Prescott committee expands draft workforce-housing incentives, asks staff to add fee-in-lieu and payment options

At a recent Prescott City Workforce Housing Committee meeting, members debated changes to a draft workforce-housing policy that would expand how developers can qualify for density bonuses, allow the city to pay all or part of impact fees, and add enforcement tools tying incentives to delivery of workforce units.

The committee focused on ways to create buildable density that still addresses neighborhood concerns about open space and compatibility. Randy, a committee member who identified himself as a builder, said, “I don't see how we're going to accomplish density to attract a builder … and yet have the open space that I heard about last time.” He proposed allowing developers to “contribute to an open space program somewhere else in the city” as a way to retain density at a specific site while preserving parkland elsewhere.

Chelsea, a Community Development staff member, told the committee she could add “fee in lieu of” language to the list of considerations for council. “I think what I'm hearing you say, Randy, is that you're essentially asking for a fee in lieu of providing certain areas,” she said, and added that whether a fee would be used would depend on the specifics of each project and negotiation with counsel.

Why it matters: Committee members said the policy must both make workforce housing financially feasible for builders and preserve local standards—particularly in historic neighborhoods. The committee framed its work as recommendations to city council that should provide clearer, reusable guidance to developers while leaving certain discretionary decisions to elected officials.

Key changes and staff direction

- Broaden density-bonus language: Committee members asked staff to expand examples of qualifying features beyond on-site open space to include parks, recreational amenities, enhanced landscaping or buffering, preservation of historic structures and the fact that a project provides workforce units. Staff said it will present both expanded wording and sample charts showing specific bonus levels (for example, a percentage increase tied to specific, verifiable criteria) when the draft returns to the committee.

- Add fee-in-lieu and payment flexibility: The committee asked staff to include “fee in lieu of providing some of these things” as an option council could consider. Members discussed not specifying amounts in the policy but instead giving council discretion to weigh commensurate public benefit.

- Impact-fee payment timing and mechanisms: Members asked staff to investigate whether impact fees—currently collected by certificate of occupancy per ARS 9-463—can be deferred beyond that point or structured so developers may begin repayment after a portion of the project is leased or sold (examples discussed: after 20% occupancy or six months). Staff said they will research statutory limits and possible contractual mechanisms, including no-interest city loans or deferred-repayment contracts, and report back.

- Accountability and liens: The draft already proposed financial-assurance language tying incentives to delivery of workforce units. Several committee members supported retaining a lien or similar recourse so the city can recoup incentives if promised workforce units are not built or preserved; one member noted that in practice a bank’s construction lien would have priority and that the city’s remedy is typically second in line. Staff said they will refine proposed language to avoid creating undue financing hurdles while protecting the city’s interest.

- Phasing and incentives: The committee discussed whether workforce units may be included in later project phases. Members accepted language discouraging deferral to a final phase but agreed to add a contractual approach: if workforce housing is built later in a multi‑phase project, incentives would be withheld or deferred until that workforce phase begins or is under construction.

- "Will" versus "may" language: Legal counsel advised that “may” preserves council and staff discretion while “will” can be riskier from a legal perspective because it limits discretion; however several committee members argued stronger “will” language better signals city partnership and provides clearer direction to staff and developers. The group agreed staff will mark provisions where the committee prefers “will” and those where counsel recommends “may,” and present those distinctions to council.

Other staff updates and next steps

- Housing needs assessment and presentation: The committee was told the city’s housing consultant will brief city council next week on the housing-needs assessment results and then return for a December study session. Committee members asked to plan how to present the policy to council in December; the group has the full two hours scheduled for that study session and discussed designating speakers.

- Home of My Own program: Staff said the county-provided Home of My Own contractual documents are on the City Council agenda for Sept. 9. City staff and Yavapai County development staff are scheduled to attend the council meeting to answer questions.

- Future agenda items: The committee plans to return a revised draft with expanded density-bonus examples and a sample chart, staff will report on the legality and mechanism for deferred-impact-fee options, and November’s meeting will focus on the “impact piece” of funding (impact fees and other financing strategies).

What was not decided: The committee did not set fixed numerical bonuses, specific fee amounts, or exact timelines for deferred payments. Members repeatedly emphasized the draft will rely on case‑by‑case council review for many incentives and that the policy is intended as a living document to be revised as the city and developers gain experience.

Quotes from counsel and staff

Joe, city attorney, summarized counsel’s general drafting preference: “When it comes to tying the city's hands, may will always be the recommendation of legal counsel.” Amber, Community Development staff, said she would present examples and a chart to the committee in a future meeting so the group could pick a preferred approach.

Next steps: Staff will return with revised language that (1) expands density-bonus qualifiers and includes fee-in-lieu language and sample bonus charts, (2) adds “pay all or a portion” language for impact-fee support and research on deferred-payment mechanisms consistent with ARS 9-463 and other constraints, and (3) tightens contractual accountability language linking incentives to verified delivery of workforce housing. The committee plans to bring a revised draft to council during the December study session for further discussion.