12. 	COST OF DEVELOPMENT ELEMENT


The City of Peoria believes that sustained development is 
necessary to increase the municipal tax base incurred by a strong 
local economy.  New increases in tax revenues can be offset by the 
costs of providing facilities and services such as parks, libraries, 
water full supplies, sustaining adequate police and fire protection, 
constructing road and sewer and water lines. New development 
should pay its fair share of these costs.  The purpose of this 
element is to identify and delineate the fiscal impacts created by 
new development and determine how costs will be equitably 
apportioned. An equally important charge within the element is to 
address when and how costs will be assessed as well as their 
apportionment.

The Cost of Development Element is organized in the following 
manner:

12.a.	Introduction
12.b.	Goals, Objectives and Policies
12.c.	Plan Implementation Framework
12.d.	Implementation Program

12.a.	  INTRODUCTION

The City of Peoria subscribes to the basic principles of fairness in 
the application of fees and taxes for new development.  Revenues 
derived from development impact fees should reflect costs 
generated by the development for extension or expansion of 
infrastructure and services.  Characteristics and timing of 
infrastructure improvements are matters to be determined by the 
citizens of Peoria.

IDENTIFYING A LEVEL OF SERVICE FOR THE COMMUNITY
The citizens of Peoria have judiciously committed tax dollars to 
ensuring a sufficient level of service (LOS) for the community.  LOS 
is defined as the characteristics of City services and infrastructure 
that Peoria has developed over the years since its incorporation.  
This can be measured by the number of parks or library books, for 
example, that the community supports.  LOS is directly related to 
the City’s commitment to safeguard quality of life.  Since 1999 the 
City has utilized studies prepared by Tischler and Associates to 
monitor the costs to maintain the LOS, especially in developing 
areas.   These studies are the basis for the adoption and 
maintenance of impact fee schedules. 

Impacts resulting from new residential neighborhoods and 
commercial development are noticeable in fast-growing cities such 
as Peoria. Development outpacing school construction, lagging 
utility and transportation infrastructure, increased public safety 
response times and flood control are types of situations that may 
arise when necessary infrastructure components are not in place 
concurrently with new development.

Table 12-1, City of Peoria Level of Service Standards, outlines the 
service level standards currently expected for various services 
supplied by the City of Peoria. Mitigation measures would likely be 
required for new development impacting these LOS standards.  
City policy supports achievement of the City LOS as soon as 
possible in newly developed neighborhoods.


TABLE 12-1
      CITY OF PEORIA LEVEL OF SERVICE STANDARDS
Service 
Minimum Performance Standard
Transportation
Level of Service “C” for all arterial and 
collector routes
Parks, Recreation and Open Space
Neighborhood Parks
1.57 acres per 1,000 residents
Citywide Parks
1.46 acres per 1,000 residents 
River Corridor and Trails
466 linear feet per 1,000 residents
Open Space
4.14 acres per 1,000 residents
Libraries
0.45 square feet of facilities per capita
1.39 volumes per capita
Water System
System designed for Peak Demand and for 
Fire Flow Protection
Wastewater System
System designed for a minimum flow rate 
of 300 gal/day/du
Fire Protection
Four minute response time, 90% of the time
Five minute response time, 90% of the time 
in areas with homes that are fully 
sprinklered
Law Enforcement
Respond to citizen requests for services:
2 minutes or less for Priority 1 calls
10 minutes or less for Priority 2 calls
45 minutes or less for Priority 3 calls
Storm Drainage
No change to peak storm water run-off
Solid Waste Collection
2 residential collections per week


























Achieving the LOS standard is more costly in parts of the city 
where growth is occurring or infrastructure is deficient.  This is 
due to the initial expense of adding supportive infrastructure to 
serve these areas.  In these instances separate service areas are 
identified to isolate costs associated with growth.

Since incorporation in 1954, the City has employed a variety of 
methods to determine the fiscal impacts from new development 
and provide for a fair assessment of the associated public cost 
burden.

According to the City’s “Principles of Sound Management,” there 
are three guiding principles applicable to a discussion of issues 
associated with development-related costs.  These are:

?	Establish service and facility standards to help identify how 
existing capacities will support demands from new 
development;
?	Recognize new development impacts on existing public 
services and facilities;
?	Where applicable, and to the extent possible, require growth 
to pay for itself.

