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Austin Water Utility considering increase in impact fees

Friday, November 30, 2012 by Elizabeth Pagano

Developers may soon face higher impact fees to install new water and wastewater connections both within and outside the city. And that may not be the most controversial proposal coming to the City Council.


Repeating the idea that “growth should pay for itself,” Austin Water Utility Supervising Engineer Brian Long presented the proposed changes to interested stakeholders Wednesday night.


While the utility updates impact fees every five years, the changes this year could be more substantive than in years past. Increased maximum allowable fees, recommendations from the Austin Water Joint Subcommittee and a directive from City Council this summer have made the potential for change greater than in years past. While typically there is no public input process before fees are presented to boards and commissions, the city manager’s office decided that, given the substantial changes proposed, it would be a good idea this time.


Impact fees are designed to offset the impact of new development on the community, in this case the cost of providing new water and sewer infrastructure. The fees are applied when a new meter is purchased or wastewater is connected. Averaged out, the city collects about $6 million annually from these fees, although their nature makes them dependent on growth.


Along with increased fees, Long said the city may do away with the old seven-area development zone structure. Under that scenario, all new impact fees would be assessed equally across the city.


The city created the seven-area development zone to provide an incentive for development in the central city and in the desired development zone (DDZ), generally East of MoPac. For years, developers in the DDZ have paid a smaller percentage of the maximum allowed fee than in the Drinking Water Protection Zone, where growth is discouraged. With the implementation of flat fees, the result is that the greatest impact would be to fees in the central city.


“What the joint committee said is, if we were to maximize the impact fee and get rid of the zone discount policy, we might be able to get more revenue this way,” Long said. “And that would lessen the burden on the rates and ratepayers.”


The significance of such a move was not lost on those in attendance.


“I guess you can just take the words ‘desired development zone’ and throw them out the window,” said Vera Massaro, who is the regional development manager at Qualico Housing.


“The word that everybody uses is affordability. And it’s used and reused, although it’s never applied. … Every time these fees go up, and it doesn’t matter where they go up, there’s really no guarantee that rates are going to go down. Because nothing ever goes down,” she said.


This proposal seems likely to raise the hackles of environmentalists as well as central city developers.


Long reminded In Fact Daily that this could be seen as a reduction of subsidies for new development. He also explained that impact fees were unlikely to determine where development would flourish. In addition, the elimination of zones would not mean that waivers intended to encourage development would vanish.


Right now, impact fees range from as low as $700 for a new water hookup in a downtown location in an area zoned for redevelopment (known as CURE) to $2,500 outside the city’s extraterritorial jurisdiction, or ETJ. For wastewater, the fees range from $400 to $1,400. There are now three “flat rate” plans on the table, one at a uniform 75 percent of the state’s maximum allowable rate, $4,100 for water and $1,700 for wastewater; one at 80 percent ($4,300 for water, $1,800 for wastewater); and one at 85 percent ($4,600 for water, $1,900 for wastewater).


The most extreme option, which sets fees at the uniform 85 percent, would raise water fees 84 percent for new connections furthest from the city center, and 557 percent in areas downtown that currently have the lowest fees.


The other change discussed at the meeting was easier to understand, but no less radical for large developers.


AWU is considering eliminating its cost-reimbursement program. Service extension requests (SERs) come from developers to extend water or wastewater utility to a tract of land.


Currently, the city repays the costs to developers who build water and wastewater infrastructure if the developer increases the size of the pipes in conformance to a city request. The reimbursement covers 100 percent of hard construction costs and 15 percent of soft costs.


Since 1993, the city has spent $207.4 million in authorized repayments of these types.


In the case that the city requested oversizing of a main water line, as they would do if they thought more infrastructure would be needed in the future, the city would continue to pick up the difference in cost between what the developer needed and what the city wanted.

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