Funding the Town’s Transportation Infrastructure Improvement Plan (IIP) – An Initial Discussion of Impact Fees Town Council Meeting March 1, 2017

Total IIP: $196 M.

Purpose of Presentation Discuss Current Impact Fee Program Discuss Updated Fee (Estimate Only) Discuss Comparative Information Identify Policy Decisions Discuss Calendar

Section 1 Discuss Current Impact Fee Program

What is an Impact Fee? One-Time Fee Assessed to New Development to Pay for the Proportionate Share of Infrastructure Costs New Development Imposes on a Community Town Impact Fees: Transportation, Police, Fire, Parks and Recreation, Library, & General Facilities

What is an Impact Fee? (continued) The Fee is Assessed Using a Standard Formula Based on the Specific Characteristics of the Development Single-Family Residential Multi-Family Residential Retail Office Industrial

What is an Impact Fee? (concluded) Most Recent Reform Effective August 1, 2014 Can Only be Used to Fund “Necessary Public Services” 10-Year Planning Period for Projects Fees Must be Recalculated At Least Every 5 Years

QC’s Current Impact & Capacity Fees (Single-Family Home) Amount % 1.Wastewater Capacity $5,082 32% 2.Water Capacity $4,014 25% 3.Parks and Recreation $3,681 23% 4.Transportation $1,263 8% 5. Library $723 5% 6. Fire $490 3% 7. Town Facilities $479 8. Public Safety $167 1% TOTAL $15,899 100%

Transportation Impact Fee “Necessary Public Services” for Transportation includes: Arterial Streets Collector Streets Traffic Signals Right-of-Ways

QC’s Current Impact Fee Components 10 Year Costs % 1.Recovery of Existing Infrastructure Capacity (Debt Service) $3.3M 34% 2.New Projects $6.5M 66% TOTAL $9.8M 100%

QC’s Transportation Impact Fee History (Single-Family Home)

Section 2 Updated Fee (Estimate Only)

The Process Financing General Plan Plan How will the Town Manage Growth? Transportation Master Plan What is the Town’s Level of Service? Infrastructure Improvement Plan (IIP) What Projects Must be Built to Achieve the Level of Service? Financing Plan How will the Town Pay for the IIP?

Impact Fee Calculation The Impact Fee Calculation is Based on Two Types of Information Financial Information Traffic Volume Information

Key Elements - Financial Recovery of Existing Infrastructure Capacity (Existing Debt) Infrastructure Improvement Plan (IIP) New Borrowing Costs for IIP Reduction (Offset) for Dedicated Construction Sales Tax

Key Elements – Financial (continued) Recovery of Existing Infrastructure Capacity (Existing Debt) Amount: $1.7M Over 10 Years One Bond Issue from 2007 for Traffic Signals and Project Refinanced in 2016

Key Elements - Financial (continued) Infrastructure Improvement Plan (IIP) Amount: $196M Number of New Lane Miles: 91 Number of Projects: 41 Maintains Current Level of Service Growth and Non-Growth Cost Allocation Determined for Each Project

$196M IIP

Key Elements - Financial (continued) New Borrowing Costs for IIP Discussed at Feb 15th Council Meeting Estimated Amount: $20M Short-Term Financing Anticipated “Line of Credit” – Borrow Only Needed Debt Payments Tied to Revenue Receipts Paid Off by 10th Year

Key Elements – Financial (continued) Reduction (Offset) for Dedicated Construction Sales Tax $26M of Costs Otherwise Funded from Impact Fees were Reduced by the Town’s Dedicated Tax Estimated Fee Total Growth Costs $83M Less Dedicated Construction Sales Tax - $26 M Growth Costs Funded From Impact Fees $57M

Key Elements – Traffic Volume Level of Service (LOS) Population Estimates Trip Generation Rates Number of Service Areas

Key Elements – Traffic Volume (continued) Level of Service (LOS) Measures Traffic Volume and Flow Established in the Transportation Master Plan QC’s LOS is a ‘D’ Same as Most Cities

