New Impact Fee Increases Make Sense and Are Reasonable and Fair

Let's keep the discussion about impact fee increases simple: If you use something, you pay for it. If you don't, you don't. The current proposal to raise impact fees on new developments in the growing edges of the city is not about growth or anti-growth or sprawl or infill or smart growth. It's about being fair about who pays for the capital improvements by the El Paso Water Utilities to accommodate the new growth.

Let's say that I plan to attend several concerts at the Plaza downtown but I don't want to pay for parking. I want to use a parking space downtown but I don't want to pay for it. Instead, I want the property taxes of all other property owners in El Paso to increase by a few cents to pay for my parking space. Fair? Of course not. I use the parking space so I should pay for it. I could, of course, elect to park away from downtown and walk - but I can't force you to pay for the convenience of my parking downtown.

Or, say I want a swimming pool in my backyard - the works: rock landscaping, a waterfall, a grotto, a spa. But I don't want to pay for it; instead I want you to pay for it with an additional fee tacked on to your water bill. Fair? Need I answer.

To accommodate new development in west, east and northeast El Paso, the EPWU will have to fund some capital improvement projects. We're talking about expanding the Bustamante Wastewater Treatment Plant, new interceptors, new pumping and force mains, etc. These are improvements that they should be making because of the new homes that additional people will need. To finance these improvements, the PSB approved and the EPWU requested impact fee increases. Here is their presentation to the City Improvement Advisory Committee (CIAC) on January 27th:

Impact Fee Update 

CIAC with 7 developers and 2 neophytes on the committee voted unanimously to oppose the increase. The City Plan Commission (CPC) voted 6-0-1 to recommend the increase to City Council.

Just skim through the presentation and you can see the additional improvements that must be made to the water and wastewater systems to keep up with new development.

Keep in mind that the impact fees only cover 75% of the expenses. You and I (unfair or not) will pay the additional 25%. (Hmmm . . . wonder if I can get at least 25% of my dream pool paid by the rest of you.) 

However, to hear the El Paso Times tell the story a crisis akin to Hurricane Sandy is about to hit El Paso. In their Sunday story yesterday, an added headline reads: "Sharp increase is possible if City Council approves ordinance". 

Sharp increase? $3,835 more per new home on the eastside is a sharp increase? Amortized over 30 years at 5% and that increase is no more than $15 per month. If someone can't afford an additional $15 per month, they shouldn't be buying the house. Heck, if I were the developer, I'd raise the price $5,000 and no one would blink at the difference. I bet that developers do just that or more.

But, what if the City follows by raising the taxes on our homes again? Then that additional cost of the home may mean paying much more in taxes each year. This isn't an argument against impact fees. This is an argument against out-of-control city spending by City reps who campaign against taxing people out of their homes and yet approve budgets that do just that.

Some will argue that we shouldn't have to pay for other things that we don't use. I don't get to drive the shiny new police car - but I do get the protection and the confidence that El Paso will continue to be the safest city its size in the country. I'm not on welfare so why should I pay for it. However, our entire community benefits and our commonwealth expands when we aren't burdened by added expenses of crime, poor health, lack of education, etc. It's a good thing in and of itself to offer a hand up. It's a additional bonus when that hand leads to greater productivity and an expanding economy because of more employment and so forth. 

Finally, the PSB does not hold city land in its inventory in order to finance future development. Although I'm sure that he knew better, Ed Archuleta unwisely used that argument when he tried to prevent putting more land into permanent open space. No, the PSB manages our land in order to recharge our aquifers from whence we get half our city water and, in droughts, much more than that. Some of that land is not necessary for recharging and could be sold except that some of us argue that some of that land (but not all) should be kept in a natural state because of other ecological benefits and aesthetic and recreational enjoyments. 

The issues of growth paying for itself (or not), infill development, smart growth can be considered separate to this discussion on impact fees. It is only fair that those whose new homes will increase the need for water and wastewater infrastructure should pay for those additional capital improvements. Whether the additional growth by development really does pay for itself is another matter. But keep in mind one fact like death itself: our borders are finite - our space, though seemingly copious, is limited. How do you have a healthy, sustainable economy beyond growth? If there is a means to do so, shouldn't we be exploring that exciting economic possibility rather than gobbling up all the beauty and benefits that we can have by keeping much of our land naturally pristine?

And one more question: shouldn't El Pasoans be considering the possibility that cheap building labor and cheap homes are not the engines which are driving our economy but the anchors that are weighting us down and keeping our property taxes too high? (Perhaps to answer that question would be to discover why some developers adamantly oppose impact fee increases.)

But that's another debate.

Arguments Against Impact Fees Are Fallacious

The issue of impact fees is again before City Council and the citizens of El Paso as well as the ratepayers of the water utility. Please mark March 4th on your calendars. That is the day that City Council will decide about increasing the impact fees. This post is just the first in what will be several on this subject.

