NCPA - National Center for Policy Analysis


October 15, 2009

The Arizona League of Cities recently threatened to file a lawsuit because the Arizona Legislature imposed a two-year moratorium on development impact fees during Governor Brewer's special session.  The League argues that the fee freeze is unconstitutional because it had nothing to do with the budget issues the special session was called to address.  But the League's challenge should fail because the fee freeze is no different than a targeted tax cut and no more out of place during the special session than a targeted tax hike, says Nick Dranias of the Goldwater Institute.

  • Cities require developers to pay impact fees before allowing them to build large-scale developments.
  • In theory, the fees protect residents from subsidizing new development by having developers pay for necessary public infrastructure and services, like roads and sewers.
  • But too often, Arizona cities use impact fees, like Mesa's "Cultural Impact Fees," to force developers to pay for a spending wish list that has nothing to do with defraying the public cost of new development.
  • In practice, impact fees are just special taxes on developers and when developers pass them along to future homebuyers, who never had a voice in local politics, they amount to taxation without representation.

Given this reality, the fee freeze was certainly relevant to the budget issues of the special session, explains Dranias.  There is nothing arbitrary about the Legislature thinking a fee freeze, like a targeted tax cut, might improve the state's budgetary outlook by triggering more development, more money in homebuyers' pockets, more economic growth and consequently, more tax revenue.  For this reason, the League's threatened lawsuit shouldn't pass judicial muster.

If a targeted tax hike would have been constitutional during last summer's special session, so are targeted tax cuts like the impact fee freeze.  Rather than submitting to threats of litigation, the Legislature should call the League's bluff.  Let the League file a lawsuit and then force it to prove impact fees for museums and visual arts centers are not taxes and that the goal is only to make development pay for itself, says Dranias.

Source: Nick Dranias, "Legislature should call the League's bluff on impact fee lawsuit threat," Goldwater Institute, October 14, 2009.


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