Excessive Burden on Taxpayers

[Below is another op-ed piece by Charlie Wakeem which appeared in yesterday's El Paso Times. elpasonaturally reprinted the same piece with additions under the title of Political Influence Costs Taxpayers Millions.]

Ray Adauto, who represents the El Paso Association of Builders, wrote a response April 17 to a guest column I had previously submitted to the Times. His response contains so much misinformation that I must respond to it.

Before I do, please remember that I served on the Capital Improvements Advisory Committee with Adauto for five years and we’ve always treated each other cordially and with respect.  Nonetheless, Adauto serves his industry.  I serve no one (except El Paso) when I serve on boards and committees.

I am not now nor have I ever been against development.  Development is vigorous business activity and healthy for any community.  The question is not whether there should be development, but how and where it should take place.
Adauto states that “there are dozens of reasons people live in El Paso.”  He’s right, but one reason should be “quality of place.”

Land development is the industry that is most responsible for our city’s appearance together with good but fair city codes which promote complete neighborhoods, multi-modal transportation and walkability.

Adauto states, “One thing that makes our community special is the ability to find affordable housing…”

Providing affordable housing is important, but it should not place an excessive burden on taxpayers who subsidize it and eventually pay for the infrastructure that the developers leave out.

Adauto states:  “Proponents of impact fees, like Charlie Wakeem, keep espousing the notion that if you raise fees then you can keep growth out.”
That is not true at all!  Impact fees are not designed to punish developers or stifle growth.  They are designed to make sure new growth is financially fair to all stakeholders.  (Why should residents of older neighborhoods subsidize the development of new neighborhoods?)

This concept is set forth in Chapter 395 of the Texas Local Government Code.
Adauto states:  “Surprisingly, it is conveniently never explained that a large portion of the monthly water/sewer rate a new home buyer pays goes toward subsidizing replacement of older, outdated infrastructure.”

He should know better.  Chapter 395 strictly forbids the use of impact fees for replacement of old infrastructure.  The fees can only be used for infrastructure necessary to serve new growth.  All taxpayers and/or ratepayers are obligated to pay for repairing and replacing old infrastructure.

Adauto states:  “That’s why the PSB purchased thousands of acres of desert back then (early 1950’s) to have land to sell to try to keep the cost of water and sewer service down.”

Just the opposite is true.  The Public Service Board purchased the land so that El Paso wouldn’t run out of water (as it almost did in 1952).  The PSB determines whether the land is “inexpedient to the system” and can be sold.

When it established the PSB in 1952, City Council wisely assigned it the responsibility for “management and control” of the city’s water and land resources.  The more we sell the PSB land, the scarcer our water resources become.

The PSB Selection Committee met in late 2014 to recommend—to City Council—someone to fill the “engineer” position on the PSB.  David Nemir was the incumbent and was eligible for another four-year term.

A policy states that land-development engineers don’t qualify to serve on the PSB due to a possible conflict of interest.  One of the applicants was such a person.  I pointed this out.

The committee was told that the applicant had recently sold his firm and retired. If he did so, then why is he still representing land developers at the City?
The committee recommended Nemir by a wide margin. However, Council inexplicably appointed the land-development engineer.

Charlie Wakeem

Political Influence Costs Taxpayers Millions

[Below is an op-ed piece written by Charlie Wakeem and published by the El Paso Times in yesterday's Sunday paper. It was published under the title of Wakeem: City backslides on development issues. N.B.: Charlie is a gentleman. He won't name names but I will. Brad Roe replaced David Nemir who was a stellar member of the PSB. The attorney for the PSB/EPWU at the time was Bob Andron. Fortunately he retired and was replaced by Lupe Cuellar.]

In light of the recent revelations about the dysfunction and mismanagement in City Hall, I feel it’s time for me to speak about other issues I’m aware of.
One only needs to look at the difference in city government since the 2013 municipal election and decisions City Council has made since then.  Most of the problems are already well-documented, including but not limited to issues with the city manager and Rep. Larry Romero and City Council’s lack of vision and transparency.

