Finally, We're Getting to Impact Fees

Tuesday, City Council will be asked to kick start a process imposed by state law for when a community wants to impose impact fees on new development.

As a taxpayer and a resident and a representative of Central El Paso, the question of how we grow and who pays for it has always been an important one for me. The developers argue that we need to keep the infrastructure obligations and expectations that we impose on development low. We are a poor town, they say. If we want folks to be able to afford a new home in Far East El Paso better not to ask too much from the developer or homebuilder.

The development community wants to focus the community's discussion on affordablity for the new homebuyer. This is an important considertation but it should not be the only consideration. How about affordability for existing homeowners? If we don't ask for new development to pay all of the costs of new development, who picks up the rest of the bill and how does it impact affordability for existing homeowners who pay taxes and utilities?

As we start this community conversation, I think it is important that we all start with the same basic facts. In early September, the Builders Association fowarded a letter in opposition to impact fees to all of their members, asking them to sign and send the letter to City Council. I'm assuming that these are the talking points that they will carry to the media and to meetings. It concerns me because it is full of so much misinformation and is coming from an industry that knows better.

The Builders Association says that an impact fee would be double-billing new homeowners. An impact fee would not be double-billing new homebuyers because it is paying for infrastructure that is currently not paid for by developers or builders. No item that is currently paid for by the developer would be imposed through the impact fee. By State law, cities can only impose impact fees to pay for water and wastewater infrastructure, roadway infrastructure and stormwater infrastructure. Staff is recommending that we not impose any fees related to roadway infrastructure because our current subdivision ordinance and annexation agreements allow us to adequately capture the costs related to building out arterials that serve these subdivisions. Staff is also recommending that we not impose any fees related to stormwater infrastructure because the stormwater master plan is currently not complete.

The only impact fee that staff is currently recommending is for the costs related to building out water and wastewater infrastructure. These costs are currently not paid for or built by the developer. In the Association's letter, they state that “when a homebuilder builds a new home, he/she must pay all costs to extend the water and sewer lines to the home. Therefore, all costs for water and sewer are already included in the lot price and the construction of the new home because the developer and the home builder have incurred the costs.” While it is true that developers do pay for water and sewer lines to the homes within the subdivision, they do not pay for water-wells, water treatment, water storage, water distribution pumping, wastewater collection, pumping, treatment and reuse distribution. Therefore, the costs for these items are not paid for by the new homeowners. They are paid for by existing homeowners through the water rates.

Our water rates increased last year by 10%. 35% of the water rate increase was due to new growth that was not paid for by new homeowners. While I think it is important to be conscious in our decision making about affordability for new home construction, I think we have to be as equally conscious about affordability for existing homeowners. Because some portions of growth do not pay for themselves, existing homeowners foot the bill and increasingly these costs are harder to bear, especially given the rising costs of other goods and services.

Additionally, the Association states that “developers pay (both directly and indirectly) for all capital improvements and facility expansions related to new development.” This is not correct. Under the old subdivision ordinance, developers pay for street, sidewalk and utility infrastructure, a portion of arterials that is attributable to their development, neighborhood lighting and parkland. They do not pay for or contribute to park equipment (approximately $75,000 an acre), arterial lighting, fire stations, police stations, recreation centers, library branches and other regional municipal facilities. Also, as mentioned above they do not pay much for the water and wastewater infrastructure. We did fix some of this in our new subdivision ordinance. For example, we now require that developers provide a basic amenity package (playground equipment and park benches) for neighborhood parks so that existing taxpayers don’t have to pay for that. Unfortunately, many developers have opted to vest under the old ordinance so that they don’t have to follow the new subdivision rules and pay for these items. While most of this, except for the water and wastewater infrastructure, would not be recouped through impact fees, it is important to note that not all capital improvements required by new growth are paid for by the new homeowner.

The question really that we have to answer as a community is how much of new growth should be paid for by existing taxpayers through their water bills and how much should be charged to new homeowners.

There are other considerations that should be tackled through this process. Currently, the Public Service Board is recommending a standard fee that is applicable throughout the city regardless of where you are building. For example, if you are building on an infill lot in older area of the city that already has existing infrastructure, you would pay the same as if you were building out at the edges of the city in an area that requires totally new infrastructure. I will ask City Council to consider setting different service areas and fees to account for varying costs of infrastructure and to encourage developers to build in parts of the city where it is less costly for us as a community to build out infrastructure.

My understanding is that State law also allows for some rebates of the fees if you are building affordable housing for low and moderate income families. I will ask City Council to consider this option as we go through the process.

The important thing is to begin the process and the discussion. It has been a long time in coming.

For more news about the debate on impact fees, check out Newspapertree.com.