What are Impact Fee Credits?
Impact Fee Credits are provided by the city to the developer/owner of a property through a final impact fee credit agreement when the developer provides public capital facilities which were otherwise programmed for construction by the city with Impact Fee funds. In essence, the developer pays the associated impact fees in part or in full by providing the capital facilities.
What is a Credit Agreement?
A Development Impact Fee Credit Agreement is a written agreement executed by the developer of a property and the city of Phoenix. The purpose of a credit agreement is to determine a reduction of impact fees in exchange for the developer providing a capital facility that would otherwise be built by the city using impact fee funds.
- A Preliminary Credit Agreement is completed prior to completion of a capital facility identified in the Infrastructure Financing Plan, in order to allocate an estimated value of credits to a development.
- A Final Credit Agreement determines the total value of credits to a development upon completion of the capital facility and acceptance by the City.
What type of infrastructure qualifies for impact fee credits?
The capital facility provided must be included in the approved Infrastructure Financing Plan (IFP) and not currently scheduled for or under construction by anyone else (either the city or another entity).
Does the City reimburse me in cash if I provide qualifying infrastructure?
No. Credits are reductions in impact fees only. The city does not reimburse with cash from impact fee funds since such reimbursements require a project to be publicly bid like any other capital facility completed by the city.
How are credits applied?
In the final credit agreement, city staff works out the developer's actual costs to provide the capital facility, which can include only the same cost components as used to create the cost estimate in the IFP. Then we review the cost estimate for the capital facility contained in the IFP to see which is less, the IFP estimate or the developer's actual costs. The total credit amount applied is the lesser of the developer's actual costs, or the IFP estimate (as required by State statute).
Second, we work out how many Equivalent Demand Units (EDUs) are in the development, and divide the total credit amount amongst all the EDUs equally. Then, that amount is subtracted from the impact fee due.
Example: A developer of a 500-unit subdivision constructs a 16" water main. The water main is included for future funding/construction in the IFP. The 16" main cost the developer $2 million to construct. However, the cost estimate for the 16" main in the IFP is higher - $2.5 million. The total credit that the city may allocate is the actual cost of $2 million. The $2 million is then divided amongst the 500 units, resulting in an impact fee credit of $4000 per unit. If the water facilities impact fee per unit is $5000, the developer pays an impact fee of $1000 ($5000 fee - $4000 credit).
What if my credits exceed my actual Impact Fee?
Let's use the previous example, but instead assume the water main facilities impact fee is only $3000 per unit. Since each unit was allocated $4000 in credit, $0 is collected for the water facilities impact fee for each unit, and the $1000 is considered to be excess credits. No money is reimbursed.
Is there any way I can still benefit from "excess credits"?
It may be possible to allocate excess credits to other parcels of land within the same service area. However, many variables affect what is permissible and you are encouraged to contact the Impact Fee Program Manager with further questions.
I'm providing capital facilities for which I think I should get Impact Fee credits. How do I go about getting an Impact Fee Credit Agreement?
Contact Impact Fee Staff. Staff will ask some questions and let you know what you will need to submit for review. Typical submittal requirements are:
- Legal description of the property/development to which credits are to be allocated.
- Description of the capital facilities.
- Construction plans for the capital facilities, if underway.
- Engineer's cost estimate for the capital facilities.
- Map showing location of capital facilities.
- Additional information on an "as needed" basis, depending on the location and the capital facility.