City impact fee waiver broke law
According to documents obtained from records requests, city of Kingman staff took incorrect and even illegal action when they failed to draft an agreement and have it approved by City Council before waiving sewer, water and transportation impact fees for the Kingman Academy of Learning charter school in March.
The amount waived totaled more than $54,000.
Both the state law and city ordinance governing impact fees require the approval of a governing body and the passage of some kind of development agreement.
While the city did draft such an agreement in September of 2006 for the Kingman Unified School District, staff failed to do so for KAOL in March, and the mistake already has brought impact fee critics out of the woodwork - although no one can say such a result wasn't expected.
Upon discovering that schools aren't completely exempt from being charged impact fees, pursuant to state law and the city's impact fee ordinance, then-City Manager Paul Beecher wrote, "Crap, this could present a pr problem for us and bring Pennington back out of the woods."
The public relations problem is that the city is required to approve a development ordinance in public, and having not done so earlier, the critics of impact fees would catch the fix if staff were to put the issue on a Council agenda.
Now staff plans to do just that in an effort to correct the mistake.
Records obtained from the city show that Development Services Director Gary Jeppson waived fees for KAOL because of the September Council action of waiving fees for KUSD.
"On this basis," he wrote March 22, "the City of Kingman is waiving the transportation, water, and sewer development investment fees for the Kingman Academy of Learning's modular classroom building and the KAOL administrative building."
Jeppson does not have the authority to waive the fees, and such approval was not sought, he confirmed Friday. However, he said that he was unaware that a development agreement had not been drafted when he waived the fees.
"At the time, I thought there was, but there was not, so we need to go through the process to develop a development agreement with them," he said.
According to Jeppson, an agreement will be drafted and the issue brought before Council.
According to an e-mail developer and impact-fee opponent Travin Pennington requested, City Attorney Carl Cooper wrote several city employees - including Jeppson - about KAOL's request for a waiver.
"KAOL has requested that the city waive the transportation investment fees that are currently imposed by city code (through state statute)." A majority of the e-mail was redacted, but at the bottom of the page it continues: "Gary is looking for acknowledgement that he is currently empowered to make the decision to waive the transportation fees for KAOL and that is consistent with the goals and policies of the City."
According to the city's own policy, it is not consistent.
The city ordinance allows Kingman to charge transportation impact fees - which represent one of three fee categories may be charged to schools. There are seven total categories which the city can charge to residential, commercial and institutional entities. Pursuant to Arizona Revised Statute, "the city may seek to negotiate the construction of public facilities or the provision of services, or to negotiate the payment of development investment fees pursuant to a development agreement or intergovernmental agreement with such entities," the ordinance states.
Essentially, in order for a city to waive fees, it must draft either an intergovernmental or development agreement, depending on whether or not the entity applying for the waiver is a government agency or not.
The purpose of such an agreement is to establish that the amount of fees being waived matches the in-kind service to the city and the public.
Jeppson said that there has been a "gentleman's agreement" for several years with KAOL that the city can use its facilities. That exchange - use of the facilities for a reduction in impact fees - will likely be outlined in the forthcoming development agreement, Jeppson said.
According to an attorney hired by the city to brief Council and staff on the requirements and background of impact fees, the waiving of any fees requires Council approval.
Andrew McGuire of Gust Rosenfeld PLC wrote via e-mail Friday that Council must approve not charging the fee to the user, and the amount of fees waived must be transferred from another revenue source.
"A council generally must have some form of agreement to 'waive' (development impact fees)," he confirmed.
pay the fee
The amount to be charged, if waived, still must be paid, he added. Impact fees account for additional services to be provided by the city to a new development, hence the term. But when the fees are waived, "the impact of those uses does not go away," he wrote Aug. 30. Rather, they must be paid for from other sources of revenue, he said. "The most common other source of revenue is the municipality's general fund."
"(C)harging a lesser fee or charging no fee at all simply shifts the burden of providing the infrastructure needs of new growth from the developer of the new growth to the population of the municipality as a whole," McGuire went on.
Jeppson said that to his knowledge, there has only been one other instance of the city waiving fees, and if there were, he would know.
That came when the city voted 4-2 in July to enter into a development agreement with Kaplan Realty. The agreement waives a portion of the fees in exchange for several pieces of right-of-way on Stockton Hill Road and Airway Avenue that the city will use to expand the streets. The city isn't sure of the exact amount of fees to be waived, but an appraisal has been ordered. Jeppson said the amount of fees waived will be the equivalent of the appraised value of the right-of-way the city obtains.