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Development Impact Fees

Impact fees are part of the development approval process and are used to pay for new infrastructure or capital facilities that are shown to provide a benefit to property owners, and are charged when developers or landowners are proposing changes or improvements to their land.  Impact fees are explained here in regard to water and wastewater improvements; for a broader explanation of impact fees, visit the Planning and Development Department’s webpage.

Impact fees can be charged for wastewater infrastructure such as sewer lines, wastewater lift stations, wastewater treatment facilities, and water reclamation facilities (reclaimed water distribution systems are not included in the wastewater impact fees).  For water infrastructure, impact fees help pay for transmission pipelines, pressure-reducing or flow-control valve stations, well facilities, booster-pump stations, storage reservoirs, and water treatment facilities.

Impact fees are only collected in the northern and southern growth areas of the City (see the map below) and can vary depending upon the infrastructure needs of the area.  These fees are determined in an Infrastructure Financing Plan.  In this Plan, future land use and population are projected for each growth area, which are then standardized into equivalent dwelling units (EDUs), or what is used by one single-family housing unit, to estimate total demand for the area.  Improvement costs are then estimated to meet the total demand for the area. 

	Download Adobe Acrobat version of map

Unlike other improvements, water and wastewater costs can be variable relative to demand.  The availability of existing infrastructure, the distance to treatment facilities, and the topography and terrain can all affects the capital costs needed to meet project demand.  Therefore, water and wastewater costs are standardized to what is necessary to provide adequate capacity for transmission, collection and treatment to meet projected demand in a growth area.  Impact fees are then charged per EDU for what is necessary to provide this capacity.

Once gross water and wastewater impact fees are calculated, they are reduced or offset by future revenue collected for growth-related debt service and by Development Occupational Fees, since these revenue streams reduce the amount of funding needed for required infrastructure.  The difference, or net impact fee, is what a developer or property owner pays per EDU. 

Water and wastewater projects for large commercial and residential projects can be significant contributions to public infrastructure by a developer.  Credits, which reduce the developer's/landowner's impact fees, are given in return for infrastructure dedications, improvements and/or financial contributions for capital facilities that were identified in the infrastructure financing plan.  If a facility has not been explicitly included in the inventory of facilities that was used to develop the relevant infrastructure-financing plan, then credit can only be provided if EACH of the following requirements have been met:

• The facility should have been in the plan, but wasn’t because facility designs in the area changed (e.g. water distribution system specifications changed), because the facility was incorrectly omitted, or because important new information has become available.
• The facility is of a class normally included in the relevant infrastructure-financing plan.
• The director of the relevant department agrees that credit should be provided for the facility.

It is the responsibility of the developer to apply for impact fee credits.  Credits are generally not granted until a facility and/or land has actually been dedicated to the City, and consultations must be held with WSD to ensure that the facilities meet City requirements well before impact fees are paid.  For larger water or wastewater projects, some credits may be given before all facilities are dedicated when the developer has provided the City an irrevocable letter of credit adequate to cover the cost of constructing the facility for which credits are granted.  If a developer enters into a repayment agreement with the City, credits are only granted for the infrastructure actually funded by the developer once the agreement is taken into account.

Impact fees are collected for specific infrastructure needs, and all impact fee revenues are deposited into different accounts representing these requirements. These dedicated accounts cannot be used for any purpose other than that specified for the account.

Impact fees are paid to the Planning and Development Department at the time building permits are purchased. In those cases where a water and/or wastewater hookup is being provided, the fee is paid when the permit is issued for the water meter.

In complicated situations involving numerous parcels, multiple property owners, and/or several types of facilities, the City will enter into a credit agreement with a developer or developers that dedicate land and facilities.  Credit agreements do not have to be approved by City Council and are relatively easy to prepare and administer. Credit agreements generally are used to establish an agreement between the City and others on such matters as:

• The description and value of the facilities and land that are to be dedicated to the City in return for impact fee credits.
• The distribution of the resulting credits to the different properties benefiting from the allocation of credits.
• Any agreements involving the provision of a letter of credit or other assurances of financial obligation, or the timing of the completion and dedication of the facilities.

In some extremely complicated situations, the City will enter into a development agreement that involves impact fees. Because development agreements must go to City Council for approval, and involve extensive legal review, these types of agreements are very rarely used to specify the amount and distribution of credits. Instances that may require development agreements include:

• Situations involving large-scale over-sizing of water or wastewater facilities where the credits must be spread over several non-contiguous areas to make the project viable for the developer or development consortium. These are special situations where the City encourages a developer or other entity to provide a very large facility such as a lift station, reservoir, or booster station.

Situations involving complicated, large-scale developments where the City and the developer or development consortium are both providing infrastructure improvements according to a particular schedule and program. These agreements may include specific language on the types and amounts of credits that will be granted, since a whole range of other infrastructure-financing issues are being dealt within the agreement.

Where can I learn more?

Development Impact Fees

Last modified on 05/25/2011 13:28:00