Some developers in Queen Creek were overcharged impact fees, audit uncovers

The Queen Creek Town Council. (Courtesy of town of Queen Creek)

Some single-family-home and non-residential developers were charged additional amounts for impact fees and will be reimbursed, the Queen Creek Town Council was told recently.

Impact fees are assessed from new development and fund areas including parks, town facilities, streets, police, fire and library services.

A town-contracted auditor doing a random sampling of 55 building permits filed July 1, 2014-June 30, 2016 found 18 were charged impact fees at a new, higher amount when they should have been at a different level.

“We did have some instances where, per the state statute, if you started a subdivision once you pulled the permit on that first home in that subdivision the fees that were in place at that time are grandfathered in, if you will, for a 24-month period,” Kevin Burnett, senior project manager for Willdan Financial Services, said to the council Dec. 5.

“We did find a couple of instances where that first permit was pulled and a … development occurred within the 24-month period, but they were assessed a different fee that had been adopted since that original permit took place,” he said.

The state statute freezes the developer’s rates for a period of two years if they go up, but decreases them if they go down, Dan Olson, the town’s deputy finance director, said to the council.

It is 24 months from the date of the first building permit issued for a housing subdivision or from the date of the final plat approval for commercial and nonresidential development, he said.

The town adopted a new fee schedule that became effective Aug. 1, 2014, with impact fees increasing for streets (single-family residential development), parks (commercial) and library (commercial), he said.

“What happened is, beginning Aug. 1, 2014, the town simply assessed the new fees on every permit that was issued and did not take into account that 24-month period. We didn’t look back and say, ‘Well, this should have been charged under the old fee,’” Mr. Olson said.

Of 40 sample single-family house permits, 16 were incorrectly assessed a higher impact fee for streets and were overcharged a total of $10,112, he said.

In a sample of 15 nonresidential permits, two were incorrectly assessed for parks and library impact fees and were overcharged a total of $4,819.74, Mr. Olson said.

“These results were based on a sample that Kevin took. Now our job, as staff, is to go back and identify all of the instances where we charged an incorrect fee and provide a refund to the developer,” Mr. Olson said.

The review of issued permits is expected to be completed by April 30. The town is in the process of updating its permitting software, he said.

Queen Creek Mayor Gail Barney

“I have been assured that steps are in place to try to make this not happen again,” Mayor Gail Barney said.

“We realize that these things can slip through the cracks at any time … but I do appreciate the fact that we are catching it on our own this time and that we are putting steps in place to try to avoid it in the future.”

Mr. Burnett’s findings were part of the Town of Queen Creek’s biennial impact fee audit covering fiscal years 2014-15 and 2015-16. The town council voted 7-0 on Dec. 5 to approve Resolution 1241-18 accepting the report.

Development impact fees are based on land-use assumptions and an infrastructure improvement plan adopted by the town, Mr. Olson said at the Dec. 5 meeting.

The audit looked at the land-use assumptions and how actual development compared to the projections, if identified projects were completed as anticipated, were expenditures made on items identified in a study report, has the town maintained the same level of service for new growth and were fees charged correctly, according to a presentation made at the Dec. 5 council meeting.

“While it’s called an audit, it’s not an audit in a traditional accounting sense. It’s more of a check-in or a progress report at this stage of the analysis, because you’re only two years into your audit,” Mr. Burnett said.

The audit results show:

  • Single-family and commercial development exceeded projections.
  • Multi-family, industrial and office development did not meet projections.
  • The progress of infrastructure projects is consistent with the town’s adopted infrastructure improvement plan.
  • All expenditures were for items identified in the adopted infrastructure improvement plan.

During the audit period of July 1, 2014-June 30, 2016, a total of $13.9 million in development impact fees were received. There were no assessments for multi-family or industrial categories, Mr. Olson said.

Assessments were from:

  • 1,852 single-family home permits issued.
  • 273,000 square feet of commercial space.
  • 58,000 square feet of office and other space
  • 516,000 square feet of school-related space for streets.

“We will note that schools are exempt from most impact fees, but (not) for streets, which is why we have a bigger number for streets because we have a lot of school construction during that time period,” Mr. Olson said.

The $12.9 million raised in impact fees were received as follows:

  • $6,909,386 for parks.
  • $1,022,872 for town facilities.
  • $3,158,694 for streets
  • $388,866 for police.
  • $1,039,203 for fire.
  • $1,381,728 for library.

Editor Richard Dyer can be contacted via e-mail at rdyer@newszap.com or at twitter.com/rhdyer or facebook.com/RichardDyerJournalist

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