These principles reflect City policy and are consistent with the 
requirements embodied within the Growing Smarter legislation 
with respect to assessing the costs of development.  Accordingly, 
the Cost of Development Element is designed to:

?	Identify various mechanisms that are allowed by law and 
that can be used to fund and finance additional public 
services necessary to serve the development, including 
bonding, special taxing districts, development fees, in lieu 
fees, facility construction, dedications and service 
privatization.
?	Identify policies to ensure that any mechanisms that are 
adopted by the City under this element result in a beneficial 
use to the development, bear a reasonable relationship to 
the burden imposed on the City to provide additional 
services to the development and otherwise are imposed 
according to law.

PLANNING FOR INFRASTRUCTURE GROWTH AND IMPROVEMENTS
The City annually updates its 10-year Capital Improvement 
Program (CIP), which is designed to anticipate and budget costs 
associated with improving the City’s infrastructure. Projects are 
described, discussed, scheduled and budgeted in order to provide 
a comprehensive synopsis for the city manager and City Council.  
The plan also allows for scheduling construction of improvements 
so that they are in place as soon as possible in relation to the 
construction of new neighborhoods.  Improvement projects listed 
in the plan are directly related to the LOS the City strives to 
maintain for its citizens. The approved CIP reflects City policy and 
strategies to maintain the established LOS.

PAYING FOR GROWTH
The City of Peoria may utilize a number of funding strategies for 
new infrastructure, equipment and facilities necessitated by 
growth.  The City collects development or “impact” fees for specific 
services or utilities in conjunction with building permit activity.  
These fees may be used to pay for needed expansion of services 
directly or may pay for bonds issued by the City to pay for 
expansion projects.  Other mechanisms available to the City for 
funding expansion of services include:

?	Primary and Secondary Property Taxes
?	Transaction Privilege (Sales) Tax
?	Specialty Industry Tax (such as a Hotel Bed Tax)
?	Excise Tax
?	Improvement Districts
?	Community Facilities Districts
?	User Fees

IMPACT FEES ASSOCIATED WITH NEW DEVELOPMENT
The City of Peoria should collect its fair share of costs attributable 
to providing infrastructure and improvements for new growth.  
Generally these costs will be collected through a variety of 
methods, including but not limited to impact fees, public 
investment through different funding sources and third party 
contributions.  The following factors should be considered in 
assessing these revenue sources for infrastructure and 
improvements:

?	The benefit of new revenue will be linked to providing retail 
and employment centers that are located in the city.

?	The benefit of regional commercial and employment centers 
are of utmost importance for the economic vitality of the city.

?	The development of retail and employment opportunities within 
the city that will enhance the quality of life by locating these 
uses in close proximity of Peoria residents.

?	The use of practical and affordable standards for the required 
development should be maintained to encourage a variety of 
housing types and well-designed commercial/employment 
centers.

?	The benefit of balance and quality growth should be considered 
when evaluating a development and whether it exceeds the city 
requirements.

COST CLASSIFICATION 
Each City service or activity is divided into two distinct parts - 
General Operations (i.e. energy, labor costs) and the City’s physical 
structure (i.e. capital projects, infrastructure).  General operations 
costs are usually funded through the collection of taxes, utility and 
service payments, grants and subventions.  Increases in tax 
collections and revenue flows to the City associated with new 
development are generally used to pay for the impacts of growth 
affecting general operations.

The City’s physical structure refers to land, buildings, vehicles, 
equipment and improvements to streets, utilities and other 
facilities and property owned by the City.  To achieve the City’s 
LOS goals, it is necessary to add to the physical structure.  For 
example, new housing development will require a corresponding 
increase in parks and open space lands, streets, utilities and other 
public infrastructure.  Costs to expand the physical structure will 
be borne by new development where the costs are fair and 
reasonable and results in services or facilities necessary and 
pertinent to the new development (and are otherwise legally 
permitted assessments).

