Southern Arizona Home Builders v. Town of Marana, 254 Ariz. 281

Background:

Town of Marana acquired a wastewater reclamation facility (WRF) in 2012–2013, assuming outstanding debt and issuing 20‑year bonds to finance acquisition and subsequent Phase 1 expansions and upgrades.
Phase 1 upgrades (2017–2018) increased capacity and—because of ADEQ requirements—improved treatment from Class B+ to Class A+, producing broader reuse options and operational savings.
The Town’s Infrastructure Improvement Plans (IIPs) and revised 2017 impact fees allocated essentially 100% of the acquisition and Phase 1 costs to future water and sewer customers; the Town made an unallocated $3.2 million contribution.
Southern Arizona Home Builders Association (SAHBA) sued in 2018, arguing the fees violated A.R.S. § 9‑463.05 by forcing new development to pay costs that also benefit existing residents.
Trial court and court of appeals upheld the fees relying on City of Scottsdale precedent. The Arizona Supreme Court granted review to interpret the post‑2011 version of § 9‑463.05 and to decide whether the Town’s fee allocations complied with that statute.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
May the Town assign 100% of the WRF acquisition cost to future development?	SAHBA: No—acquisition benefits existing residents and public taxpayers should share costs.	Town: Yes—the acquisition secures effluent/recharge credits and was done to serve future development.	Court: No—violates § 9‑463.05; costs that benefit both must be proportionally allocated.
May the Town charge nearly all upgrade/modernization costs to new development?	SAHBA: No—upgrades improved level of service and saved costs for existing residents; those costs are not fully chargeable.	Town: Yes—the upgrades were undertaken to provide capacity for new development.	Court: No—statute prohibits charging new development for upgrades that benefit existing development or provide a higher level of service; proportional allocation required.
Does City of Scottsdale presumption of validity control review of impact fees under current § 9‑463.05?	SAHBA: 2011 statutory changes removed deference; fees must be narrowly construed.	Town: Relied on Scottsdale’s deference and "beneficial use" analysis.	Court: Scottsdale largely inapplicable post‑2011; courts must narrowly construe municipal fee authority and apply the statute’s proportionality limits.
Remedy: Should fees be invalidated or remanded for recalculation?	SAHBA: Sought summary judgment invalidating the fees.	Town: Sought to uphold fees as adopted.	Court: Vacated appellate decision, reversed trial court, and remanded for fact‑bound, evidence‑based proportional allocation and recalculation consistent with § 9‑463.05.

Key Cases Cited

Home Builders Ass'n of Cent. Ariz. v. City of Scottsdale, 187 Ariz. 479 (1997) (applied presumption of validity and a "reasonable relationship" standard under the pre‑2011 statute)
Dolan v. City of Tigard, 512 U.S. 374 (1994) (established the "rough proportionality" test for exactions under the Takings Clause)
State ex rel. Brnovich v. City of Tucson, 242 Ariz. 588 (2017) (non‑charter municipalities derive authority solely from statute)