When the Payson Town Council voted Thursday night to expand the Building Advisory Board from five to seven members and to increase that body's responsibilities to include reviewing and making recommendations for revising development codes, it began addressing an issue that has been festering among the development community for some time.
The complaint: that the cost of building in Payson is unreasonably high and may very well be contributing to the housing and real estate slowdown the Rim country is experiencing.
As local businessman Ray Pugel put it, "We just can't take any more of government passing these things without thinking about the fiscal impact."
The local real estate market was down in 2000 compared to the previous year. According to Beth Myers of Tall Pines Real Estate, home sales were down 16 percent, with land sales off 34 percent. The average price of homes sold appreciated only by 2 percent, Myers reports, which she called "very weak."
According to local Realtor Bob McQueen, impact fees are "a major contributor to the Town of Payson being in a recession."
Community Development Director Bob Gould said he thinks it's time to go back and revisit the various costs and charges to see how they impact the cost of housing.
"That was my idea from the beginning, because when we adopted these things we didn't know how they would affect housing prices."
According to local builder Steve Johnson, owner of SRJ Homes, there are four kinds of impact fees.
"First is the sewer fee that is assessed by the Northern Gila County Sanitary District, which has its own board and is not governed by anybody," Johnson said. The sewer impact fee on a typical home is currently about $2,000.
Then there are water, streets and parks impact fees, all of which are collected by the town building department at the time a permit is issued.
The water impact fee depends on the area of town where the property is located. "It could be zero or it could be $3,850, which is more typical," Johnson said.
Streets and parks impact fees are "pretty much applicable to all," he said. "They run about $650 each.
On top of impact fees, builders and developers also have to meet a host of code and zoning requirements. In addition to general building codes there are codes and regulations that developers must comply with for fire safety, utilities, streets, and subdivisions.
When Gould added it all up for a report to the council on housing last May, government fees for a 1,500-square-foot home in Payson totaled about $12,000, or about 10 percent of the total cost of the home. By subtracting the $2,000 of that amount that goes for building permits and plan reviews, Payson's total impact fee of $10,000 can be compared to those of communities of varying size in and around the Valley compiled by the Arizona Homebuilders Association.
They range from a low of $807 in Goodyear to a high of $13,290 in Peoria. While Phoenix charges an average of $8,661, the fees in the smaller communities of Queen Creek and Surprise average about $7,500.
While line-item comparisons are difficult because of the way the various fees are broken down, the major difference between those of Payson and those communities that charge less is the cost of the water impact fee. While Payson charges an average of almost $4,000, Queen Creek charges nothing and Surprise charges about $2,500 for "water resources and systems."
Adding $12,000 to the cost of a home is enough to make some prospective buyers walk away, Johnson said.
"Some people just say no and build in the county, especially if the extra cost means they can't qualify for a mortgage."
The impact fees, Johnson said, affect affordable housing the most. "It's a bigger percentage of a less costly house than an expensive one," he said.
While Gila County can be "just as difficult to deal with," Johnson said the county's impact fees are considerably lower. The county, he said, tends to lag behind the town in adding fees and costly code restrictions.
The need to hire structural engineers for homes built in Payson is a case in point.
"I've been in business for 15 years and built over 150 homes," Johnson said. "On the first 100, I never needed the phone number of a structural engineer in my Rolodex. Since we adopted the UBC building code a few years ago, I do.
"Why didn't I have to do that on the first 100 homes? None of them have blown over, and no customers have complained about cracks."
It was another set of new requirements, a recent change in the Town of Payson Uniform Fire Code, that finally moved the developers and builders to take action.
The fire code was amended at the Oct. 12, 2000 meeting of the town council to mandate automatic sprinklers for all new buildings 3,000 square feet or larger, to give building officials and the fire chief the option of requiring sprinkler systems in renovated buildings that increase the size of the structure by 40 percent or that cost more than $500,000 to remodel, and that mandate sprinkler systems in existing homes that are increased in size by 40 percent or to a size greater than 3,000 square feet.
Believing the changes add unreasonable costs to both new construction and renovation projects, Pugel and a group of fellow builders and developers filed a petition asking for a public referendum.
The petition, and the contentiousness and costs that would accompany a public referendum, were major factors in Payson Mayor Ray Schum's decision to try and address the situation.
In a recent memo to councilmembers, Schum said, "Since becoming aware of the possibility of a referendum being initiated, ... I have given some thought to the idea of taking a pro-active approach toward solving the problem rather than a reactive one."
By authorizing additional members and responsibilities for Payson's Building Advisory Board, councilmembers think they've taken an important step in that direction. Adding two members to the board means two more trades or skills can be represented, and the board's expanded role in recommending code revisions could provide the pre-emptive component that keeps government fees from escalating to the point of a costly referendum.
While the board also will look into commercial fees and costs, Gould said they are very different.
"For one thing, we don't require parks or streets impact fees," he said, "and the water assessment varies greatly because it is based on projected use."
Doug Brackin, owner of Majestic Mountain Motor Inn, and his partners in the new Fargo's Restaurant project paid $45,000 in water and sewer impact fees.
"We paid about $20,000 for water, which was a heck of a deal, and about $25,000 to the sanitary district for sewer fees," he said. " If you want to live in paradise, you have to pay the fare."
Johnson, who thanked the council Thursday for taking the initiative, is hopeful.
"I'm very happy to see the city want to do some discovery in this area," he said. "I'm optimistic that we can find some things we can cut and still have good, safe homes with good roads."
Schum and Town Manager Rich Underkofler, are more tempered in their enthusiasm.
"Impact fees have to be based upon the cost of providing the service in the unique community where you are, and the cost of water, for example, is more here than in Scottsdale," Underkofler said.
"Besides, if the cost is not borne by new construction, then who pays for it?" he asked.
Gould agreed. "We actually charge builders about half of what it costs us for streets and parks," he said. "We discount those items and then hope to make it up with grants."
But not everyone is enthusiastic about the plan. A handful of people objected to the proposal Thursday, including political activist Ruby Finney, who said she objected to the scope of the changes.
"It sounds like another pile of bureaucratic stuff to me," she said. "And I don't like the idea of the fox watching the chicken house."
Town Planning and Zoning Commission Chairman Ruth Craig said she is concerned that the board's new responsibilities will overlap those of her commission. While Craig said she is willing to reserve judgment, she also said, "If we don't agree with what they bring to us, then the town council is going to be placed in a position of having to decide."
Johnson and other builders and developers in town said they're just happy the issue is finally being addressed, and since they are now going to be included in the process, they are willing to take their chances.
"Town employees just don't have the same motivation to change things," he said. "The bigger bureaucratic system they build, the safer their jobs are.
"It's really important that those of us who are complaining will have the chance to participate in the process."
While Johnson said he has no idea what the expanded board will do, he thinks it will find "some stuff (in the regulations) we can do without.
"But whatever happens, now at least we can all believe in the results," he said.
Schum said Johnson is approaching the issue exactly the way he hopes the rest of the building community will.
"We aren't promising anything," he said, "but we want to run a good and efficient town."
Johnson said he still believes in the future of the Rim country. "The reasons we are all here are still here," he said. "I just want this to be a diverse community that all income levels can enjoy."