Phoenix holds public hearing on proposed impact fee increases; developers seek grandfathering for affordable projects

Phoenix City Council held a public hearing on Feb. 19 on a proposed update to development impact fees that would raise charges assessed on new development to pay for capital projects such as water, wastewater, streets and public safety facilities.

Matthew Klein of Lincoln Avenue Communities, an affordable-housing developer, told the council proposed fee increases would threaten projects already under contract. Klein said a multifamily site he contracted for in third quarter 2024 had been modeled under prior impact fees and that increases — he estimated an earlier fee of $3.5 million could rise to more than $7.5 million — would jeopardize feasibility. He asked the council to extend grandfathering provisions for affordable housing developments that are already in the entitlement process.

City staff explained state law and the timeline for implementation. A staff member said state law requires new fees to become effective at least 75 days after adoption, and that fees cannot increase for 24 months once effective. For multifamily and nonresidential projects, final site plan or plat approval filed before that 75-day effective period allows developers to be grandfathered under older fees for 24 months; single-family grandfathering also requires a building permit. The staff member added that some northern parcels face additional water and infrastructure constraints that can extend review timelines.

Council members probed fairness and structure. Vice Mayor O’Brien asked whether single-family units pay the same fee regardless of home size; staff said within an impact-fee service area all single-family units pay the same per-unit fee, while multifamily is assessed a reduced per-unit rate and nonresidential is assessed by impact. Councilwoman Hodge Washington and others asked staff to ensure the fee schedule did not over-collect and noted staff had reduced earlier proposed numbers after reexamining water treatment assumptions and other cost drivers.

No adoption vote occurred that day; the council closed the public hearing and said a vote would be scheduled for a later meeting after additional review. Staff and council members indicated they would continue to evaluate the schedule, grandfathering timing and whether the fee structure could be refined in future updates.

The public hearing included several council questions about how impact fees relate to overall capital planning, what costs impact fees may not cover (operations, maintenance, replacement capital), and the limits state law imposes on altering fees within the five-year window. Council members also discussed whether fee adjustments should be paired with other funding sources (bonds or general capital) if the council wanted to reduce fees for particular geographic areas or project types.