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.
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.
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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.