Home Builders Ass'n v. Apache Junction

• Citation: 198 Ariz. 493,11 P.3d 1032
• Decision Date: 12 October 2000
• Docket Number: No. 2 CA-CV 99-0198.,2 CA-CV 99-0198.
• Parties: HOME BUILDERS ASSOCIATION OF CENTRAL ARIZONA, a non-profit corporation; Beazer Homes Holding Corp., a Delaware corporation; Diamond Key Homes, Inc., an Arizona corporation; Providence Homes, Inc., an Arizona corporation; Courtland Homes, Inc., an Arizona corporation, and as class representatives of all others similarly situated, Plaintiffs/Appellants, v. CITY OF APACHE JUNCTION, a municipal corporation, Defendant/Appellee, Apache Junction Unified School District, Intervenor.
• Court: Court of Appeals of Arizona

11 P.3d 1032

198 Ariz. 493

HOME BUILDERS ASSOCIATION OF CENTRAL ARIZONA, a non-profit corporation; Beazer Homes Holding Corp., a Delaware corporation; Diamond Key Homes, Inc., an Arizona corporation; Providence Homes, Inc., an Arizona corporation; Courtland Homes, Inc., an Arizona corporation, and as class representatives of all others similarly situated, Plaintiffs/Appellants, v. CITY OF APACHE JUNCTION, a municipal corporation, Defendant/Appellee, Apache Junction Unified School District, Intervenor.

No. -0198.

Court of Appeals of Arizona, Division 2, Department A.

October 12, 2000.

Quarles & Brady L.L.P. by Charles W. Herf, Julie A. Pace, and Mireya C. Martin, Phoenix, for Plaintiffs/Appellants.

Law Offices of William E. Farrell by William E. Farrell, Scottsdale, for Defendant/Appellee.

Law Offices of Glenn J. Gimbut by Glenn J. Gimbut, Yuma, for Intervenor.

Miller LaSota & Peters, P.L.C., by Donald M. Peters, and Susan A. Cannata, Phoenix, and John A. Baade, Tucson, for Amici Curiae Arizona School Boards Association, Amphitheater Unified School District No. 10, Cave Creek Unified School District No. 93, Casa Grande Elementary School District, Dysart Unified School District No. 89, Flowing Wells Unified School District No. 8, Gilbert Unified School District No. 41, and Marana Unified School District No. 6.

Law Offices of Neil Vincent Wake, By Neil Vincent Wake and Linda D. Skon, Phoenix, for Amici Curiae Calvis Wyant Homebuilders; Continental Homes; GHE & A, Inc.; Standard Pacific of Arizona, Inc.; Northern Arizona Home Builders; Southern Arizona Home Builders Association; Arizona Chamber of Commerce; Arizona Multihousing Association; Arizona Association of Realtors; and Arizona Tax Research Association.

David R. Merkel, Tempe, for Amicus Curiae, League of Arizona Cities and Towns.

OPINION

BRAMMER, Presiding Judge.

¶ 1 Appellants, Home Builders Association of Central Arizona and several corporate home builders, appeal from the superior court's judgment concluding that the City of Apache Junction (the City) had statutory authority to pass an ordinance that imposes development fees on residential developments for school capital finance purposes. Concluding that no such authority exists, we reverse and remand.

Facts and Procedural History

¶ 2 In an apparent attempt to assist the Apache Junction Unified School District (the District), in December 1997, the Mayor and City Council of the City passed Ordinance 1014 (the Ordinance), which amended the City's code, effective March 1998.¹ The Ordinance assesses a fee for "any building permit" issued for single family, multi-family, or mobile or manufactured homes, and cites A.R.S. § 9-463.05 as the authority for its adoption and the imposition of the fee. The amount of the fee varies depending on the type of dwelling unit, with single family homes generating the highest fee and multi-family units the lowest. The purpose of the Ordinance was to raise funds to defray the costs associated with new school construction within the District occasioned by occupancy of new housing facilities within the City.

¶ 3 The day after the Ordinance was adopted, the City and the District entered into an intergovernmental agreement, pursuant to A.R.S. § 11-952. The agreement provides, inter alia, that funds raised by the City pursuant to the Ordinance would be "transferred" to the District for "additional necessary capital school facilities to serve population growth within the ... City as it exists now or as it may be increased in the future."

¶ 4 Appellants filed this action seeking declaratory, injunctive, and special action relief, the latter pursuant to Rules 3(b) and 3(c), Ariz. R.P. Special Actions, 17B A.R.S. Appellants alleged that the City had no authority to enact the Ordinance under § 9-463.05, that article XI, §§ 1 and 2, of the Arizona Constitution essentially precluded the fee, that the fee was an "unauthorized tax," and that its imposition violated their due process and equal protection rights, thereby violating 42 U.S.C. § 1983. Appellants sought a judgment declaring that the Ordinance was "unlawful, arbitrary and capricious and in excess of the legal authority of the [City] under Arizona law," and requested special action and injunctive relief to prevent the City from assessing the fee. Appellants further requested an accounting of the fees already paid as well as their return and prejudgment interest thereon. The trial court granted the District's motion to intervene in support of the Ordinance's validity.