I have served on several city boards and committees during the past decade, the latest being the Open Space Advisory Board.  Among others, I also served on the Subdivision Ordinance Rewrite Committee, the Comprehensive Plan Advisory Committee, the PSB Selection Committee and the Capital Improvements Advisory Committee, which makes recommendations to City Council regarding impact fees.

I was formerly chairman of the Open Space Advisory Board, which advises City Council on the Open Space Master Plan.  I was term-limited from the board last summer.

OSAB accomplished a great deal in the first few years of its existence.  However, things started to change after the 2013 municipal election.  City staff began to keep board members from having a say in setting the agenda and posting items for ineffective and useless Information and Discussion only instead of Action, thereby limiting the collective voice of its citizen board members.

I can only surmise that it’s the people with political and financial influence that are behind the silencing, since OSAB is unpopular with many of those people.
The City spent several years at a cost of millions of dollars, in large part provided in grants by the federal government, for Plan El Paso, El Paso’s nationally-recognized, award-winning comprehensive plan.

It has since been shelved.  Proof of this is that it is no longer available on the city’s web site.  Once again, it seems apparent that some people with influence have convinced the City to ignore it, because Plan El Paso discourages urban sprawl.

Impact fees are strictly regulated by the state and are designed so that new growth pays for itself, instead of the taxpayers or ratepayers subsidizing the new growth.  El Paso has imposed impact fees on new growth for water and wastewater infrastructure since 2009.

Impact fees are calculated by anticipating how many new housing units will be built in new growth areas over a ten year period and the cost of infrastructure to extend water and wastewater service to those new units.  The calculation was originally roughly $2,000 per new water meter (unit) in the city’s three new growth areas when the impact fees were imposed in 2009.  City Council approved 75% of that amount in impact fees.  That left the rest of us still subsidizing new growth for about $500 per unit.

Every five years the state requires impact fees to be recalculated.  In 2014 the El Paso Water Utilities calculated about $35 million more for infrastructure to serve the East and Northeast new-growth areas with a slight increase in the West.

I had term-limited off the Capital Improvements Advisory Committee by then.  The East and Northeast new growth areas are now approximately as much as $4,000 per unit.  The Capital Improvements Advisory Committee, the majority of whose members belong to the El Paso Association of Builders, convinced City Council to withhold any increase.

You and I are now left with subsidizing new growth for water and wastewater costs at up to $2,500 per unit.

Also, in late 2014, the PSB Selection Committee, met to select the engineer position on the PSB.  The incumbent was the very highly qualified David Nemir, who had already served on the board for the previous four years and was eligible for another four year term.  One of the other applicants, who I will not name, was a land development engineer.

There is a policy that land development engineers do not qualify for membership on the PSB due to a possible conflict of interest.  I pointed this out at the meeting.  However, the attorney for the PSB/EPWU said the applicant had recently sold his engineering firm and retired.  If he sold his firm and retired, why is he still representing land development clients at the City?  I’ve personally seen him do so.

The mayor, who serves on the PSB and chairs the selection committee, was absent at this PSB selection meeting.  The selection committee proceeded to re-nominate Dr. Nemir by a wide margin. 

When the committee’s recommendation subsequently went to City Council, the land development engineer was inexplicably appointed in place of Dr. Nemir. City Council has the right to appoint anyone it wants, but we have to ask ourselves whether political influence was involved. 

The best way for citizens to make change is elections.  Let’s choose the candidates with integrity and a vision for our city, who work for us and not self-serving financial interests. 
   
Charlie Wakeem

Another Yes for Impact Fees

Photo by Vanessa M. Feldman originally published
in the EP Times 11/20/2011

elpasonaturally has already posted one very thoughtful response to the Newspaper Tree's story. You can re-read that post HERE.

It has come to our attention that the NPT has failed so far to publish another response written as a comment online to their story. (Comments to this blog are monitored for profanity or spam. Otherwise, whatever the opinion, they are posted usually very soon after those comments are made.) Here is a very good response to the NPT by Mr. Benjamin (Jamie) Ackerman:

"Impact Fees – Yes!

"Ratepayers pay attention!  Your water / sewer bill will increase if impact fees are reduced!

