The City desires to update its capital recovery fees, or impact fees, in order to appropriately fund construction of new facilities and expand existing facilities to serve future development. The impact fee program facilitates the funding participation of new development at a fair rate based on the demand placed on the City's water transmission and distribution and wastewater collection and conveyance systems by the development. The fees consider and apply to water and wastewater projects identified on the City's Water and Wastewater Impact Fee CIP necessary to support growth and development. The process for amending the City's Land Use Assumptions, Capital Improvement Plans, and Impact Fees is established by Texas Local Government Code Chapter 395. To formulate the fees to be assessed, land use assumptions that project growth over a planning period must be established. Additionally, Capital Improvement Plans that address the needs of that growth must be prepared and approved. The purpose of the impact fee is to provide a funding mechanism for the implementation of the water and wastewater capital improvements over a planning period.
An initial step in the update of the impact fee is the establishment of land use assumptions, including population and employment projections over the 30-year planning period (2020-2050). The assumptions include the type, location, quantity, and timing of land uses. The Land Use Assumptions (LUAs) in Section 2 of the Impact Fee Update Report includes a description of the methodology used in preparation, explanation of the data considered, and presentation of historical and projected growth trends.
The other major step in the update of the impact fee is the preparation of Water and Wastewater Capital Improvement Plans (CIPs). The proposed CIP for water was developed based on a hydraulic model of the existing water system, application of growth projections to that model, and identification of improvement projects needed to meet TCEQ minimum requirements for water service. The proposed CIP for wastewater was developed based on a hydraulic model of the existing collection and conveyance system, application of growth projections to that model, and identification of improvement projects needed to provide required capacity within the sewer system. Individual projects are identified and are spread as appropriate over the planning period into the categories of near term, 2030, and 2050 projects for planning purposes. Projects may shift in time based on actual patterns of development and the plan should be reviewed and updated as needed in five years. (The projects that make up the Capital Improvement Plans have also been configured in such a way to serve as updated Water and Wastewater Master Plans for development which were adopted by Council on March 4, 2025.)
After the summation of CIP costs, the totals are reduced by the amount of utility service revenues expected to be generated by development over the program period and used to pay for improvement costs. Once growth rates have been established and CIP costs minus the calculated revenue credit determined, those values are used in the calculation of a cost per service unit (land use equivalent or LUE) for both water and wastewater. Those resultant amounts are the updated maximum assessable water and wastewater impact fees. Those updated maximum assessable fees are $8,814 per LUE for water and $5,556 per LUE for wastewater.
A few things to note about the applicability of impact fees. Impact fees are generally assessed at time of platting, but are not collected until issuance of a building permit or application for a meter. That means the new maximum asssessable impact fee would only apply to properties platted after the effective date of the new ordinance (typically the date of council approval - anticipated to be April 1) or a later date if so desired to allow a grace period for plats about to be filed (June 1 or July 1 for example). Properties platted before the effective date of the new ordinance cannot be charged more than the old maximum assessable impact fee regardless of how far in the future a building permit is issued. Once the new maximum assessable impact fee is established the City has in the past chosen to phase in the actual fee charged/collected based on when the building permit is issued (again this only applies to plats filed after the effective date of the ordinance or phase in).
During its meeting on January 22, 2025, the Capital Improvement Advisory Committee (CIAC) held a workshop that included presentation and discussion of the LUAs, CIPs, and calculated maximum assessable impact fees. The CIAC discussed and developed a recommendation to City Council regarding adopting the amendment to the Water and Wastewater Impact Fees. Written comments on the proposed amendments have been provided to Council in the form of their meeting minutes and are summarized here and the associated letter. The minutes having been approved by the CIAC on March 5 and were filed by posting on the City's website that week. The CIAC recommends the following based on what was proposed by City Staff:
- Adopt the Water and Wastewater Land Use Assumptions and Capital Improvement Plans as presented by Staff.
- Assess impact fees at the new maximum amount on properties platted after a date determined by City Council (staff is suggesting July 1 of this year) (impact fees charged to properties platted prior to that date would be at the current rate, regardless of when a building permit was pulled), but with a phase-in schedule as follows (Phase-in Option A):
- Adoption of the Water Impact Fee rate per living unit equivalent (LUE) for development of $4,407 during the first year of the program (staff suggested July 1, 2015), $6,610 during the second year (staff suggested July 1, 2026), and $8,814 during the third year (staff suggested July 1, 2027). Those rates represent 50%, 75%, and 100% of the calculated maximum assessable rates to be charged in years one, two, and three of implementation, respectively.
- Adoption of the Wastewater Impact Fee rate per living unit equivalent (LUE) for development of $2,778 during the first year of the program (staff suggested July 1, 2025), $4,167 during the second year (staff suggested July 1, 2026), and $5,556 during the third year (staff suggeted July 1, 2027). Those rates represent 50%, 75%, and 100% of the calculated maximum assessable rates to be charged in years one, two, and three of implementation, respectively.
At the public hearing on March 18, 2025 Council meeting, Council asked about what a faster implementation phase might look like. As discussed, the longer the phase in to get to the point where new development is paying the maximum assessable impact fee, the more of the burden of paying for the cost of the infrastructure necessitated by new development is shifted to existing residents and businesses. This option would maintain a three-month grace period, until July 1 2025 before the new fee schedule and the maximum assessable fee would be applied.
Phase-in Option B:
- Adoption of the Water Impact Fee rate per living unit equivalent (LUE) for development of $5,817 during the first year of the program, $8,814 during the second year. Those rates represent 66% and 100% of the calculated maximum assessable rates to be charged in years one and two of implementation, respectively.
- Adoption of the Wastewater Impact Fee rate per living unit equivalent (LUE) for development of $3,667 during the first year of the program and $5,556 during the second year. Those rates represent 66% and 100% of the calculated maximum assessable rates to be charged in years one and two of implementation, respectively.
Since the last council meeting, staff became aware that Senate Bill 1883 (Bettencourt) was referred to the Local Government Committee and that a public hearing and testimony was held on March 24. Senate Bill 1883, among other things, would create a limitation on impact fee increases by stipulating that "A political subdivision may not increase the amount of an impact fee for three years from the later date of the date the fee was adopted or most recently increased, if applicable." Staff has concerns that if this bill becomes law it would limit the ability fo the City to provide for a phase in of impact fees. As such staff is now recommending going to the maximum assessable impact fee year one. Additionally, staff is proposing the applicability date of the new maximum assible fee be moved forward to June 1 (to allow two months for plats about to be filed to come in under the old fee schedule) and then moving the implementation of the new fee to July 1, 2025. The concern is that as this bill moves along, changes may be made that further restrict the City's ability to impose the maximum fee.
No Phase-In Option C
- Adoption of the Water Impact Fee rate per living unit equivalent (LUE) for development of $8,814 during the first year of the program which is 100% of the calculated maximum assessable rate.
- Adoption of the Wastewater Impact Fee rate per living unit equivalent (LUE) for development of $5,556 during the first year of the program which is 100% of the calculated maximum assessable rate.
Public notice of the Council hearing on March 18, 2025, was published in the San Antonio Express News on February 12, 2025. At that hearing, Council and the public were given a presentation of the proposed LUAs, CIPs, and impact fees.
SUMMARY OF RECOMMENDATION
Staff recommends Council adoption of Ordinance 25-F-017 adopting the LUAs and CIPs as presented and amending Code of Ordinances Chapter 90 Article V Water and Wastewater Capital Recovery Fees including the schedule of fees to be charged and Option C for the phase in.
RECOMMENDATION
Approve Ordinance 25-F-017. |
