Kingman proposes alternative to impact fee

New state law gives Kingman until Jan. 1 to have new revenue source in place

John Salem

John Salem

KINGMAN - City Council and a few members of Kingman's building community gathered for an impact fees workshop regarding Senate Bill 1525, which is essentially a complete rewrite of the state's development fee statute.

According to a staff presentation, after Jan. 1, 2012, impact fees cannot be collected for anything not considered a necessary public service. That puts an end the general government fee of $729 per residential unit and $1.11 per square foot of commercial buildings.

The statute also requires existing fee programs be replaced by Aug. 1, 2014. City governments will need to adopt new fee ordinances, procedures, infrastructure improvement plans and fee studies during the same time-frame as well. After the 2014 cutoff, Kingman cannot collect fees without the adoption of a new program nor implement a building moratorium to "buy time," according to the presentation.

The new infrastructure improvement plan must explain when improvements will be completed and services provided. Improvement plan time-frames cannot exceed 10 years except in the case of water infrastructure, which will have a 15-year limit, according to the presentation.

Due to the complicated nature of SB 1525 and the $150,000 price tag of the required impact fee study, city staff recommends Council consider an ordinance to eliminate all impact fees outside of wastewater so the city can repay its Hilltop Wastewater Treatment Plant loan. Staff also recommends raising water meter connection fees in order to accommodate water system infrastructure improvements, and creating a construction sales tax and using the revenue for capital improvements.

As is, developers pay $528 per 100-square feet of construction in impact fees, not including those paid for wastewater. Under the city staff proposal, the same 100-square feet of construction would cost $200 in tax if the contractor charged $100 per square foot.

According to the presentation, this would generate $700,000 in tax revenue annually. Also, construction sales tax cannot exceed the city's sales tax rate under the new statute.

Currently, impact fees are collected like this: Take a $200,000 house and subtract $50,000 for land; then multiply the remaining $150,000 by 0.65 to reveal the approximate price of materials, $97,500; at this point, the city assesses the impact fees. State fees are also collected at this point.

Once impact fees are collected, the remainder is multiplied by 0.0885 to figure the sales tax, which must be paid within a month of the home's sale.

Doing away with the current impact fee system and instituting a 2-percent tax on construction would bump the current rate to 10.85 percent on all contracted jobs, including remodeling.

Councilman Keith Walker argued that if taxes are going to be applied to every contracting job in the city - including remodeling jobs - 2 percent may be too much. Maybe Council should look at 1 percent instead, Walker said.

Mayor John Salem said it's time to overhaul the city's impact fee system because it simply does not work. He said a new tax would be more suitable but wants to see more discussion of possibilities.

George Ripps, owner of Fripps Ranch, encouraged Council to think about staggering the tax until the ailing economy gets better. Try to create a system where the amount of fees collected increases as the economy improves, he said.

Economic Development and Marketing Commission Chair John Kirby said as construction wanes due to fees and the economy, revenue goes down, which is unreliable. A better, more secure funding source is needed, he said. It's time to "put on the big-boy pants" and start discussing a primary property tax, Kirby said.

Kingman Area Chamber of Commerce CEO Pam Wilkinson reminded Council that the number of people in the audience was not a fair representation of the stakeholders in the building community and explained that more people need to have their say.

With the building community involved, Council plans to move forward by having city staff create ordinance options, including possibly assessing the tax only on new construction, and charts that breakdown exactly how much is collected in wastewater fees and how a construction tax fits in and affects the bottom line.

This workshop created more questions than answers, Vice Mayor Robin Gordon said. There will need to be a public forum as a plan is formed, she added.

City Manager Jack Kramer said staff will look at gathering all the information requested by the Sept. 6 meeting, so Council can possibly set a public meeting date.