An audit found that more permits for single-family homes in Yuma were issued than anticipated while the multi-family and commercial permits were less than estimated.
The City Council on Wednesday presented the results of an audit of the development impact fees collected by the city. The audit and a public hearing are conducted every two years as required by state law.
The draft version of the audit report was posted on the city’s website on Dec. 23. A public hearing must occur within 60 days of the release of the audit to the public.
Carter Froelich, managing principal of Launch Development Finance Advisors, a Scottsdale firm, conducted the findings and presented the results of the audit, which cover a two-year period beginning July 2018 and ending June 2020.
The purpose of the audit, as explained by Froelich, is “No. 1, to make sure all the expenditures that are being made for infrastructure items are allowed pursuant to Arizona Revised Statutes as well as your development impact fee report.
“And also to make sure that when builders are coming, or commercial developers are coming to pull permits within the city, that they are paying the appropriate amount as determined by the development impact fee study as well as what the city council has agreed those fees ultimately should be.”
The firm audited the city’s Land Use Assumptions and Infrastructure Improvements Plan,which the city used to determine how much to charge in development impact fees.
Impact fees are collected with the purpose of having “growth pay for growth.” The money raised is then used on expenditures related to streets, police and fire protection as related to the new growth.
Like the name implies, these documents are assumptions of future growth. “It’s a crystal ball. Most people’s crystal balls aren’t any good,” Froelich said.
The audit compared projections to actual results and anticipated population growth and type of development over the study period. A population assumption is based on information provided by the state, city and Census Bureau.
The actual population was slightly higher than estimated, off by 2%, “not anything to really be concerned about,” Froelich said.
The audit found that in both fiscal years 2018-2019 and 2019-2020, more single-family home building permits were issued than estimated in the Land Use Assumptions. In 2018-2019, 472 permits were issued while the LUA estimated 303. In 2019-2020, 534 permits were issued, while the LUA estimated 306.
However, the multifamily permits issued were less than estimated by the LUA. In 2018-2019, 4 permits were issued, while the LUA estimated 108. In 2019-2020, 14 permits issued, while the LUA estimated 109.
Commercial square footage was also less than estimated by the LUA. In 2018-2019, the city issued permits covering 275,871 square feet, while the LUA estimated 344,000 square feet. In 2019-2020, 189,998 square feet were permitted, while the LUA estimated 350,000 square feet.
Regarding the city’s Infrastructure Improvements Plan, the audit report states: “We noted without exception that DIFs (development impact fees) were being collected and utilized appropriately.”
As for the way the development fees were used, the report concluded that “based upon the procedures performed prior to and after the most recent Ordinance O2019-019, it appears as though the City is administering the DIF program as approved by City Ordinance 2012-06.”
The audit concluded by recommending that the city continue to monitor multifamily and commercial permits, and if significant differences in permits continue, consider updating the LUA and IIP prior to the next required five-year update.
During the study period, the city had a single “fairly significant” general plan amendment that could impact capital facilities, such as streets, police, fire, etc.
“Although it’s something we noted, it was nothing we felt would make a significant change to the city’s current development fees that you’re currently collecting.”
Froelich summarized the audit findings: “Nothing found would lead us to conclude that the City of Yuma’s DIF program is not being properly administered. We did not find any issues that would cause us concern, as a matter of fact, we didn’t find any.”
Councilman Gary Knight questioned the difference in single-family home permits. “So basically the increase that we saw in single-family homes that we didn’t really count on, kind of goes along with the 315 acres that we switched to low density, does it now?”
Froelich noted that the audit doesn’t track where the homes were built. “We really focus on the dollars, what is being collected, as opposed where development is occurring and is that occurring where it should be,” he said.
He explained that most cities run at odds with the development community in the “expenditure dollars,” meaning that the development community is paying for their share of new growth as it impacts capital facilities, “and they want to see those dollars are used in a constructive and transparent manner.”
No members of the public spoke during the hearing.