SAWS Impact Fees Represent More than Meets the Eye

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From Smart Growth America's Measuring Sprawl 2014 report.

From Smart Growth America's Measuring Sprawl 2014 report.

On May 29, San Antonio City Council will vote on how much to charge developers for new growth and the resulting water and wastewater needs. These impact fees are raising questions about the relationship between growth, resources and cost. More people require more water, but how much more water we need and who pays for it is a more difficult question.

While much of the issue coverage focuses on how much to charge new growth for water supply, the issue is really much broader and highlights the need for a community conversation about growth and sustainability.

Impact fees, first authorized by City Council in 1992, were created so new growth would pay a portion of water and wastewater infrastructure costs incurred as a result of their expansion. While some cities have a similar fee obligation for electrical power, too, San Antonio only requires impact fees for water.

The total fee is broken into five major categories: water supply; water delivery, flow and system development; and wastewater collection and treatment. Fees also vary based on location. For example, wastewater impact fees are affected by proximity to the treatment facility. The water supply fee is a flat fee, unaffected by location.

State law requires that impact fees are reassessed every five years based on projected water needs and costs over a 10-year horizon. City Council appoints the Capital Improvements Advisory Committee (CIAC), on which I was a member, that reviews the land use projections and projected costs in the above-listed categories and then calculates the maximum fee allowed by law.

The committee is allowed to recommend the full amount or a lesser sum. This recommended amount is presented to the SAWS board along with the SAWS staff recommendation. Once the board votes, the issue is put before City Council.

Of the five categories listed above, the only fee currently being debated is the water supply fee. The full fee of $2,796 was recommended by the SAWS staff and the SAWS board in a vote of 6-1. The lower fee of $1,590 was recommended by the majority of the CIAC board. This lower number was calculated by dividing the cost of all of the city’s firm-yield water supply since the city started obtaining supply and dividing it by all existing ratepayers and those projected to move here in the next 10 years. The adoption of the lower fee would result in a $155.6 million difference over the 10-year horizon.

A SAWS rate increase would be required to offset the amount not collected from new homes.

Ultimately, the debate centers not on a specific amount, but rather on a philosophical question of who should pay for new water. For me, the sole dissenter on the committee who favored the higher fees supported by staff and the board, it simply came down to equity.

New supply is driven by new demand; therefore, growth should bear the majority of those supply costs. This is not to say that the new growth pays all the costs of new supply. Even with the higher impact fee, existing ratepayers will see rate increases based on new supply especially because new supply costs considerably more than old supply. Projects like desalination and water reuse are expensive and there is no inexpensive water left.

Description of Phase 1 of SAWS' brackish water desalination project as presented to the SAWS board on March 4, 2014.

Description of Phase 1 of SAWS’ brackish water desalination project as presented to the SAWS board on March 4, 2014.

To illustrate, the previous impact fee for water supply calculated only a few years ago was $1,297, but new projects included in the 2012 Water Management Plan explain the increase. The cost of new supply may not be negotiable, but how much we need is.

The development community has been very vocal, advocating for the lower number and arguing that the whole city benefits from new, diversified supply; therefore, existing ratepayers should share the cost. While it is true that San Antonio needs a diverse water portfolio, much of this diversification is already completed or in progress.

The problem with this argument is these proposed fees are actually a reflection of the need for more water not for diversity of supply.

New homes drive that need and new homes don’t use water at the same rates as existing homes. The vast majority of the city’s residential irrigation systems are in new homes. According to SAWS data, a house with an irrigation system uses 50-60 percent more water than a house without one. In addition, the average lot size of a new home is larger than those of most existing ratepayers. Therefore, even if the supplies required by new homes incidentally helps existing homeowners, they are still driving up demand at an exponential rate.

While impact fees are important in their own right, they really should be considered in relation to the many other currently culminating water issues.

Right now, San Antonio is debating future water supply projects, all of which have a very high price tag. Projects with low capital costs but high operation and maintenance costs, such as the Vista Ridge project, will be paid for almost entirely by ratepayers and not by new growth because of state law limitations on impact fees. SAWS is also reviewing new rate structures as they merge their customers with those from the former Bexar Met. Meanwhile, wastewater costs are increasing based on an EPA settlement with the city and no one really knows what all this will all add up to 5-10 years from now.

