Protecting Pinal County’s Property Tax Payers

Over the years, covering multiple Boards of Supervisors andCountyManagers,PinalCountyentered into numerous agreements waiving impact fees. These are fees used to cover the cost of expanding the water supply and other necessary services as required byArizonalaw. The waiving of impact fees literally means property taxpayers must make up the loss of revenue to the County.

 In October 2006, the Pinal County Board of Supervisors passed and adopted Ordinance No. 101806-DF, which established a development fee schedule forPinalCounty. The purpose of the ordinance is to require new developments to pay for their proportionate share of capital costs associated with providing public safety, streets, and parks facilities.

 In November 2000, Pinal County and Johnson Ranch/Centex Homes amended a November 1997 agreement waiving development impact fees for ten years with an option to renew for an additional ten years. The 1997 agreement expired in November 2007. When Johnson Ranch/Centex Homes requested another ten year waiver of development impact fees, the Board of Supervisors denied the request.

 One of the primary reasons the Board of Supervisors denied the extension was based on a vastly different set of facts facing the Board of Supervisors in 2007 versus the Board of Supervisors in 1997. In 1997, the population of San Tan Valley was estimated at 2000 residents. In 2007, the population was estimated at 40,000 residents. Today, the population is over 80,000 residents, a forty fold increase.

 Growth of this magnitude places a draconian strain on County resources, e.g., the Sheriff’s Department, Public Works, and Public Health, to mention a few. IfPinalCountyviewed County government capitulated to developer demands to waive impact development fees, the lost revenue would be made up in property taxes during a recessionary period.

 Johnson Ranch/Centex Homes developed 4,880 lots with 808 lots remaining to be developed at the time. The build out of 4,880 lots outstripped the infrastructure agreed to in the original development agreement. The exponential population growth inPinalCountywas not foreseen in 1997, lending credibility to the idea that theArizonalegislature should redefine a phased development from ten to five years,

 As a result of the County’s denial of extension of waiver of impact development fees, Johnson Ranch/Centex homes decided to litigate the matter. At approximately the same time, an Arizona State Representative, on behalf of an anonymous developer, attempted to sponsor a bill (HB 2578) freezing all development impact fees. Members of the Pinal County Citizens for Excellence in Government, a non-partisan organization, managed to convince the Representative that his bill was not friendly to property tax payers. The bill was withdrawn.

 The importance of this litigation is evidenced in the 21 development impact fee agreements inPinalCounty. The potential for property tax payers to incur $500 million in new taxes is real. Two developers opted for litigation: Johnson Ranch/Centex Homes and Grosvenor Holdings (Entrada del Oro). Centex Homes prevailed in Superior Court.

 The County appealed on the basis of the Arizona Gift Clause, where the State Constitution prohibits the County from giving or loaning its credit in the aid of any individual or corporation by donation, grant, subsidy or others (Article 9, Section7), public policy consideration, changed circumstances unforeseen at the time of the original agreement, and the best interests of the public.

 In December 2010, the Court of Appeals reversed and remanded the ruling of the Superior Court finding improper the grant of summary judgment in favor of Centex Homes. The Court of Appeals found ambiguity in the Development Agreement and directed that the matter could not be settled by summary judgment; it had to be heard by the “trier-of-fact.”

 Centex Homes filed a Petition for Review with the Arizona Supreme Court. The Petition for Review was denied in May 2011. In June 2011, the Court of Appeals issued a Mandate commanding the Superior Court to conduct such proceedings as are required to comply with the Appellate Court decision. Centex Homes has yet to initiate any proceeding in Superior Court.

 Pinal County Management and the Board of Supervisors were right in refusing to extend the development impact fee agreement and it is right in defending its decision in court. The case is not yet closed but every Pinal County property tax payer should stand up and cheer the position Pinal County Government has taken in this matter.

 Development impact fees are assessed subject to the doctrine that new growth should pay for its own costs; property tax payers should not subsidize homebuilders and new residents.