SAWS Impact Fees

This week, the city council conducted a public hearing where San Antonio Water System presented their proposed increase of impact fees for development. State law dictates a very clear process for setting impact fees. The public hearing is the culmination of months of work by SAWS staff and a council-appointed Capital Improvements Advisory Committee.

Impact fees are charged to new development to finance the capital costs of infrastructure needed to supply water and wastewater service to homes and business. These fees are determined by formulas set by the state of Texas, which considers the total amount of revenue required for water and wastewater infrastructure and divides it over the anticipated number of new connections to the water system. Impact fees go toward capital costs only, not operations and maintenance of the system. The impact fee process ensures that existing ratepayers don’t bear the entire cost of infrastructure needed to service new development.

There are five different impact fees charged by the water system: two for water delivery, two for wastewater, and one for water supply. While both SAWS staff and the Capital Improvements Advisory Committee have recommended adoption of the maximum fees allowed under state law for both water delivery and wastewater systems (consistent with how SAWS has handled impact fees for the last 25 years), there was disagreement on the increase of the water supply fee.

SAWS staff recommends increasing the water supply fee to the new Texas maximum – from $1,297 to $2,796 per Equivalent Dwelling Unit (EDU) – while the SAWS’ Capital Improvements Advisory Committee recommends a more modest increase to $1,590.
SAWS contends that its proposal will make the distribution of the cost burden for new water supply more equitable. According to SAWS, new water supply will cost $1.4 billion over the next ten years. If the maximum water supply fee is adopted, current ratepayers will still finance 81 percent of the new water supply and new development will finance the remaining 19 percent. According the SAWS’ report, an additional 2.7 percent rate increase will be necessary the lower supply fee increase is adopted.

The SAWS’ Capital Improvement Advisory Committee, however, contends that every ratepayer benefits from economic growth and new sources of water, therefore, ratepayers should share more in the costs for new water supply infrastructure. They say that higher impact fees on developers will be passed on to customers via increased home prices and rentals, which will burden the real estate and construction industries, two primary drivers of job creation and economic growth in San Antonio.
City Council will vote on impact fees on May 29.
What do you think? Should SAWS charge the maximum impact fees under state law in order to place more of the costs of water infrastructure on new development? Or should the council be more concerned that the prospect of increasing fees on development will burden economic development?