Councilmember Carl Diedrich,

Question, as a four year member of City Council could you please explain this part of your plan:

 “As Mayor, I would introduce a small business support plan…”

My question is this: Why, if you really believe this plan is the correct path for Maricopa, don’t you, as a current member of City Council introduce it RIGHT NOW? Would winning the office of Mayor bestow upon you some new and previously unknown power to offer plans/suggestions? Are members of City Council currently not permitted to introduce plans, propose new ideas, or suggest alternative ways of doing business?

My belief and hope is that you, or any member of the Council, could introduce plans and, assuming those plans had merit, could work on implementing them in a cohesive, well-developed manner.

Which brings me to my next point; this plan has serious problems.

First, and perhaps most importantly, it fails on philosophical grounds. Your overarching idea is that government should subsidize bad economic behavior. It particularly disturbs me that you have lived through the results of this type of policy right here in Maricopa, yet your plan promotes and encourages this imprudence once again.

Here is what I mean by that statement, again directly from your example:

“If those fees are required up front, it is possible the restaurant wouldn’t be able to finance those fees and would have to use available capital to pay them, capital that would severely limit their expansion efforts.”

The fact of the matter is that those (Development Impact) fees are required “up front”, would and should be planned on by any competent business owner, and finally, after analyzing the cost-benefits of the project, if a business concludes that they simply cannot afford the expansion right now, the proper course of action is NOT to expand! Yet your plan provides just the opposite course of action: expand now, don’t worry about (ever) paying the impact fees, and we’ll all somehow come out ahead. This seems irresponsible.

Here is my understanding of your plan, please correct my errors:

Scenario No. 1 (Current Course)

City has collected $80,000 over the last four years from XYZ.
XYZ plans to expand in 2012.
XYZ projects the result of that expansion will raise revenue from $1,000,000/yr to $1,500,000.
Calculated development impact fees from this expansion will be $50,000.

Thus:

$80,000 Sales tax collected 2008-2011
$50,000 DIF in 2012
$150,000 Sales tax to be collected 2012-2016 (Your plan calls for a 3-5 year “payback” period, tax calculated at 2percent on revenue of $1,500,000/yr each year for five years.)

Total City revenue collected, years 2008-2016: $280,000

Scenario No. 2 (Mr. Diedrich’s Plan)

Facts same as above except development impact fees are “credited” against prior year taxes, the remaining balance is then reduced over 3-5 years by “up to 50 percent of new (emphasis added) sales tax revenue available for credit, depending on the number of jobs created.” Let’s assume maximum benefit (50 percent credit over five years).

Thus:

$80,000 Sales tax collected 2008-2011
$0 DIF in 2012 (the $50,000 is reduced by $20,000 to $30,000 which is then reduced by credits)
$150,000 Sales tax to be collected 2012-2016
-$25,000 (Sales tax credited against $30,000 DIF Receivable-$500,000/yr at 2 percent times 50 percent, this is the portion of “new” revenue subject to the “credit”.)
$5,000 Balance of $30,000 DIF that remains after five years of credits.

Total City revenue collected, years 2008-2016; $210,000

Your plan appears to leave the city with $70,000 less than the current approach. This outcome should come as no real surprise as it seems to be your intent:

“to completely offset the development impact fees”
“and ultimately abating the development impact fees”

Also, bear in mind that this analysis of your plan rightfully ignores the effect of “creating new jobs” as a result of the proposed expansion; the employment effects would be the same regardless of your plan’s use/application of any development impact fees and thus have absolutely zero impact on the numbers. In other words, the staffing levels required by the expansion itself do not change simply because an unrelated expense may change.

Finally, how does your plan comport with A.R.S. § 9-463.05(B) 13 which says in part:

“If a municipality agrees to waive any of the development fees assessed on a development, the municipality shall reimburse the appropriate development fee accounts for the amount that was waived.”

On its face, the statute appears to leave the city with the obligation to pay whatever amount of DIF is “waived” via your plan. Again, development impact fees are not discretionary or arbitrary amounts, they are fees rightfully and legally assessed to a developer per statute and city ordinance.

As to your idea of creating a new “Small Business Ombudsman” within city hall to “act as [an] intermediary when difficult issues arise” I offer two brief comments:

We are to believe that the average, intelligent, capable small business owner is going to be so overwhelmed by the complexity and vagaries of city hall navigation that they will need to enlist the aid of yet another city employee to be successful. Question, if you know that the current system is so complicated, so inefficient, why don’t you delve into eliminating the “red tape” and inefficiencies versus simply throwing it all in the lap of the “ombudsman”?

We, as voters, elected you and the other members of City Council to your positions of trust specifically to serve as an advocate and a champion on our behalf. If a small business owner did in fact face such a daunting process at city hall and felt they were being unfairly treated or ignored, why would you support creating another layer between the owner and a real solution? Most leaders would simply shoulder the responsibility, aid the owner directly, and would not rest until their problem with city hall was rectified. The answer to bureaucracy is never more bureaucracy, however well intended.