanes) Excludes northwest area of city limits where arterial streets were funded with Improvement Districts = SDF Project locations 2018 2022 Total Residential Existing Average EDUs 54K 69K Build-Out Average EDUs 58K 74K Total Non- Residential Existing Sq Ft 33M 44M Build-Out Sq Ft 66M 66M Land Use Assumptions Arterial Streets Comparison Arterial Streets - Summary Parks Parks - Highlights • Currently fees are charged within 3 service areas (NW, NE & SE) with the NW fee ending as of this studies new fee implementation • Fees assessed only to residential - single family and multi-family • This fee considers: Eligible Acres of Park Land, EDUs, and other financial factors such as Fund Balance, CIP, Debt Outstanding, and Current and Future Revenue, and related Expenses (Studies & Audits) • No change to methodology • Fees eliminated for NW, reduced for NE, and increases for SE service areas Parks Service Area Future Projects Included: *Mesquite Groves Community Park (30 acres) *Lantana Ranch Community Park (30 acres) = SDF project locations Parks - Summary Fire Fire - Highlights • Functional Population used to calculate EDUs – Concept based on the observation that demand for public safety facilities tends to be proportional to the presence of people • This fee considers: Functional Population, EDUs, and other financial factors such as Fund Balance, Debt Outstanding, and Current and Future Revenue, and related Expenses (Studies & Audits) • No change to methodology • Fees Increased for all land use classifications except Office Fire Service Area Future Projects Included: None Fire - Summary Police Police - Highlights • Functional Population used to calculate EDUs – Concept based on the observation that demand for public safety facilities tends to be proportional to the presence of people • This fee considers: Functional Population, EDUs, and other financial factors such as Fund Balance, Debt Outstanding, and Current and Future Revenue, and related Expenses (Studies & Audits) • No change to methodology • Fees decreased for all land use classifications except Public/Institutional Police Service Area Future Projects Included: None Police - Summary Airport Public Buildings Public Buildings - Highlights • Single – citywide service area • No legal requirement to update grandfathered calculation • Only activity is debt being serviced • No change to methodology • Fees remains unchanged for all fee categories: • $110 for Single Family Dwelling Unit • $79 for Multi-Family Dwelling Unit • $0.12 per Retail Square Foot • $0.08 per Office Square Foot • $0.02 per Industrial Square Foot • $0.03 per Public Square Foot Stats: Fund Balance = $153,003 Outstanding Debt = $1,764,427 10-Year Revenue Forecast = $1,210,770 Airport Public Buildings Water Water - Highlights • System Capacity used to calculate the “Service Unit” or EDU • This fee considers: Demand (both Peak and Average), Capacity (Production, Storage, Booster) and System Utilization including Water Supplies Available, and other financial factors such as Fund Balance, Debt Outstanding, and Current and Future Revenue, and related Expenses (Studies & Audits) • No change to methodology • Fees decreased for all meter sizes except 3” meters (due to reevaluation of the capacity of a 3” meter – from 160 GPM to 225 GPM). Water Service Area Future Projects Included: None Water - Summary Airport Public Buildings Wastewater Wastewater - Highlights • System Capacity used to calculate the “Service Unit” or EDU • This fee considers: Demand (both Peak and Average), Capacity (Treatment) and System Utilization, and other financial factors such as Fund Balance, Debt Outstanding, and Current and Future Revenue, and related Expenses (Studies & Audits) • No change to methodology • Fees increased for all meter sizes with 3” meter increasing at a larger percentage due to the Flow Capacity being reevaluated (as discussed in the Water Section). Wastewater Service Area Future Projects Included: None Wastewater - Summary Airport Public Buildings Reclaimed Water Reclaimed Water - Highlights • System Capacity used to calculate the “Service Unit” or EDU • This fee considers: Demand (both Peak and Average), Capacity and System Utilization, and other financial factors such as Fund Balance, Debt Outstanding, and Current and Future Revenue, and related Expenses (Studies & Audits) • No change to methodology • Fees increased for all meter sizes with 3” meter increasing at a larger percentage due to the Flow Capacity being reevaluated (as discussed in the Water Section). Reclaimed Water Service Area Future Projects Included: None Reclaimed Water - Summary City of Chandler SDF Permit Examples Single Family SDF – Permit Example Northeast Service Area Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $3,869 30% $3,792 27% -2% Parks (NE service area) 237 2% 129 1% -46% All Other Non-Utility* 455 4% 492 4% 8% Utility 8,258 64% 9,543 68% 16% Total Single Family Fee $12,819 $13,956 9% * All Other Non-Utility Includes: Police, Fire, Public Buildings (excluded Library) Single Family SDF – Permit Example Southeast Service Area Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $3,869 26% $3,792 20% -2% Parks (SE service area) 2,338 16% 5,242 27% 124% All Other Non-Utility* 455 3% 492 3% 8% Utility 8,258 55% 9,543 50% 16% Total Single Family Fee $14,920 $19,069 28% * All Other Non-Utility Includes: Police, Fire, Public Buildings (excluded Library) Multi-Family SDF – Permit Example per Unit Northeast Service Area Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $2,190 35% $2,059 32% -6% Parks (NE service area) 176 3% 109 2% -38% All Other Non-Utility* 334 5% 400 6% 20% Utility 3,624 57% 3,825 60% 6% Total Multi-Family Fee $6,324 $6,393 1% • All Other Non-Utility Includes: Police, Fire, Public Buildings (excludes Library) Multi-Family SDF – Permit Example per Unit Southeast Service Area Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $2,190 28% $2,059 19% -6% Parks (SE service area) 1,735 22% 4,424 41% 155% All Other Non-Utility* 334 4% 400 4% 20% Utility 3,624 46% 3,825 36% 6% Total Multi-Family Fee $7,883 $10,708 36% • All Other Non-Utility Includes: Police, Fire, Public Buildings (excludes Library) Commercial or Retail SDF Permit Example Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $504,000 82% $389,400 75% -23% All Other Non-Utility* 47,000 8% 52,100 10% 11% Utility 66,064 11% 76,344 15% 16% Total Commercial Fee $617,064 $517,844 -16% * All Other Non-Utility Includes: Police, Fire, Public Buildings Note: Fees based on 100,000 sq ft building with a 2” meter Office SDF Permit Example Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $404,000 79% $534,700 84% 32% All Other Non-Utility* 39,000 8% 29,000 5% -26% Utility 66,064 13% 76,344 12% 16% Total Office Fee $509,064 $640,044 26% * All Other Non-Utility Includes: Police, Fire, Public Buildings Note: Fees based on 100,000 sq ft building with a 2” meter Industrial SDF Permit Example Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $117,000 61% $105,000 54% -10% All Other Non-Utility* 8,000 4% 11,500 6% 44% Utility 66,064 35% 76,344 40% 16% Total Industrial Fee $191,064 $192,844 1% * All Other Non-Utility Includes: Police, Fire, Public Buildings Note: Fees based on 100,000 sq ft building with a 2” meter Institutional SDF Permit Example Category Current Fee % of Current Total Proposed Fee % of Proposed Total % Change in Fee Arterial Street $97,000 55% $197,600 67% 104% All Other Non-Utility* 12,000 7% 23,000 8% 92% Utility 66,064 38% 76,344 26% 16% Total Institutional Fee $175,064 $296,944 70% * All Other Non-Utility Includes: Police, Fire, Public Buildings Note: Fees based on 100,000 sq ft building with a 2” meter East Valley Comparison SDF Permit Examples Comparison to East Valley Cities Land Use City of Chandler Town of Gilbert City of Tempe Town of Queen Creek Arterial Street X X X X Parks X X X X Fire X X X X Police X X X X Library X Public Buildings/General Govt X X Traffic Signals X Water Resources X Water X X X X Wastewater X X X X Reclaimed Water X Single Family SDF Permit Comparison East Valley Category City of Chandler Proposed Town of Gilbert* Town of Gilbert* City of Tempe** Town of Queen Creek Arterial Street $3,792 $3,119 $1,716 $356 $2,118 Parks (SE service area) 5,242 11,935 5,167 991 3,189 All Other Non-Utility 492 4,422 2,928 1,197 1,891 Utility 9,543 20,094 10,622 4,466 5,283 Total Single Family Fee $19,069 $39,570 $20,433 $7,010 $12,481 • Note: 100,000 SQ FT Facility with 2” utility (all types) • *Gilbert – Greenfield Utility Service Area • **Tempe – South Service Area Multi-Family SDF Permit Comparison East Valley Category City of Chandler Proposed Town of Gilbert* Town of Gilbert* City of Tempe** Town of Queen Creek Arterial Street $2,059 $2,227 $1,330 $356 $1,479 Parks (SE service area) 4,424 7,672 3,358 991 2,293 All Other Non-Utility 400 2,934 1,972 1,197 1,359 Utility 3,825 20,094 10,622 4,466 5,283 Total Multi-Family Fee $10,708 $32,927 $17,282 $7,010 $10,414 • Note: 100,000 SQ FT Facility with 2” utility (all types) – Per Unit • *Gilbert – Greenfield Utility Service Area • **Tempe – South Service Area Commercial SDF Permit Comparison East Valley Category City of Chandler Proposed Town of Gilbert* Town of Gilbert* City of Tempe** Town of Queen Creek Arterial Street $389,400 $868,400 $237,400 $84,700 $263,000 All Other Non-Utility* 52,100 1,041,400 420,600 110,500 248,300 Utility 76,344 107,101 56,617 23,816 28,159 Total Commercial Fee $517,844 $2,016,901 $714,617 $219,016 $539,459 • Note: 100,000 SQ FT Facility with 2” utility (all types) • *Gilbert – Greenfield Utility Service Area • **Tempe – South Service Area Industrial SDF Permit Comparison East Valley Category City of Chandler Proposed Town of Gilbert* Town of Gilbert* City of Tempe** Town of Queen Creek Arterial Street $105,000 $161,300 $56,500 $16,900 $72,200 All Other Non-Utility* 11,500 570,600 234,900 43,000 183,600 Utility 76,344 107,101 56,617 23,816 28,159 Total Industrial Fee $192,844 $839,001 $348,017 $83,716 $283,759 • Note: 100,000 SQ FT Facility with 2” utility (all types) • *Gilbert – Greenfield Utility Service Area • **Tempe – South Service Area • Public outreach – October 2023 – COMPLETE • Council Work Session – December 4, 2023 - TONIGHT • Public Hearing – LUA & IIP Report – December 7, 2023 • Adopt LUA and IIP – January 11, 2024 • Adopt Motion of Intent to modify SDF fees – January 11,2024 • Public Hearing on Proposed SDF fees & First Read of Ordinance – February 22, 2024 • Final Adoption of Ordinance to modify SDF fees – April 4, 2024 • New Fees Effective – July 1, 2024 Tentative - Timeline Thank you Questions?