Components of physical structure costs may include land, 
buildings, equipment, vehicles, apparatus, concrete and asphalt 
construction costs, consultant costs and credits where appropriate 
for bond payments for the same components.

12.b.	  GOALS, OBJECTIVES AND POLICIES

The goals, objectives and policies provide guidance on 
approaching a fair and reasonable assessment of the costs for 
mitigating the fiscal impacts created by growth.  Policies in this 
element advocate careful management of financial resources to 
maintain uniform levels of service standards.

GOAL 
12.1:
EQUITABLY ASSESS AND MANAGE THE  FISCAL AND 
CAPITAL IMPACTS RESULTING FROM NEW 
DEVELOPMENT.
_______________
Objective 12.1.A:	
Maintain uniform community services and standards.
___________
Policy 12.1.A.1:			
The City shall identify levels of service (LOS) indicators for the 
delivery of City services that reflect the typical experiences of 
citizens and other service users.
__________
Policy 12.1.A.2:
The City shall coordinate the creation of its annual CIP with 
the General Plan and LOS to assure maintenance of services 
received by Peoria citizens.
__________
Policy 12.1.A.3:
The City shall identify components of City services affected by 
growth.
______________
Objective 12.1.B:	
Measure citywide incremental changes in land use and the 
effects on service level standards.
__________
Policy 12.1.B.1:	
The City shall develop and monitor leading indicators of 
growth and changes in land use ratios in the City. 
__________
Policy 12.1.B.2:		
The City shall identify costs of expansion of City operations 
and facilities to maintain service level expectations.
______________
Objective 12.1.C:	
Develop a plan to finance the costs associated with expansion 
of government operations.
__________
Policy 12.1.C.1:		
Manage the provision of citywide services to maintain existing 
level of service standards.
__________
Policy 12.1.C.2:	
The City shall identify fees and other revenues and funding 
mechanisms that may be used to pay for expansion of 
operations and new facilities generated by new growth.

12.c.	  PLAN IMPLEMENTATION FRAMEWORK

The City of Peoria maintains updated sources of information that 
assists in identifying projects and activities necessary for achieving 
LOS standards.  This information, usually in the form of reports or 
plans, also aids the city in determining project priorities and 
scheduling.  Project implementation must be closely balanced with 
the need to sustain a strong financial position.  A brief summary of 
these sources is listed below.

CAPITAL IMPROVEMENT PROGRAM (CIP) 
The Capital Improvement Program is the City’s ten-year capital 
spending plan. This plan is updated annually and assists the City 
in its efforts to coordinate design and construction programs.  All 
project descriptions in the CIP offer detailed information on the 
work, cost and timing of the project and it’s identified revenue 
source.

CIP COORDINATION WITH THE GENERAL PLAN 
The Peoria General Plan also addresses LOS through the various 
elements included in the plan.  Each element identifies goals and 
objectives for the particular aspect of City services addressed.  The 
plan has a 10-year horizon, over which it guides decisions that the 
City makes as it looks to support and enhance the LOS.  Capital 
projects are anticipated as implementation tools of the element in 
which they are located.

BOND ELECTION INFORMATION
The issuance of general obligation and revenue bonds by 
governmental entities within the state of Arizona requires voter 
approval.  The City of Peoria prepares a comprehensive public 
disclosure of capital expenditure information prior to the election 
date.  Information prepared for the bond information brochure 
includes a comprehensive assessment of long-term capital needs 
for the City’s public works, utilities and community services 
projects.
DEVELOPMENT FEE REPORT 
Cost assumptions are continually evaluated relative to the new 
impact fee structure assessed against new development.  These 
fees are one-time charges for recovering a proportional share of 
capital costs.  The cost analysis considers detailed study reports 
that address the complex legal and financial requirements 
associated with these fees.
CITYWIDE LOS STANDARDS
Each City service is uniquely structured to meet its Level of Service 
(LOS) standard.  The cost appropriation methodologies for each of 
the cost centers listed below were developed and described as part 
of the 2003 Tischler & Associates Development Fee Study.  

COST CENTERS IDENTIFIED IN DEVELOPMENT FEE STUDY
The cost of maintaining levels of service are identified by cost 
centers listed below.  A methodology has been described that 
considers the appropriate factors for measuring the costs of these 
services.  The methodology is then used to calculated fees that 
should be collected to maintain the LOS or establish the LOS in 
developing areas.