This impact fee discussion should not be viewed in a vacuum. It is part of this larger picture and this decision will set a precedent for who pays going forward. Growth is an important part of our city’s economy, but all growth is not created equal and how we grow will determine if we have resources for everyone in the future.

If we can lower our usage, we can lower our projected demand and the supply price tag comes down. The decisions we make today affect the bottom line for all of San Antonio, new and old alike.

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Documentary Showcases San Antonio’s ‘Green Solutions’ to ‘Water Blues’

Conversation: SAWS Abandons Pipes, Redirects Focus to Desalination Plant

 

10 thoughts on “SAWS Impact Fees Represent More than Meets the Eye

  1. This community discussion should also include consideration of how these impact fees and other fee structures can be implemented to shape and manage future growth. Currently, SAWS does not distinguish between growth on the Edwards Aquifer Recharge Zone and less environmentally sensitive areas, despite the fact that the State imposes some rather costly regulations on infrastructure in the Recharge Zone.

    For example, camera testing is required at regular intervals for sewage lines on the Recharge Zone. The cost of compliance with these requirements is estimated at $37,000/mile every five years. Currently, this cost is borne by all SAWS rate payers. Until such time as a more equitable method of financing inspections and other measures needed to protect the Recharge Zone are implemented, all SAWS rate payers are subsidizing the cost of growth where we least want it.

    Because of the threat to the aquifer, the Greater Edwards Aquifer Alliance would like to see new contracts for SAWS wastewater service curtailed on the Recharge Zone. The cost to all of us, should growth continue in this area, may amount to more than we ever imagined.

    At this time, when San Antonio is considering the acquisition of expensive new water supplies, we have the opportunity to discuss and implement policies that can predicate water conservation practices, environmental protection, and how San Antonio can grow in a sustainable manner. We ask that these issues be a part of the discussion as we move forward in expanding SAWS supplies and service.

  2. Might one option be to choose an impact fee somewhere between the low and high ends with the understanding that only xeriscaping or other water efficient landscaping practices be used in new developments? The would prohibit the installation of turf and conventional irrigation systems to artificially keep grass alive. The majority of water consumed by residential customers is through landscape irrigation and, coupled with indoor conservation, this would serve to curb the increase in necessary supply.

    Developers will cite higher upfront costs, but the option would be between this and higher impact fees. Plus, innovation can help bring down the cost of complying with new landscaping rules. Why charge a higher fee while still allowing water waste when it can be partially addressed on the demand side? It seems inevitable that San Antonio and the rest of South Central Texas will have to embrace more water efficient landscaping. With the region experiencing unprecedented growth there is a need to begin addressing this long-neglected issue.

    • Aaron — I completely agree that something like what you propose is possible and I would love to see that happen. I actually advocated for an intermediate number without success, which is why I am now a proponent for the maximum number. The other option is simply too low. One of the challenges with what you suggest is that this negotiation would have to occur outside SAWS and requires city leadership. It is this big picture thinking that is needed. Until now, impact fees have been seen as a stand-alone issue, but as you note, they can and should be used to discuss land use ordinances. My hope is that now that the fee finally increased to a number that will compel developers to come to the table and have a discussion about large-scale practices and how to bring down the bottom line for everyone.

  3. After watching the discussion on this issue at city council, it was my understanding the impact fee is not applied universally to all projects, but based on the actual impact that project has on infrastructure costs. If that’s the case, it seems there are already important incentives in the proposed impact fees. The idea of xeriscaping as part of the assessment of the imposed impact fee for a specific project could be used even if the maximum impact fee were approved. Likewise, as was explained at council, development in an area where there is less impact would be subject to a smaller fee. That serves as an incentive to accommodate future growth in the existing city limits, which is an objective of the Comprehensive Master Plan Framework.

    • Kevin — I wasn’t able to attend the latest council meeting so I can’t respond to your exact reference, but there appears to be some confusion. The impact fee for water supply is the same for any new build using a standard size meter, which will be installed in the vast majority of homes. Some very large homes may have an over-sized meters or 2 meters installed, which would cost more. As far as impact fees as a whole, there are some variations on the waste water components of the fee based on proximity to pump stations etc. , but there is no variation of the fee based on the actual home impacts such as size of home, amount of lawn etc. To my knowledge, there is no legal way to do this because government code would prohibit it; therefore, incentives would have to come from other programs or areas. I hope that helps.

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