Changes likely coming for Water Utility impact fees

Members of the Austin City Council began their periodic review of a set of fees set by the Austin Water Utility for new development with a fair amount of skepticism.

 

At last week’s work session, Mayor Lee Leffingwell raised questions about a move – endorsed by the city’s Water and Wastewater Commission, but not by the water utility – to maximize collection of the fees. Other Council members questioned the utility’s standing policy of discounting the charges, including a steeper discount for projects in Austin’s desired development zone.

 

“Obviously, we’d all rather see development in the desired development zone than in the drinking water protection zone, but the question I’ve heard raised by the Water and Wastewater Commission among others, is whether maintaining that differential is an effective way to steer development to one place or another,” said Council Member Chris Riley.

 

The city collects impact fees from infrastructure built to extend its water and wastewater lines. According to Water Utility officials, the charges account for roughly $6 million in annual income.

 

However, Water Utility Director Greg Meszaros told Council members that, as a policy, the city collects “significantly less than the calculated maximum allowable (in impact fees).”

 

That policy decision is designed to spur area growth. Any costs not recouped from impact fees are recovered through water rates. At present, the utility charges between $700 and $2,500 per service unit. The maximum allowable rate, a mandated calculation, is $3,307.

 

Under state law, Council must review the utility’s impact fees every five years. Utility officials have proposed a new fee model that would substantially increase fees, but would leave proportional fee recovery largely intact.

 

This is due largely to a new maximum allowable service unit fee, a figure that now comes in at $5,159. If utility officials leave the zone structure in place, recovery would range from $1,100 to $3,900. All told, the new math would increase impact fee revenues to $80.6 million over a 10-year period.

 

In addition to a state-mandated Impact Fee Advisory Committee, utility officials told Council members that they have discussed the situation with a broad array of stakeholders, and brought their proposal to a number of commissions, including the Water and Wastewater Commission.

 

There, commissioners sided with local activist Brian Rodgers. Rogers is urging Council members to adopt what is being called option five – the maximum allowable fee.

 

In a presentation he shared with In Fact Daily, Rodgers illustrates his point. Rodgers argues that, without the maximum fee, developers force residents to pay for new construction where the development should pick up the tab.

 

Rodgers points to development trends in San Marcos, Cedar Park, and Georgetown. In each of those municipalities, Rodgers says, impact fees are higher than those imposed by the City of Austin. He adds that each of those cities is seeing expansive growth.

 

Meszaros implied that growth and who pays for it is not the full extent of the issue. “This is hard to really judge, but we think (the utility’s fee proposal) is a low risk of legislative involvement in the future,” Meszaros said. “One of our concerns had been if we take a big leap toward maximum allowable, would that somehow trigger some legislative action at the next session.”

 

Council Members Mike Martinez and Laura Morrison raised affordability concerns. “Obviously, these costs would be passed on to the homebuyer,” suggested Martinez.

 

Meszaros noted that the utility does not apply impact fees to affordable housing projects conducted through the city’s Neighborhood Housing and Community Development department. He also noted the balance between impact fees and rates, and its impact on affordability.

 

“Particularly for those who are living here now, your rates are not likely to rise as quickly because you are rebalancing how much you recover through these upfront fees instead of (applying that cost to)…rates,” Meszaros added.

 

Morrison noted it is “important that we keep in mind that increasing water rates is a driver for driving people out of the city – it just becomes too expensive to live here.” She added that the vote would not be “a simple decision at all.”

 

The fees are set for a Council vote on Oct. 17.