I begin by sharing with you an email that I received from Charlie Wakeem on the subject. Most of you know Charlie as the recent past chairman of the Open Space Advisory Board. However, Charlie has served the City as a member of many other committees including the Capital Improvement Advisory Committee (CIAC) which advises the CPC (City Plan Commission) and City Council on issues such as impact fees.

Before sending me the email, Charlie told me that the impact fee issue has nothing to do with economic growth or sprawl. It has everything to do with basic fairness. If you use something, you pay for it. If you don't use something, you don't. I'll be exploring that theme in the next few posts on impact fees. Today, here is the opener from Mr. Wakeem:


Hi Guys,

On March 4 as many citizens as possible should go to City Council (CC) and speak in support of a major issue: Impact Fees.  This is important for all of El Paso because the developers are not only trying to stop justified increases of those fees but they are also arguing for the roll back of those fees, the sale of city owned land held by the PSB and the end of Smart Growth and SmartCode. In short, they want more destructive sprawl.  

Before I continue, I suggest you watch the video stream of the February 18th CC meeting starting from 39:20 into the video.  This is the link: http://home.elpasotexas.gov/video.php.  With the exception of Lisa Turner, no one else spoke on behalf of the rate payers. 

I've been on the city's Capital Improvement Advisory Committee (CIAC) from the start, which was set up by City Council six years ago and makes recommendations to the CPC and CC.  I was term limited at the end of 2013, but I still follow them.  At the beginning CC appointed 5 developers and 4 non-developers to CIAC.  I was the last original non-developer.  There are now 7 developers and 2 non-developers on the committee.  The 2 non-developers are relatively new and are still learning.  Originally, the Impact Fees approved in 2009 were 75% of approximately $2,000 per new home built, or about $1,500. The developers persuaded CC to make the rate payers pay the other 25%. Due to needed new capital improvements, mainly to the Bustamante Water Treatment Plant, which serves the East and NE service areas, the impact fee would double if approved.  The NW service area would have no significant increase.

So much for the background.  At the January, 2013 CIAC meeting, the vote was unanimous not to recommend the increase.  Later, the CPC voted 6-0-1 to recommend the increase (which I repeat is justified).  Ray Adauto (who I might add has also been term limited but is currently serving as CIAC chair) is the Executive Director of the El Paso Association of Builders. He spoke on behalf of the developers at CC this past Tuesday - Feb. 18.  Greater El Paso Chamber of Commerce Director Richard Dayoub did the same.

Here are the arguments they made and my rebuttals [in bold red]:

1.  Impact Fees raise the prices of homes and more people will be priced out of the market.

Answer:  This is a bad arguement.  Impact fees are part of the cost of doing business.  If a buyer can't afford an additional $3,000 or $16.00 per month for a home [loan amortized at 5% over 30 years], they have no business buying one.  They are getting the benefit of the Water/Waste Water CIPs (Capital Improvement Projects), not the current rate payers.

2.  Impact Fees encourage sprawl.  Developers don't have to develop in the city, setting up bedroom communities.  They can go outside the city and not pay the impact fees and the home buyers will still use city services.

Answer:  This true, but the home buyers outside of the city pay higher water utility rates than city residents. Socorro is an example.  Horizon City has its own MUDD.  Nevertheless, what do the developers care what they're customer's utility bills are?  They already made their money without  having to pay the fees outside of the city.

3. Another source of income in lieu of impact fees is the city's sale of its land held by the PSB to developers. It will generate income from the sale of the land and will generate more income with the new home buyers on that land paying property taxes.  Developers aren't buying the land, because the city has placed too many restrictions on its development, such as Smart Growth and SmartCode.

Answer:  WOW!!  Speak of sprawl!!  There are several parts to this answer. First, City Development Director Matthew McElroy, told me that the City owned PSB land is only 2% of the total land acreage.  The PSB generates little income from land sales and would not be useful in defraying CIP costs.  

Second, the land won't be sold for many years, since growth won't occur in those areas for a long time.  Declaring the land inexpedient now would bring pennies on the dollar.  Also, most of the PSB land is being held for its water storage and recharge, and not for its commercial use. That was the original intent of setting up the PSB in the 1950s.  

Third, it's a proven fact that no matter how many new homes are built, the property taxes from them never pay for all of the city services and infrastructure needed.  That's why our property taxes NEVER go down. 

Fourth and finally, the city has worked for years to improve the quality of development through Smart Growth.  It's a major part of the Comprehensive Plan that was fully vetted 2 years ago.  If the developers don't want to buy city land with Smart Code, they don't have to.

4.  The water utilities replaces old infrastructure in the city, such as replacing pipes on Country Club Road.  There are no impact fees imposed on that. Yet the home buyers in new growth areas are billed for those improvements.

Answer: Water and Waste Water CIPs are built to last at least 50 years. Some have lasted for nearly a century.  Old infrastructure wearing out is normal and should be a cost shared by everyone.

That's all for now.

Charlie