Spokane Journal of Business

New water, sewer fees could raise home prices

Builders question city plan to base hookup charges on cost of system growth

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Spokane home builders say the cost of buying some new homes within the city could increase by as much as $5,000 if the City Council adopts newly proposed water and sewer charges to pay for about $85 million in system expansions over the next 20 years.

Under a proposal that calls for a three-year phase-in of new charges beginning this year, the combined cost to connect a new single-family home to city water and sewer services would be more than $1,200 this year and more than $3,600 by 2004.

Mark Richard, governmental affairs director for the Spokane Home Builders Association, says in the higher end of the range the new fee schedule could result in developers eventually passing on as much as $3,300 to $5,000 to new home buyers, although the average amount developers might end up passing on could be closer to $2,500. Estimates of the impact of the new charges vary widely because of the lack of uniformity in the citys current water and sewer hookup fee structures, and because of uncertainties over the timing of fee payments, which could increase financial carrying costs and other fee-related expenses for developers, he says.

Hookup fees for wastewater (for a single-family dwelling) have ranged anywhere from $300 to more than $4,000, although fees run to the higher end of that scale in only a very few areas, says Richard.

Water-service connection for a single-family residence currently includes permit costs and the cost of any actual tap-service installation or connection. For each water hookup fee, $300 is charged for sewage treatment plant expansion.

Called general facilities charges, the new fees are being proposed by Dale Arnold, director of the citys wastewater management department, and Brad Blegen, director of the citys water and hydro services department. The fees are meant to cover projected capital-improvement costs in the 20-year period, Arnold says.

The city water departments comprehensive plan estimates that by 2020, growth-related water consumption will increase by almost 13 million gallons per day, up from about 65 million gallons per day now. The plan estimates the capital costs of water-infrastructure enhancements to meet that increased consumption at nearly $21 million.

Similarly, the citys wastewater-facilities plan estimates the citys portion of growth-related sewage flows reaching the treatment plant will increase by about 11 million gallons per day over the next 20 years, to about 45 million gallons per day. That plan estimates the costs of expanding the sewer conveyance-and-treatment system at $64.3 million.

To cover those capital costs, the general facilities proposal calls for a new water service hookup charge of $1,232 for a new single-family residence. To ease the transition to the new rate, the proposal calls for a phase-in of the new fee, with one-third of the full fee, or about $407, charged this year and two-thirds of the full fee, or $825, charged in 2003, before the full amount is instituted in 2004.

The proposed hookup fee for sewer service to a new single-family residence is $2,400, which would be phased in using the same method, with $800 charged this year and $1,600 charged in 2003, before the full $2,400 is implemented in 2004.

Hookup fees for duplexes would be twice those charged for single-family homes, and fees would increase proportionately, based on capacity needs, for multifamily dwellings and commercial structures. At the high end of the multifamily and commercial fee schedules, the combined hookup fees run as high as about $150,000.

Arnold says the lack of uniformity in the citys hookups fees makes it impossible to provide a meaningful average for the amount that fees will be increased under the new schedules. A builder paying the current low-end fee of $300 for a single-family residential sewer hookup will face an increase of more than 700 percent by 2004, for example, while one whos paying more than $4,000 for such a hookup would feel a fee decrease approaching 45 or 50 percent.

Richard questions whether new development should be required to bear the full burden of capacity-related water and sewer system costs, but says the general facilities charge proposal does have a number of merits.

We like the fact that this is a uniform approach, and we can get behind the fact that this simplifies the process. Thats a win-win for everybody, he says. We also like the new approach used with large commercial and industrial projects, where fees are currently based on acreage. This approach sets those fees on usage, and thats a significant equalization.

Representatives of the home builders association have discussed the proposal with city staff members and recently attended a workshop attended by City Council members to express their concerns and suggest alternatives to some aspects of the proposal, Richard says.

The associations main proposed alternative would be to charge all city residents an additional 46 cents per month, which would be divided between their sewer and water bills. By doing that, Richard says, the city could reduce the new general facilities charges by roughly 50 percent across the new schedule.

Arnold says the home builders association worked with city staff members to come up with the amounts in the proposed alternative and agrees that they likely would produce the revenue needed to cover the projected capital costs of improvements to the systems. He says the question of whether the city should adopt such an alternative, however, is a political decision, which should be addressed by the City Council, rather than the city staff.

Richard says theres some question whether all of the new capacity requirements are strictly the result of new development, and he contends that everyone in the city benefits from growth and economic development.

I could argue that because I dont have kids, I shouldnt have to pay taxes to support schools, Richard says. The fact is, that isnt how we do things. Communities are created based on the concept of a collective approach to paying for the costs of services.

Arnold says the general facilities charges proposal is likely to be placed before the City Council late this month.

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