Rep. Kavanagh’s “Robbing Peter to Pay Paul” budget plan to be considered this morning

Posted by AzBlueMeanie:

What: House Appropriations Committee holds hearing on budget bills for 2010.

When: 10 a.m. today.

Where: Arizona House of Representatives, 1700 W. Washington St.

Details: House bills 2633 through 2642. Read them at

House Republicans plan to take the first step today to pass a budget for fiscal 2010 following a plan that relies on cities giving up impact fees collected from developers. Developer money part of budget vote | ®

[E]ven if the proposal does have enough votes to pass, it's unclear whether it's enough to balance the state's $3 billion budget shortfall.

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The proposal is scheduled for a vote in a special meeting of the House Appropriations Committee today. That would clear the way, said Rep. John Kavanagh, the committee's chairman, for negotiations with the Senate and a possible vote this week.

The plan, a tweaked version of one released last week, relies on nearly $1 billion in federal stimulus money, $670 million in department and program cuts and nearly $400 million in fund transfers.

To avoid a tax increase, House leaders think they can collect $210 million from cities and towns by allowing them to use impact fees they've collected from developers for their general operations budget. That would free up other state money cities receive," i.e., state revenue sharing.

Kavanagh says it would now be "voluntary" — not mandatory — for cities to participate.

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One thing lawmakers don't know is whether enough cities will participate to generate $210 million in revenue. But Kavanagh said he believes the formula could generate up to $1 billion in revenue, though lawmakers would not take that much.

If the projections are too high, lawmakers would need to either make further cuts or find new sources of revenue.

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Additionally, lawmakers say there's another $255 million sitting in special accounts — unspent funds school districts are not allowed to touch. The GOP plan would sweep those funds, but only ones that schools cannot currently use.

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[T]he lobbying group representing Arizona cities and towns offered a legal opinion Monday that using municipal impact fees to balance the state budget would violate the state constitution.

Ken Strobeck, executive director of the League of Arizona Cities and Towns, said even as a voluntary approach, the impact-fee change doesn't make much sense. He said cities that participate would be left to figure out later how to pay for projects they promised developers and taxpayers.

"Certain promises have been made to certain developers," Strobeck said. "It's a solution that does not have much credibility."

An attorney for the league prepared a legal briefing saying any use of impact fees to balance the state budget is prohibited by the Arizona Constitution on the basis they are a "land-use regulation." Taking them, therefore, would amount to "the taking of private property without just compensation."

"And any such use of funds is likely to trigger immediate legal challenges," the briefing states.

The Plan has already drawn editorial opposition from the Arizona Republic Legislative raid on local coffers would be wrong:

[T]he Legislature shouldn't raid the wallets of cities, towns and counties.

The latest House budget proposal includes a $210 million "voluntary" contribution from cities, designed to scoop up impact fees. Maricopa County would be forced to transfer $66 million to the state general fund, while Pima County would have to donate almost $17 million. Bills introduced by Republican leaders late Monday include other maneuvers, such as changing funding formulas, that would shift costs from the state to local government.

These raids are unfair, counterproductive and, in the case of development fees, possibly unconstitutional.

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One of the worst ideas is a complex scheme to siphon off impact fees. These are the fees that cities and towns collect on new homes and commercial buildings in areas that lack basic services. The budget proposal contains a switcheroo: Local governments could use the fees for regular operating expenses, freeing up money to go to the state.

Diverting the money from its intended use is likely unconstitutional. And it's fiscally irresponsible: Without the fees, infrastructure like waterlines and parks would be delayed and eventually have to be funded by taxpayers.

Phoenix Mayor Phil Gordon also weighs in against the idea in his opinion Plea to Legislature–Don't raid Ariz. cities' impact fees:

This week, a budget-balancing proposal surfaced that, among other things, would "rebate" (that's code for "seize") $210 million from cities and towns across the state and transfer that money to the state's general fund.

This is a fundamentally bad idea. It is illegal and unworkable.

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One part of the proposed plan is to seize those impact fees, otherwise known as development fees, that developers pay to cities to pay their fair share of needed facilities. A city must accumulate impact fee revenues over time to build these costly infrastructure projects when they are needed. If those funds are seized or transferred to the state, the money to build these projects will be gone.

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It is important for those legislators and the Central Homebuilders Association lobbyists who have pushed this plan to understand that impact fees must comply with strict U.S. and Arizona constitutional requirements. Impact fees must have a logical connection, or "rational nexus" to the burden of the development on public infrastructure. The proposal clearly does not meet the legal test. If the state takes these fees, cities will be sued and forced to refund fees to the developers that paid them, penalizing taxpayers yet again.

To our legislators, I respectfully ask that you abandon this plan, as well as any plan that balances the state's budget using city-earned revenues from any source. To the Central Arizona Homebuilders' board and its members, I respectfully ask you to instruct your lobbyists to drop this proposal and work with the cities to help balance the state and city budgets without compromising our shared future.

Rep. Kavanagh's "Robbing Peter to Pay Paul" budget plan is a foolish idea and very likely unconstitutional. it will only lead to legal challenges and it will do nothing to balance the state budget. Contact your state legislators now to register your opposition.

0 responses to “Rep. Kavanagh’s “Robbing Peter to Pay Paul” budget plan to be considered this morning

  1. As I haven’t read the Arizona Constitution recently I’ll pass on claiming constitutionality or unconstitutionality but I would say that since all municipal corporations (e.g. cities) are political subdivisions of the State of Arizona and derive their very existence to the state that the so-called raid is just a reassignment of money from one government account to another.