¶ 5 Appellants also sought certification to maintain the action as a class action, pursuant to Rule 23, Ariz.R.Civ.P., 16 A.R.S., requesting relief on behalf of "all entities" who had been charged and who had paid fees to the City pursuant to the Ordinance. They sought a return of the fees, also alleging that, by collecting the fees, the City had deprived the class members of due process of law.

¶ 6 Rather than litigating appellants' request for class certification, civil rights claims, damages, and other issues, the parties stipulated that the trial court should first decide the threshold question of whether the Ordinance was authorized under Arizona law. Although the issue raised a question of law, the trial court held an evidentiary hearing that addressed the social and economic background against which the fee was imposed.² After that hearing, the trial court concluded that enactment of the Ordinance was a proper exercise of the City's power under A.R.S. §§ 9-463.05, 9-240(B)(18), 9-240(B)(21)(a), 9-276(A)(16), 9-276(A)(23), and 9-499.01.³ Accordingly, it denied appellants' request for declaratory, injunctive, and special action relief and entered judgment in favor of the City and the District pursuant to Rule 54(b), Ariz.R.Civ.P., 16 A.R.S. Appellants appeal from that judgment.⁴

Standard of Review

¶ 7 The central question we must resolve is whether the Ordinance is authorized under either § 9-463.05 or any of the other statutes on which the trial court relied. This presents an issue of statutory interpretation, a question of law that we review de novo. Tallent v. National Gen. Ins. Co., 185 Ariz. 266, 915 P.2d 665 (1996); Lavidas v. Smith, 195 Ariz. 250, 987 P.2d 212 (App. 1999). The adoption of the Ordinance is a legislative act that carries a presumption of validity. See Home Builders Ass'n of Central Arizona v. City of Scottsdale (City of Scottsdale II), 187 Ariz. 479, 930 P.2d 993 (1997)

.

¶ 8 The City and the District argue that we must accord the City's decision to impose the development fee "considerable deference" or must uphold the Ordinance unless it was enacted "arbitrar[ily] and without factual justification." City of Scottsdale II, 187 Ariz. at 482-83, 930 P.2d at 996-97; see also Home Builders Ass'n of Central Arizona v. City of Scottsdale (City of Scottsdale I), 179 Ariz. 5, 875 P.2d 1310 (App.1993)

(court should defer to municipality's findings that development fee will result in beneficial use and is reasonably related to burden imposed on municipality by development unless those findings are arbitrary, erroneous, and wholly unwarranted). Our resolution of the legal issue here, however, does not hinge on evaluating or questioning the "factual underpinning" or "wisdom" of the City's legislative decision embodied in the Ordinance. Id. at 482, 875 P.2d 1310,

930 P.2d at 996. Rather, our focus is on whether any legal authority exists for the City to take the action it did. See City of Scottsdale I,

179 Ariz. at 7,

875 P.2d at 1312 (although courts generally defer to municipalities' legislative determinations of factual matters, municipalities nonetheless "may not use fees for any purpose or in any manner that will not meet the statutory requirements").

Legal Framework

¶ 9 We set forth below selected parts of the Ordinance to which the parties primarily direct their arguments:

WHEREAS, A.R.S. § 9-463.05 authorizes cities and towns to assess development fees to offset costs to the municipality associated with providing necessary public services to a development; and,

. . . .

WHEREAS, the Mayor and City Council of the City of Apache Junction have found that a development fee for additional necessary school capital facilities is not only necessary but will result in beneficial use to new development; and,

WHEREAS, the Mayor and City Council of the City of Apache Junction have determined that new development within the City impacts the Apache Junction School District by requiring additional necessary school capital facilities, new school buildings with required educational and recreational facilities and equipment;

NOW, THEREFORE, BE IT ORDAINED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION, ARIZONA, AS FOLLOWS:

Section I IN GENERAL

That the Apache Junction City Code Volume 2, Land Development Code, Chapter 7, is hereby amended by adding a new Article 7-2 Development Fees for Schools to read as follows:

Section 7-2-1 Authorization

This Section is authorized by Ordinance No. 1014 and is enacted pursuant to the general police power of the City and the authority granted to the City by the State of Arizona as found in A.R.S. § 9-463.05.

Section 7-2-2 Purpose and Intent

It is the purpose and intent of the City of Apache Junction to implement a comprehensive plan by requiring that new development pay for its share of public facilities through the imposition of development fees that will be used to finance, defray, or reimburse all or a portion of the costs incurred by the municipality to provide additional necessary public services to its citizens resulting from new residential development within the City.

. . . .

Section 7-2-4 Applicability

Unless expressly excepted or exempted, this Article applies to all fees imposed by the City to finance, defray or reimburse the cost of additional necessary school capital facilities including additional school buildings, educational or recreational facilities and necessary

...