Key Elements – Traffic Volume (continued) Projects Used in Calculation Cannot Increase LOS New Lane Miles Needed: 111 New Lane Miles in IIP: 91 San Tan Valley Traffic Impacts are Excluded from the Calculation

Key Elements – Traffic Volume (continued) Population Estimates Population Expected to Double by 2026 69K Population in 2026 8% to 10% Growth Annually

Key Elements – Traffic Volume (continued) Trip Generation Rates Impact Fees are Based on the Burden Each Classification of Development Places on the System Measured by Vehicle Miles Traveled (VMT) Residential Developments: Per dwelling unit Non-Residential: Per 1,000 square feet of floor area

Key Elements – Traffic Volume (continued) Town Specific Data was Used to Develop Land Use Travel Characteristics 75% of the IIP is Being Built to Handle Population Growth Caused by Single- Family Homes All Other Uses Total 25% (Multi-Family, Retail, Office, and Industrial)

VMT Calculation Vehicle Trip Ends Trip Adjustment Factor Trip Length # of trip ends entering and exiting a development Trip Adjustment Factor Adjusts for pass by and pass through trips Trip Length Average trip length for Queen Creek Trip Length Weight Factor Length of trip by development type Vehicle Miles Traveled

VMT = Trip Ends * Trip Adjustment *Length * Length Weighting VMT Calculation VMT = Trip Ends * Trip Adjustment *Length * Length Weighting VTE – The number of trips generated by a development Trip Adjustment Factors – Adjusts trips for secondary stops or stops of convenience. Adjusts for trips leaving the Town, or passing through the Town from neighboring communities. Average Trip Length – Estimates the average length of a trip (in miles) generated by new development Trip Length Weight Factor – Identifies the difference in length of trips generated by development. Residential trips tend to be longer than non-residential trips.

Key Elements – Traffic Volume (concluded) Number of Service Areas One (Town Wide) Basis for Recommendation One Transportation System Town is Relatively Small @ 26 Square Miles Affect of Railroad Tracks and Two Creeks

New Estimated Fee

Components of the Calculation Financial Information: $57M (of the $196M IIP) Can be Paid from Impact Fees Traffic Volume Information: 91 New Lane Miles are Being Constructed to Create Capacity for 1.8M Vehicle Miles Traveled

Single-Family Home Fee ESTIMATED Fee (Legal Maximum) $4,800 Current Fee $1,263 Increase (~3x) $3,537

Why the Fee Increase?

Why the Fee Increase? The Fee Increase is a Net Effect Caused by Two Issues Significant Changes in Key Elements Increased the Fee Refunding of Obligations Decreased the Fee

Significant Increases in Key Elements Estimated Fee Current Fee Change % Change New Projects Costs Paid from Impact Fees $57.9 M $6.5 M $51.4 M 791% Population Increase 33K 20K 13K 63% New Vehicle Miles Traveled 915K 510K 405K 79% New Lane Miles 91 7 84 1206%

Change in Impact Fee Components ESTIMATED FEE 10-Year Costs CURRENT FEE 10-Year Costs Change 1.Recovery of Capacity in Existing Infrastructure (Debt Service) $1.8M $3.3M ($1.6M) 2.New Projects (IIP) $57.0M $6.5M $50.5M 3.New Borrowing Costs for IIP $0.9M NA TOTAL $59.7M $9.8M $49.9M

Refunding of Obligations The Refunding of Existing Obligations has Reduce the Amount of Costs Funded from Impact Fees by $11.8M Refinanced 2007 Bonds Savings: $0.8M Over 16 Years Refinanced Improvement District Bonds Savings: $2.9M Over 16 Years Refinanced Two Development Agreements Savings: $8.1M Over 20 Years

Section 3 Comparative Information

Comparison of Frequently Used Funding Sources Queen Creek Chandler Gilbert Mesa Operating Budget Yes Impact Fees No Dedicated Construction Sales Tax Proposition 400 Gas Tax (HURF) Voter Approved G.O. Bonds (paid from Property Taxes) Dedicated General Sales Tax