?	Libraries					
?	Transportation
?	Parks, Recreation and Open Space 		
?	Water
?	Wastewater 
?	Solid Waste 
?	Law Enforcement 				
?	Fire and Emergency Medical 			
?	General Government 
     
LIBRARIES
Incremental expansion is the methodology used to calculate costs 
for maintaining the library LOS.  Cost components for library 
services include: (1) land for library buildings; (2) buildings and 
furniture; (3) library materials (books, etc.); (4) consulting for 
preparation of the fee.   Library development fees include a small 
credit for bonds that have financed library construction.

PARKS, RECREATION AND OPEN SPACE (PROS)
Incremental expansion is also used to calculate costs of the 
various PROS components, which include neighborhood parks, 
citywide parks, open space, rivers and trails, recreational facilities, 
consultant costs for preparation of the fee, principal payment 
credits and vehicles and equipment used for these facilities. The 
City uses a goals and objectives approach for developing new 
facilities and anticipating community needs for these facilities.  
The City adopted a Parks, Recreation and Open Space Master Plan 
in 2002 containing standards for the development and location of 
facilities and corresponding LOS standards.

LAW ENFORCEMENT
Law enforcement uses two methodologies to determine cost 
equity.  A buy-in approach is used for buildings while an 
incremental expansion approach is used for vehicles and 
equipment.  Demand factors for law enforcement services differ 
among residential and non-residential areas of the City.  
Residential development fees are calculated on a per capita basis 
and then converted to an appropriate amount by size of housing 
using multipliers based on type.  

The most equitable manner for determining nonresidential costs is 
by using nonresidential vehicle trips.  The Police Department also 
responds to all traffic accidents in the public right-of-way, which 
is an additional reason to use trip generation as the measure for 
demand.  A trip adjustment factor has been used to avoid double 
counting each trip at the point of origin and point of destination.  
Fees to cover these costs are offset somewhat by bond credit 
payments.  A consultant fee factor is used to cover costs 
associated with preparation of the fee.

FIRE AND EMERGENCY MEDICAL SERVICES 
Demand for fire and emergency medical services (EMS) is based on 
the location of people.  Desirable land for fire stations has good 
arterial roadway access and a central location within its service 
area.  Fire station locations compete with other non-residential 
uses competing for the same site characteristics.  

Both Fire and EMS services are provided to residential areas and to 
non-residential areas (areas containing jobs).  Approximately 85 
percent of the Fire Department’s service requests originate in 
residential areas and 15 percent in non-residential areas.  

Development fees pay for costs associated with land acquisition, 
building construction and the purchase of fire and emergency 
medical apparatus. Fees to cover these costs are offset somewhat 
by bond credit payments. A consultant fee factor is used to cover 
costs associated with preparation of the fee.

GENERAL GOVERNMENT
 In determining General Government development fees, an 
incremental expansion cost approach is used to determine the 
need for building space and general government vehicles.  Building 
space needs have been adjusted to allow for space used by 
enterprised services.

Costs are allocated to residential and non-residential sectors of 
the community.  Approximately 85 percent of cost is allocated to 
residential areas and 15 percent to non-residential areas.  Services 
are determined according to where people are located, similar to 
rationale used in the law enforcement methodology. Development 
fees pay for costs associated with land, building space, equipment 
and vehicles.  Fees to cover these costs are offset somewhat by 
bond credit payments. A consultant fee factor is used to cover 
costs associated with preparation of the fee.

TRANSPORTATION SERVICES
Transportation fees are based on a transportation plan prepared 
by City staff and Kimley-Horn and Associates (KHA).  This plan 
depicted the transportation needs of the City based upon the 
ultimate buildout population as denoted in the General Plan.  Trip 
generation rates for each type of development are multiplied by 
the net capital cost per unit of trip capacity to yield the 
development fee for each type of development.  Rates are reduced 
to account for trip duplication in destination locations.

