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S. Ariz. Home Builders Ass’n. v. Town of Marana - 8/16/2021

Arizona Court of Appeals Division Two holds that a municipal development fee on future development does not violate A.R.S. § 9-463.05 simply because the project happens to serve existing development as well.


The Town of Marana, anticipating future population growth, acquired a Water Reclamation Facility (WRF).  The Town made improvements to the WRF and increased its capacity.  To pay for the acquisition and project, the Town issued 20-year bonds and, importantly, imposed development fees on future, but not existing, developments to pay the debt.  Southern Arizona Home Builders Association (Association) requested declaratory judgment that the fees violated A.R.S. § 9-463.05.  The trial court held that the fees did not violate the statute.

Division Two of the Court of Appeals affirmed.  A.R.S. § 9-463.05 prohibits the use of development fees for “upgrading, updating, expanding, correcting or replacing existing necessary public services to provide a higher level of service to existing development.”  The Association argued that the acquisition of the WRF and increased capacity heightened the “level of service” for existing residents and therefore the fees to pay for this work violated the statute.  

The Court of Appeals disagreed, noting that existing residents had no need for the Town to acquire the WRF or increase its capacity.  The acquisition and increased capacity only benefited new developments.  Following the same reasoning, the court rejected the Association’s claim that the costs were disproportionately applied to future developments in violation of A.R.S. § 9-463.05(B)(3): the fees were proportional because it was only the future developments that would require the increased water.

The Association also argued that the improvements made to the existing infrastructure benefited existing residents and therefore fees for these improvements violated the statute.  The court again disagreed, holding that the fact that the upgrades and modernization to the WRF incidentally improve the processes serving existing residents does not make the development fees unlawful when such upgrades were only undertaken so that the WRF would have the capacity to provide necessary public services to new development.

Finally, the court agreed with the Town that although A.R.S. § 9-463.05(E)(6) requires the municipality to project demand for the next ten years when planning these projects, nothing in the statute mandates that the fees for the project only be imposed during that ten-year span.  The 20-year bond obligations did not violate the statute.

Judge Espinosa authored the opinion, in which Judges Eppich and Eckerstrom joined.

Posted by: Bryce Talbot

Posted On: 9/17/2021