"When new houses are built on undeveloped land in El Paso, El Paso Water Utilities must provide water and sewer infrastructure for those homes.  That costs money.  There are only two ways to pay for it:  impact fees or increase to the bills of existing ratepayers.   Let’s be fair.  Should developers and new home buyers pay that cost, or should YOU, the ratepayer, foot the bill?  Is it in your interest to subsidize the developer’s profits or should they pay their own way?

"In 2009, City Council decided to impose impact fees on new development instead of asking ratepayers to foot the bill.  City Council could have asked developers to pay 100% of the costs associated with new growth, but instead they only charge impact fees on 75% of the costs.  Ratepayers pay the remaining 25% of the costs of water and sewer infrastructure.  We have no impact fees for stormwater and other costs of new development.  Remember, all those new, impervious rooftops, roads, driveways and sidewalks cause more runoff.  Ratepayers like you, pay for all the needed increase to stormwater infrastructure.


"Do you want to subsidize developers?  Or, do you think they should pay their own way?  Contact City Council and tell them to continue or increase impact fees."

Since Mr. Ackerman urges readers to contact their city representatives (and we should be doing so continuously all during this year when they are "reviewing" impact fees), here are their addresses:

Oscar Leeser    mayor@elpasotexas.gov
Ann Lilly          lillyam@elpasotexas.gov
Larry Romero    romerol@elpasotexas.gov
Emma Acosta   acostaea@elpasotexas.gov
Carl Robinson   robinsoncl@elpasotexas.gov
Michiel Noe      noem@elpasotexas.gov
Eddie Holguin   holguinex@elpasotexas.gov
Lily Limon        limonl@elpasotexas.gov
Cortney Niland  nilandcc@elpasotexas.gov

Note that, with the exception of Mayor Leeser's, these are personal council addresses and not the generic addresses posted on the city's web site - addresses that go to a staff member and may or may not ever get to the Representative. 

Not Impact Fees but More Land is Goal of Developers

Damn the people's will by petition. Sprawlers want City to jettison NW Master Plan and Smart Growth so they can plow up more natural land.

elpasonaturally is going to be saying a lot about impact fees. As reported here, City Council last Tuesday decided to have a one-year moratorium on those fees and see if there was some other way to pay for water utility capital improvements - perhaps Prop 6 money from the State of Texas. I suggested to Council that they also have an objective study done about growth and prosperity - i.e., whether growth pays for itself.

Prior to last week's Council, the Newspaper Tree did an informative piece about the issue.

In it they report on the arguments by the builders against impact fees.

In response to their arguments, Charlie Wakeem wrote a letter to Anthony Halpern of the NPT. Here is his letter with my editing:


"This letter is a response to your February 27 article about impact fees in the NPT.  I served on the Capital Improvement Advisory Committee or CIAC for the first six years after it was created by City Council.  I was term limited off the committee at the end of last year.  This is the committee that reviews impact fees and makes recommendations to the City Plan Commission and City Council.  When the committee was first formed, there were five members from the development community and four members from the public at large, including myself.  Now seven of the nine members are from the development community.  That's why CIAC is "vehemently opposed to increasing the charges" as you state in your article.

"The proposed fee increases are not the real issue.  It's a side show.  The development community is using them as misdirection to get what they really want and they know they have City Council's political support.  They want more urban sprawl as cheaply as possible, both in the three impact fee service or growth areas and in the city-owned PSB land on both sides of the mountain.  The latter is the most egregious.  They are being supported by the Greater El Paso Chamber of Commerce.

"Here are some of their arguments.

Housing affordability

"They say they will have to pass the fee increase on to the new home owners, which could price them out of a home.  That's a poor argument.  The highest fee increase is in the East Service Area.  I'll use those fees to illustrate the facts.  The current East maximum is $2,156.00.  The city currently charges 75% of that amount, which comes to $1,617.00.  The proposed maximum increase is $3,835.00.  The difference from $2,156.00 is $1,679.00.  If City Council keeps the 75%, the fee would only be $1,259.25.  Amortized over a 30 year mortgage at the highest current rate of 4.25% the increase in a home buyer's monthly payment is only $6.20 a month.  Less in the Northwest and Northeast Service Areas.  Hardly unaffordable.

