City Council voted 9-2 to approve San Antonio Water System's increased impact fees Thursday morning. The vote also included a $12 million increase to inner-city development fee waivers – clear disincentive for commercial and suburban sprawl and an expanded incentive for infill development.
District 10 Councilman Mike Gallagher and District 10 Councilman Joe Krier voted against the measure.
Increased fees imposed on developers will likely translate into higher housing costs for new or moving San Antonians that want to live in new developments. That concern ultimately was outweighed by the 2.6 percent rate increase SAWS would have had to implement in order to recover the costs of ensuring a water supply for a projected 250,000 population increase over the next 10 years.
SAWS estimates that meting the needs of those new homes will cost $731 million.
"This is a reasonable approach we can live with," Mayor Julián Castro said, acknowledging that current ratepayers should not be held disproportionately responsible for new growth.
This fee also reflects the incorporation of BexarMet customers, said SAWS President and CEO Robert Puente. "We're well on our way to full integration."
The water supply fee is charged to new residential and commercial projects as they are, in part, responsible for an increase in water demand. Even with the fee increase, over the next 10 years, the impact fee paid by developers will account for 46.6 percent of projected capital spending on water supply projects ($1.36 million).
The total fee is broken into five major categories: water supply; water delivery, flow and system development; and wastewater collection and treatment. The water supply fee is a flat fee, unaffected by location.
“Everyone benefits from growth and economic development,” Puente said during a City Council B Session earlier this year. “Our philosophy, however, on impact fees is that growth should pay for growth.”
Several developers spoke against the fee increase during the morning's citizens to be heard session, generally arguing that growth pays for itself – that everyone benefits from growth. More people means more ratepayers, more property taxes, more jobs, more commerce, etc.
(Read More: SAWS Impact Fees Represent More than Meets the Eye)
While council members agreed that growth should be encouraged, a majority want to manage that growth.
"If we manage our growth – and it's good growth – then everyone will benefit," District 8 Councilman Ron Nirenberg said. He noted this was the first time City Council had heard of this phased-in approach to the fee increase. "These wild changes make people confused."
Nirenberg said future rate and fee increases are inevitable.
"What are we doing wrong? The solution can’t just be to raise the fee and apply waivers where we want people to build,” he said.
Krier echoed this frustration: "This council has been told over and over and over again that if we vote for a rate increase it will secure our water future ... but we're still unable to secure a bankable supply of water.”
Instead of implementing the maximum fee on new development projects right away, a proposal City Council was weary of during previous meetings, SAWS’s approved plan will phase in the increase over the next year.
Starting June 9, a 26 percent water supply fee increase recommended by the Capital Improvements Advisory Committee (CIAC) board totaling $1,590, will apply to new developments. The $2,796 fee recommended by SAWS, will not be implemented until June 1, 2015 and represents a 116 percent increase from the current $1,297 fee.
Krier's motion to accept the 26 percent increase for the time being and wait for a new City Council, and mayor, to vote on the second increase failed to pass.
"I don't want this issue to drag on," Castro said in opposition to holding off on a vote. "I ask my colleagues to give this issue clarity."
Another concern is implementing the first increase so soon (June 9), possibly disrupting upcoming projects.
"This process began in February 2013,” Puente said, arguing the increase should come as no surprise.
The phase-in does provide some stability to the fee, review and adjustment of which is required at least every five years.
"This (structure will) better provide a measure of certainty to the development community today so that they can plan accordingly for projects in the future," District 2 Councilwoman Ivy Taylor said. "It's as good as we're going to get."
Impact fee rate is 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 cap of the impact fee is legislated by the state and must be revisited at least once every five years.