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Ponderosa Fire District v. Coconino County

Court of Appeals of Arizona, First Division

August 28, 2014

PONDEROSA FIRE DISTRICT, a political subdivision of the State of Arizona; UTILITY SOURCE, L.L.C., an Arizona limited liability company; TOWNHOMES AT FLAGSTAFF MEADOWS HOMEOWNERS ASSOCIATION, an Arizona non-profit corporation; FLAGSTAFF MEADOWS PROPERTY OWNERS' ASSOCIATION, an Arizona nonprofit corporation; THE FLAGSTAFF MEADOWS UNIT 3 HOMEOWNERS ASSOCIATION, an Arizona non-profit corporation; and BELLEMONT 276 L.L.C., an Arizona limited liability company, Plaintiffs/Appellees,
COCONINO COUNTY, ARIZONA, a political subdivision of the State of Arizona; COCONINO COUNTY BOARD OF SUPERVISORS, the duly elected governing board of Coconino County, Arizona; COCONINO COUNTY COMMUNITY DEVELOPMENT, a department of Coconino County, Defendants/Appellants.

Appeal from the Superior Court in Coconino County S0300CV201200366 The Honorable Dan R. Slayton, Judge.


Freeman Huber Law PLLC, Flagstaff By Shelton L. Freeman and Matthew J. Mansfield Counsel for Plaintiffs/Appellees.

Gammage & Burnham PLC, Phoenix By Cameron C. Artigue and Christopher L. Hering Counsel for Defendants/Appellants.

Mangum Wall Stoops & Warden PLLC, Flagstaff By Michelle D'Andrea Counsel for Amicus Curiae City of Flagstaff.

Maricopa County Attorney's Office, Phoenix By Wayne J. Peck Counsel for Amicus Curiae Maricopa County.

Holloway Odegard & Kelly PC, Phoenix By Ellen M. Van Riper Counsel for Amicus Curiae League of Arizona Cities and Towns.

Judge Andrew W. Gould delivered the opinion of the Court, in which Presiding Judge Lawrence F. Winthrop and Judge Maurice Portley joined.


GOULD, Judge.

¶1 We are asked to decide whether Coconino County, Arizona, the Coconino County Board of Supervisors ("Board"), and the Coconino County Community Development Department (collectively "the County") have the discretion to call performance bonds posted by a developer to ensure completion of subdivision improvements pursuant to Arizona Revised Statute ("A.R.S.") section 11-821 (C) and Coconino County Subdivision Ordinance No. 82-3 ("Ordinance"), section 4.14(A)(2) (May 3, 1982). We hold that A.R.S. § 11-821(C) and Ordinance § 4.14(A)(2) allow the County to exercise discretion in deciding when, and under what circumstances, it may call the performance bonds. Accordingly, we reverse the trial court's judgment.


¶2 Empire Residential Construction, L.P. ("Empire") subdivided land and developed Flagstaff Meadows, a residential community, in Coconino County. The subdivision consists of three Units; Units 1 and 2 contain completed single-family homes and townhomes. In 2006, Empire applied to the Coconino County Planning and Zoning Commission to develop Unit 3 into a residential community for single-family homes and multiple-family residences. The Board voted unanimously to approve Empire's application.

¶3 On October 17, 2006, the Board issued a resolution approving Empire's proposed Unit 3 preliminary plat, including the requirement that:

In accordance with Section 4.14 of the Subdivision Ordinance, all improvements must be completed prior to submittal of a final plat or a cash deposit, letter of credit, performance bond, or other acceptable financial security shall be required for the costs of any improvements and construction not completed, plus a 10% contingency. This includes, but is not limited to, all roadways, drainage structures, utilities, traffic control signs, street identification signs, fencing, park improvements, pedestrian trails, and landscaping.

Based on the Board's resolution, in October 2007, Empire acquired four subdivision bonds totaling $4, 396, 241.32. The bonds consisted of $3, 364, 428.10 for subdivision improvements, $196, 998.22 for emergency evacuation route improvements, $660, 000.00 for fire station additions, and $174, 815.00 for landscaping improvements. The Board approved the final plat in October 2007.

¶4 Empire began construction of the subdivision improvements and, upon completion of the emergency evacuation route improvements, the County released the corresponding $196, 998.22 bond. However, before it could complete the remaining subdivision improvements, Empire declared bankruptcy and abandoned Unit 3. At the time Empire abandoned Unit 3, the subdivision's infrastructure was not finished; there were no functional internal roads or utilities. In addition, no construction of homes had begun, and no lots had been sold to consumers. The remaining subdivision bonds totaled more than $4 million.

¶5 Following a series of trustee's sales, Bellemont 276, L.L.C. ("Bellemont") eventually purchased Unit 3 in March 2011 with the intent of constructing residences on the subdivided lots and selling them to the public. Bellemont applied to the County for a building permit to begin construction. Bellemont also requested the County call the outstanding Unit 3 subdivision bonds. Over the next several months, the County negotiated with Bellemont regarding the cost of finishing the Unit 3 improvements; during these negotiations, the County also sought to protect itself from the risk of potential litigation costs that might be incurred in calling the bonds.

¶6 The negotiations did not produce an agreement and the County ultimately passed a resolution not to call the bonds. In support of this resolution the County found, among other things, that improvements in Unit 3 were "essentially unconstructed, " "there [were] no current residents suffering from lack of infrastructure, " "the public infrastructure covered by the surety bonds is not needed to serve a substantial public interest, " calling the bonds "would primarily benefit only the single current owner of the subdivision property [Bellemont] rather than substantially benefiting the general public or the neighborhood, " ...

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