Home Builders Association of Central Arizona v. City of Mesa (11/4/2010)

December 1, 2010

Arizona Court of Appeals Division One Holds That Before a Municipality is Authorized to Impose a Development Fee Pursuant to A.R.S. § 9-463.05, the Public Service Must be Rationally Related to the Powers Granted to a Municipality, and That the Service Must be One That Traditionally Has Been Provided or Lawfully Forecast Pursuant to Statutes Governing Municipal Planning.

In 2007, the City of Mesa amended its development impact fee ordinance after retaining an outside consultant to study the costs associated with new development.  The new ordinance devoted a portion of the impact fee for the maintenance of the city’s cultural facilities.  Shortly thereafter, the Home Builders Association of Central Arizona (“HBA”) filed a complaint against the City seeking a declaration that this portion of the ordinance violates A.R.S. § 9-463.05.  That statute allows municipalities to “assess development fees to offset costs to the municipality associated with providing necessary public services to a development.”  HBA contended that cultural facilities are not “necessary public services” within the meaning of § 9-463.05.  The parties eventually filed cross-motions for summary judgment, after which the superior court entered summary judgment in the City’s favor.  HBA filed a timely notice of appeal.

The Arizona Court of Appeals affirmed.  Because A.R.S. § 9-463.05 does not define or enumerate those public services that the Legislature considered “necessary”, the Court of Appeals looked to the United State Supreme Court’s discussion of the term “necessary” in United State v. Comstock, 130 S. Ct. 1949 (2010).  There, the Supreme Court held that a legislative enactment is “necessary” under the Necessary and Proper Clause of the United States Constitution if “the statute constitutes a means that is rationally related to the implementation of a constitutionally enumerated power.”  Deciding that the Comstock test provides an appropriate balance that would allow municipalities to determine the character of their cities and ensure a uniform application of the statute, the Court of Appeals concluded that “whether cultural facilities are ‘necessary’ public services [under § 9-463.05] depends on whether they are rationally related to the implementation of powers specifically granted to the municipality.”  Because A.R.S. § 9-463.05 also requires a nexus between the amount of the fee and the burden imposed, the Court further concluded that “necessary” public services must also be limited to existing services that are already provided by the municipality, or those identified in a properly promulgated general plan or infrastructure improvement plan.  Using this approach, the Court held that the cultural facilities portion of the impact development fee at issue here did not violate A.R.S. § 9-463.05 because the maintenance of the cultural facilities is rationally related to the powers that the Legislature has granted to municipalities and because such facilities traditionally have been provided by the City to its residents.

Judge Swann authored the opinion; Judges Downie and Kessler concurred.