The development fee is adjusted to reflect the local share of the 
cost of individual improvement projects.  The fees have also been 
reduced to provide a credit for future municipal bond payments on 
transportation capital projects.  The transportation fee may also 
contain a buy-in component for previously constructed projects.  
The component would be based on the life expectancy of the 
associated transportation improvements.  Costs associated with 
the preparation of the fee are also included.

The City may undertake a fee credit program to promote 
community economic development. Fee credits would be 
considered for commercial development projects that generate 
sales taxes sufficient to amortize the costs of related 
transportation system improvements.    

Transportation fee zones were established which responded to 
topographic differences within the City.  Southern Peoria is mostly 
flat, gently sloping towards the southwest.  This topography 
reflects the agricultural past of the area.  Conversely, northern 
Peoria contains numerous mountains and drainage features that 
will likely require cost–intensive bridges or other crossing 
structures and function in rugged terrain.  Zones have been 
established to provide separate north and south fee zones to 
account for these differences.  Additional zones may be 
established in the future to further define cost variations.

WATER SERVICES  
The Utilities Department provides potable water services for the 
City of Peoria.  Provision of services involves:

?	Securing ample water reserves to guarantee a 100-year 
supply for City residents;
?	Delivering water to water users;
?	Maintaining the water system; and 
?	Ensuring water quality.

The water utility accounts are managed as an “enterprise fund” 
which is essentially a fund established to account for operations 
that are (a) financed and operated in a manner similar to private 
business enterprises – where the intent of the governing body is 
that the costs (expenses, including depreciation) of providing 
goods or services to the general public on a continuing basis is 
financed or recovered primarily through use charges; or (b) where 
the governing body has decided that periodic determination of 
revenues earned, expenses incurred, and/or net income is 
appropriate for capital maintenance, public policy, management 
control, accountability, or other purposes.  Examples of Enterprise 
Funds are those for water, gas, and electric utilities; swimming 
pools; airports; parking garages; and transit systems.”

The City is divided into two water service areas, On-Project and 
Off-Project.  The names of the service areas relate to the 
jurisdictional boundaries of the Salt River Project (SRP).  The SRP 
delivers surface water stored in its reservoirs to local water users 
located “on-project.”  Surface water and well water within SRP 
jurisdiction may not be used outside SRP boundaries.  Peoria’s 
boundaries in the SRP are the Arizona Canal on the north to its 
intersection with New River on the west.

The Off-Project service area is furnished with water from wells and 
from Colorado River water.  The Off-Project area also has unique 
service issues to address.  This area is primarily located in north 
Peoria.  North Peoria contains numerous hill and mountain areas 
and riverbeds. Uneven topography is a challenge to any project 
that relies on topographic uniformity for efficiency.  North Peoria is 
generally undeveloped and the water operations and infrastructure 
to service the area have only recently begun to be installed. 

There are two methods of calculating service delivery charges.  
They are:

?	System Buy-In Method
?	Marginal/Incremental Cost Method
Both methods are designed to comply with the “rational nexus” 
test applied by the courts.  The System Buy-In Method provides an 
estimate of the cost of delivering a unit of capacity based upon the 
net equity in the existing assets.  The Marginal/Incremental Cost 
Methodology focuses on the cost of adding additional facilities to 
serve new customers.

Water services development fees are Water Expansion Fees for the 
On-Project area.  The Off-Project area contains both Water 
Expansion Fees and Water Resource Fees.  Both types of fees are 
calculated using the Marginal/Incremental Cost Method.  The 
Water Resource Fee is calculated separately to recover costs that 
are unique to delivering water to the customers in this area.

Components of the Water Expansion Fee include:

?	Construction of the new Greenway Water Treatment Plant;
?	Construction of elevated tanks, potable wells and water 
storage areas;
?	Cost for new transmission lines; and
?	Costs for a Water Master Plan Study and expansion fee 
update.

Components of the Water Resource Fee are:

?	Costs of securing additional source water from the Central 
Arizona Project Canal;
?	Costs of securing additional source water from other 
owners of CAP water rights, including  the Gila River Indian 
Community; and
?	A credit for bond payments that avoids duplicate charges.

