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City proposes phased increase in development impact fees after stakeholder feedback
Summary
After stakeholder meetings raised concern about housing cost impacts, staff recommended phasing residential impact fee increases (80% first year, 90% second year, 100% third year) while immediately implementing reductions for certain nonresidential fees that are lower than current levels.
City staff on Tuesday presented a revised proposal to update Tucson’s development impact fees and outlined a phased implementation schedule after developers and housing advocates urged caution about near‑term cost impacts.
Planning and Development staff told the council the fee study results showed residential impact fees would increase by roughly 41%–46% from current levels if fully implemented. Stakeholders asked the city to adopt lower fees, to phase increases over time and to expand development incentives such as mixed‑use incentives. In response, staff proposed a three‑year phase‑in for residential impacts: 80% of the new fee level in year one, 90% in year two and 100% in year three.
Staff explained some nonresidential fee units are lower than current rates in the study and recommended those reductions be implemented immediately rather than phased, because a phase‑in that reduced rates below current fees would be counterproductive. The presentation noted that impact fee revenues are restricted to capital improvements that provide new capacity tied to new development and cannot be deposited into the general fund or used for ordinary operations. Staff also said the city will implement adopted fees on an August 18 effective date and recommended that adoption occur at the June 3 council meeting, with an implementation date of Aug. 18 for the selected phase‑in approach.
Council discussion included a suggestion from one member to delay the effective date to Dec. 1 to allow staff and stakeholders to discuss an alternative “flexible” fee tool that could allow tailored, project‑specific fee schedules (lower than full impact fees in exchange for asset‑management flexibility) that would be subject to council approval for specific projects. Staff noted the five‑year statutory update requirement and that the Aug. 18 effective date follows prior adoption timelines; the planning director said postponing beyond Aug. 18 would require re‑adoption of current fees to remain compliant with the special timing rules.
Ending: Council voted to proceed with the phased fee schedule and directed staff to bring the ordinance and fee tables back for adoption; staff will implement increases Aug. 18 if adopted on June 3.