How is the Town Different? Operating Budget Capacity Opportunity for Town $6.5M Placeholder for: Debt Payments / Pay-As-You-Go Project Funding Operating Costs for New Roads Constructed by the Town and Private Development Other Uses (i.e. Parks Master Plan)

How is the Town Different? (continued) Dedicated Construction Sales Tax (vs. Dedicated General Sales Tax) Town: 2% on all Construction Activity (Narrow Base) Mesa: 0.3% on all Taxable Activity (Broader Base) Dedicated Construction Sales Tax Revenues are a Direct Reduction from Impact Fees

How is the Town Different? (continued) Proposition 400 0.5% Dedicated Transportation Sales Tax in Maricopa County Most Cities in Maricopa County Receive Prop 400 Funding – QC Does Not Represents Significant Funding for Projects Mesa: $47M Peoria: $15M

How is the Town Different? (continued) Gas Tax (HURF) The Town uses 100% of our Revenues for Operations and Pavement Preservation - Not New Projects Because Street Expenses Exceed Revenues Its Not an Issue whether Used for Operations or Projects

How is the Town Different? (continued) Voter Approved G.O. Bond (Paid from Property Taxes) Approach Citizen Bond Committee Formed to Develop a List of Projects Project List to Ballot for Vote Property Taxes Set to Cover Annual Debt Service Payment

Comparison of Current Impact Fees (Single-Family Home)

Pinal County (North Central) is a Good Comp to QC Single Family Fee is $7,978 Same Level of Service as QC 91 New Lane Miles $90M Total Cost 49% Growth Related

Comparison of Impact Fees (Single-Family Home Historical Highs)

Comparison of Current Impact Fees (250 Unit Multi-Family Apartment Complex)

Comparison of Current Impact Fees (5,000 Square Foot Restaurant)

Comparison of Current Impact Fees (25,000 Square Foot Grocery Store)

Comparison of Current Impact Fees (50,000 Square Foot School Building)

** UPDATED ** QC’s Impact & Capacity Fees (Single-Family Home) Amount 1.Wastewater $5,082 2.Transportation $4,800 3.Water $4,014 4.Parks and Recreation $3,681 5. Library $723 6. Fire $490 7. Town Facilities $479 8. Public Safety $167 TOTAL $19,436 Total Fee Increased By 22% (from $15,899)

Comparison of Current Total Impact & Capacity Fees (single Family)

Section 4 Policy Decisions

Decision Needed to Prepare the Impact Fee Study Finalize Assumptions Related to the Following Obligations Interfund Loan for Payoff of Development Agreements Line of Credit for Growth Costs

Decisions Related to the Financing Plan Who Pays? Set the Impact Fee at the Legally Maximum Amount? 8+ Month Total Process 6 Months of Stakeholder Meetings and Feedback

Impact Fee Calendar (8+ Months) Task Date 1 IIP/LUA Reviewed with Town Council Day 1 2 IIP/LUA Published with Public Notice of Public Hearing Day 2 3 IIP/LUA Public Hearing (At Least 60 days after published report) Day 62 4 IIP/LUA Approved (At least 30 days after Public Hearing but before 60 days) & Notice of PH to Assess Dev. Fees Day 92 5 Impact Fee Public Hearing ( At least 30 days after Notice of Hearing) For Fee Study Day 122 6 Approve Impact Fee Ordinance (At least 30 days after but before 60 day of Public hearing) Day 182 7 Impact Fee Effective Date (75 days after Resolution to Approve Fee) Day 257

Decisions Related to the Financing Plan Who Pays? (concluded) Use Existing Sources of Funding or Consider New Ones? How Much to Use of $6.5M Placeholder?

Section 5 Calendar

Proposed Calendar Meeting #1 TBD Dates Task Meeting #1 TBD Presentation of Draft Impact Fee Study Discuss Recommended Transportation Funding Plan Meeting #2 TBD Discuss Updated Debt Management Plan

Questions and Comments