In order to provide uniform accounting for all water users, the unit 
of measure for establishing fees is Equivalent Dwelling Units (EDU).  
The EDU is a seasonal demand factor of the average daily water 
consumption by a typical residential customer during the five 
seasonal months (May through September).  The EDU represents 
the peak demand for water on the City’s water delivery system.  
WASTEWATER SERVICES
The City provides wastewater services for developed areas within 
the City.  Components for wastewater development fees are as 
follows:

?	Costs of constructing and equipping new wastewater 
treatment  and reclamation facilities; and
?	Costs of constructing new parts of the collection system

Wastewater service costs are funded through service charges billed 
directly to the customer.  Expansion of infrastructure, facilities and 
equipment to service new development funded are through 
development fees charged to the developer.   Fees structured to 
fund increased capacity for new development are calculated based 
on the Marginal/Incremental Cost Methodology.

SOLID WASTE MANAGEMENT
The Sanitation Division of the City provides solid waste collection 
and disposal services to approximately 30,000 customers, 
including 700 commercial accounts.  Solid waste collected from 
City customers is disposed at the Glendale landfill under an 
agreement between the City and Glendale.  

Several factors impact the management of solid waste services. 
Communities exceeding 60,000 in population must allow private 
operators to compete for commercial customers.  Competition may 
provide a dampening effect on growth.  As growth occurs, new 
commercial customers may select a competing solid waste service 
provider.  Most of the grocery store chains have their own 
contracts with major national solid waste companies.

Two factors that increase demand for City sanitation services are 
the explosive growth in residential development in the City and the 
“recognized need” to recycle more refuse that is discarded and 
collected.   Increasing equipment and support facilities to maintain 
levels of service include the purchase of vehicles, developing 
storage and parking facilities and developing or contracting for 
vehicle and equipment maintenance.
12.d.	  IMPLEMENTATION PROGRAM

The Implementation program for the Cost of Development Element 
of the Peoria General Plan is presented on Table 12-2, Cost of 
Development Implementation Program.  The table is presented 
under the following four headings:

Implementation Measure	Lists the action necessary to carry out 
the Cost of Development Element of the 
General Plan.

Lead Department/Agency	Identifies the responsible City 
department for accomplishing that 
particular measure.

Projected Timeframe	Identifies and prioritizes the timeframe 
for the measure to be initiated.

Potential Funding Sources	Lists the potential funding, City staff, 
volunteer or other community resource 
necessary to carry out the 
implementation action.


TABLE 12-2
	COST OF DEVELOPMENT IMPLEMENTATION PROGRAM

Implementation 
Measure
Lead 
Department/ 
Agency
Projected 
Timeframe 
(Years)
Potential 
Funding 
Sources
1.	Incorporate new 
development fee 
structure for 
wastewater, potable 
water and solid 
waste facilities
Finance 
Department / 
Consultant
0-1
?	Utility 
Operating 
Fund 
Revenues
?	Development 
Impact Fees
2.	Develop a system for 
monitoring 
indicators of growth 
and changes in land 
use ratios
Finance / 
Community 
Development 
Departments
Ongoing
?	Operating 
Fund 
Revenues
3.	Identify costs of 
expansion of City 
operations and 
facilities
Finance 
Department
Ongoing
?	Operating 
Fund 
Revenues
4.	Continuously 
evaluate and update 
(as necessary) the 
Impact Fee Structure
Finance 
Department
Ongoing
?	Operating 
Fund 
Revenues
?	Development 
Impact Fees
Source: City of Peoria, 2001; Amended 2003

The Planning and Zoning Commission should review and provide 
recommendations to the City Council for revisions to the 
Implementation Program on an annual basis in order to continue 
to pursue implementation of the Peoria General Plan.  The Director 
of the Community Development Department and staff persons 
responsible for the General Plan implementation should monitor 
the status of each implementation action throughout the year and 
provide a general recommended framework to the Planning and 
Zoning Commission for annually updating the General Plan’s 
Implementation Program.

12. COST OF DEVELOPMENT ELEMENT

		PEORIA GENERAL PLAN
		PEORIA, ARIZONA
	12-18
12. COST OF DEVELOPMENT ELEMENT

		PEORIA GENERAL PLAN
		PEORIA, ARIZONA
	12-1