Pima County has poured millions of dollars into the Development Services Department to supplement its budget since the 2008 recession created a downturn in the building industry.
Now county leaders say itβs time for the department to stand on its own β using the money it collects in fees β and to begin to pay back the more than $5 million in county tax funding that has gone to keep development services afloat.
βWe have loaned that enterprise fund $5.3 million to get over the recession,β Pima County Administrator Chuck Huckelberry said. βWe understand cycles, but it canβt be indefinite.β
But where the money to pay back the loans will come from and what it will be used for has brought up issues of tax equity and fairness.
As an enterprise fund, development services should operate on a self-sufficient basis. The department charges for building-plan reviews and inspections, and is intended to operate without tax dollars.
When the economy collapsed, new construction activity in the region came to a grinding halt.
In the peak of the housing boom in 2005, Pima County issued 5,000 permits for new home construction. By 2008, permit issuance fell to fewer than 1,000.
The numbers continued to decline through 2011, when fewer than 500 permits were issued. New construction activity still hasnβt recovered, with just 665 permits issued last year.
For the Southern Arizona Home Builders Association, the numbers mean county officials need to be cautious and deliberate in what they decide.
βWe need to focus on the reality that permitting activity hasnβt recovered,β said David Godlewski, SAHBA president.
Godlewski said he understands the countyβs general fund needs to be made whole, but he has concerns that will be done at the expense of the construction industry.
βWe would say keep fees low,β he said. βLetβs proceed with caution here.β
Supervisor Ray Carroll said he recognizes the apprehension among the development community but doesnβt think fee increases are necessarily imminent.
βIβm not sure thatβs going to be the consequence,β Carroll said, adding that an improving economy could delay the need to increase fees.
Huckelberry said the county has been cautious, not only through using tax dollars to subsidize development services, but in suspending imposition of annual two-percent fee increases from 2011-13.
The department also has shed at least 120 employees, shrinking from a 183-person workforce to fewer than 60 now.
Departmental spending also has declined from more than $17 million in 2006 to less than $7 million in the current budget year.
βWeβre looking at ways to increase efficiencies,β said Carmine DeBonis, Pima County Development Services director.
Debonis said the department has significantly reformed its processes since the economic turndown.
Permit turnaround times average five days now, he said.
In addition, the department changed from an βassembly lineβ with inspectors looking at specific aspects of plans then passing it to another inspector, increasing wait times, to a more holistic and personal approach.
Debonis said the department already has begun to repay the loans to the general fund, beginning with a $250,000 payment in the current budget year and a planned $500,000 payment already budgeted for next year.
Tucson Association of Realtors spokesman Steve Huffman said his organization isnβt opposed to the repayments but does have concerns about fee increases.
βWe donβt want to create a situation when a repayment schedule will create fee increases,β Huffman said.
Another concern from industry is the county administratorβs proposal to use the repayment funds for road repairs.
βWe all want to see the roads fixed,β Huffman said, but added the industry doesnβt want the fees it pays to become a continual source for additional road repair funds.
Thatβs a concern Amber Smith with the Metropolitan Pima Alliance shares.
βFor us itβs a larger issue with development services and a constant reaching out to the development community to pay for roads,β Smith said.
She said impact fees the development community already pays plus the increase to property values new development creates provide a financial benefit to the county.
Smith also said the Development Services Department doesnβt necessarily have to operate as a self-sufficient entity.
βThat doesnβt mean it should not be subsidized by the general fund,β she said.
Pima County Supervisor Richard ElΓas said he recognizes the industry concerns and would work with them to find solutions.
βI want to make sure we do it carefully and make sure stakeholders are involved,β ElΓas said.
But he notes there are tax equity issues at play, in particular, his district has paid the costs of supporting development services.
βWeβve been a donor district,β he said.
ElΓasβ District 5 is the smallest of the county districts and is mostly in incorporated areas, which he said puts his residents in a position of subsidizing through their taxes the work development services does in other districts.
Huckelberry said the county could face legal trouble if the general fund subsidy to development services continues.
βItβs a reality because weβre boxed in by their own class-action settlement,β he said, alluding to a 1991 settlement the county has with members of the building community.
Developers sued the county accusing it of using the fees it charged to pay for unrelated government programs.
The settlement says the department must be βoperated in a manner similar to a private business such that the intent of the governing body is that all costs are financed or recovered through user charges.β
βItβs illegal for us to keep subsidizing it,β Huckelberry said.
The board of supervisors plan to revisit the issue at its March 15 meeting.
