The cost of a new home in Oro Valley just got higher.
Last Wednesday, Jan. 21, the Oro Valley Town Council voted 6-1 to raise residential and commercial development review fees.
Councilman Al Kunisch voted against the increase.
“I think this is the wrong time,” Kunisch said about the increase.
The councilman noted the lagging economy nationwide and the nearly stagnant home-building sector of the local economy.
Last October, for example, the town approved four single-house building permits, as opposed to 18 approved the previous October.
Other town officials, though, said the increases are necessary to cover personnel costs.
“We need to get back every penny and dime that’s spent out,” Councilwoman Paula Abbott said at last week’s meeting.
The new price structure would increase the costs for development review of a 100-unit subdivision from $19,945 to $73,310. The fees have not been changed since 2003.
In fiscal 2008, development review services generated more than $2.7 million, but the department’s total expenses topped $3.2 million.
At least one Oro Valley homebuilder, however, questions that rationale.
“Why have they randomly chosen that development services should be self-sustaining when no other departments are?” asked Steve Solomon, owner of Cañada Vistas Homes.
Solomon said the town should use money generated through its 4-percent construction-materials sales tax to make up the shortfall.
Currently, construction sales taxes go into the town’s general fund.
At Solomon’s 128-lot Vistoso Town Center housing development, under construction in Rancho Vistoso, he’s already paid more than $250,000 in construction sales taxes.
“That more than covers development services for that project,” Solomon said. “It’s ludicrous to say that developers aren’t paying enough to the town to cover expenses.”
But it’s not just how the new fees and recently increased impact fees, which made it more expensive to build in Oro Valley, that have him concerned. He thinks the policies will have unintended consequences.
He thinks the ever-increasing prices will force out small builders like him and leave room only for national builders.
“I’m afraid that what it’s going to result in is that the large national builders who have deep pockets will be the only ones left building in Oro Valley,” Solomon said.
He speculates that if that happens, the town would lose its unique qualities and begin to resemble many other communities around the West, where most of the houses look the same and are built on smaller lots.
Others question the timing of the new fees when the construction industry across the country has come to a near standstill.
“I would advocate for any type of fees to be postponed until the industry gets back on its feet,” said David Godlewski of the Southern Arizona Home Builders Association.
Last December, Godlewski and SAHBA sent a letter to town officials requesting they seek alternatives to the then-proposed fee increases.
The group calculated that the change would amount to a four-fold increase in development review fees and would disproportionately affect local builders.
They proposed phasing-in the new fees over two years or, like Solomon suggested, using construction sales tax money to supplement development review departments’ budgets.
The council did not discuss any of those options at last Wednesday’s meeting.
Solomon also questioned the timing of the increases, noting the difficulty of securing funding in the midst of the current banking difficulties.
“Right now, it’s nearly impossible to get any kind of funding for construction,” Solomon said. “The financing is totally dried up.”
Putting new fees on building now, Solomon argued, would only further harm a struggling industry that, until now, had been a major part of the regional economy.
“That $2 billion economic engine is completely gone,” Solomon said.
Cost of building in Oro Valley
The Oro Valley Town Council voted in September to raise water impact fees and launch additional fees for new home construction. These prices don’t reflect the costs of development review services.
Fees for single-family homes are:
• $2,699 for parks and recreation
• $694 for libraries
• $513 for police
• $389 for other government needs
• $1,908 for transportation projects
• $7,749 for water*
• Total: $13,952
*Includes two categories of water-related fees. The figures represent the cost for a single-family home with a 5/8-inch water meter. More than 80 percent of Oro Valley Water Utility customers have that size meter. The existing water fees totaled $4,283 for a single-family home.