Audit shows Mesa botched developer impact fees - East Valley Tribune: News

Audit shows Mesa botched developer impact fees

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Posted: Saturday, February 24, 2007 4:39 am | Updated: 6:28 pm, Fri Oct 7, 2011.

Mesa’s building department miscalculated developer impact fees during the last several years, issuing refunds in some cases and recouping hundreds of thousands of dollars in others.

The city botched fees for both residential and commercial builders who headed up development projects across the city.

An internal city audit issued in 2006 revealed an error rate for fees assessed in 2004 at 14 percent for residential permits and 27 percent for commercial permits. The rates were derived from a sample of more than 100 building projects reviewed by auditors.

“That’s a very high rate for the (commercial) permits. That’s not a good scenario,” said Terry Williams, the director of Mesa’s building safety division.

The city’s miscalculations have led to problems in the construction community.

Builders in the east Mesa community of Apache Wells, for instance, were charged fees of about $2,000 in each instance that it replaced a mobile home with a traditional singlefamily home on particular lots.

Those assessments turned out to be wrong, however, because the impact fees had already been paid to the city when the original construction took place, and no new fee was owed.

Williams, who took charge of the department after an initial audit had reviewed impact fees in 2001, said the mistake in Apache Wells was a result of misreading city regulations that charged fees differently to mobile homes located in parks and mobile homes built in subdivisions. The city mailed refund checks for the errors, he said.

“That was a mistake on my part,” Williams said.

Todd Bodine, 51, said he argued on numerous occasions about impact fees being charged in Apache Wells. He said it made no sense that a “stick-built” home being constructed would be assessed impact fees, while a modular home wouldn’t.

“We weren’t building anything new,” said Bodine, who owns Bodine Construction.

“You’re telling me that somehow a modular (home) isn’t the same impact as a new house?”

The errors uncovered by the audit department in 2004 added up to a small percentage of miscalculations. The errors connected to the samples reviewed by the audit in 2004 totaled $30,128, which includes both overcharges and undercharges. That translates to about a 3 percent of the total revenue of the projects.

But the high rate of errors shows that the department needs to continue to be monitored, said Gary Ray, acting city auditor. A follow-up audit will start in March, Ray said.

“We don’t really consider the money the biggest thing. It could have been $100,000 or a million or a few hundred, the fact is there is still an error,” he said.

The audited building projects in 2004 show that the city overcharged residential and commercial builders more than it shorted itself.

In some cases, the city’s building department rounded the decimals on a project and made less than $1 per mistake in assessing the impact fees. In those cases, no refunds were issued on the project.

“It would cost us $60 to issue a refund check,” Williams said.

But other errors in the department have been large. The former head of building safety, Crystal Pearl, called for the first audit of the department in 2001 after the city failed to charge the builder of an apartment complex $400,000 in impact fees.

The fees were later recouped when the developers applied to build a second project, Williams said.

Some errors in the building safety department have been systematic. For instance, the first audit of the department showed impact fees were calculated by hand, which led to a high rate of errors.

The fees are complicated and can be vastly different even for single-family homes, which can be charged with varying amounts in fire and police impact fees based on the square footage of the project.

In the last several years, the city has streamlined definitions for commercial properties, eliminating the differences between “sit-down” and “fast-food” restaurants.

Since 2003, the city has implemented a new computer software program to determine the impact fees.

The city is also reviewing any project that is valued at more than $1 million before impact fees are assessed and the permits are issued. Meanwhile, financial staff members within the building department will be reviewing about 10 percent of the permits and the fees annually to check for accuracy.

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