Leap Frog Development

"With the increase in impact fees the development community would build homes outside the city limits in order to avoid them.  According to city planners, the developers would have to get water to those subdivisions somehow. There are two ways to provide water to those subdivisions: Negotiate with El Paso Water Utilities to extend the water infrastructure outside of the city limits or create a MUD (Municipality Utility District).  

"Extending services does not guarantee that it will cost less than the impact fees.  In addition, home owners would pay higher water rates to EPWU than city residents. 

"Creating a MUD has several risks. Water quality may be poorer; building the infrastructure could be more costly than the fees; and it's not sustainable. It's up to the homeowners in a MUD to fund and maintain the MUD.

"With or without impact fees, developers go outside the city already to avoid other fees and regulations, such as development application fees, hook up fees, building permits, parks, street lights, sidewalks, paved streets and etc., etc. etc. 

WORST OF ALL!!   

"Here is the real issue and it's not impact fees.  Builders want the city to sell its PSB land to developers lifting the city's restrictions on the land, (viz., the Northwest and Northeast Master Plans), and sell the land piecemeal for conventional sprawl development.  Unfortunately, after hearing the debate at the February 25 council meeting, this is something City Council seems amenable to doing.  It would betray the public trust after the Northeast and Northwest Master Plans were fully vetted in public meetings.  

"The excuses the development community uses to justify these land sales is twofold: revenue to the PSB through sale of the land, and ad valorem taxes to the city with the new housing.  The revenue from sales to the PSB is minimal and unsustainable.  Revenue from ad valorem taxes in new growth has never paid for itself.  A study was done several years ago by John Neal, the city manager's special projects person, that bears that out.  With these revenues, the development community justifies not having to increase or even eliminate impact fees.  

"Of course, another risk to selling the PSB land is water.  The main purpose for the PSB holding the land is for aquifer recharge to the Hueco and Mesilla Bolsons.  There is more land than locally available water to serve development on all of it."

Sprawlers' Agenda Revealed

Sprawl results in blight such as this in Central El Paso and burdensome property taxes but not prosperity.

City Council voted unanimously today to postpone raising impact fees for a year. Their vote followed a revelation by the Mayor that he had spoken with the CEO of the EPWU, John Balliew, and builders. Balliew apparently indicated in private conversations what he stated today: the EPWU's budget is set for the year and funding for the water plants would not be necessary for a year. Balliew also stated that there would not be a rate increase as the result of postponing the impact fees. There was some discussion at Council that perhaps the recent passage of Proposition 6 in the State of Texas might mean some money for water infrastructure here in El Paso.

Certainly I appreciate the Mayor's efforts behind the scenes so to speak. On the other hand, he (and El Paso) would benefit more from the expertise from City Planning. The introduction of the ordinance should have come from Planning Director, Matthew McElroy. Instead, the Mayor interrupted Mr. McElroy and had Mr. Balliew come to the podium in order to circumvent (and I'm not using this word pejoratively) the original proposal to raise the fees and, instead, to explore postponing the fees.

Dr. Noe stated that he understood that impact fees is a matter of fairness: you use something, you pay for it; you don't, you don't. However, he also stated that to have infill there had to be incentives. When I addressed Council I agreed with him about incentivizing infill projects. What concerns me is that by  "incentives" he and others mean doing away with Smart Growth and shelving Plan El Paso - the very Master Plan that sprawlers hate. (I would look for incentives in terms of reducing permit fees and hook-up fees from EPWU.) In fact, as I expressed to Council, I hope that, during this coming year, that the City will pay for an independent study to verify whether we have grown and can continue to grow ourselves to prosperity. Study after study across the nation shows that sprawling does not pay for itself but rather is a drag on the economy of a municipality. In the case of El Paso, sprawl puts the burden on the property owner with burdensome property taxes - especially the low to middle/low income families who are in a majority in El Paso. It wouldn't hurt for the City to find out for sure about growth, sprawl and prosperity.

By the 1950's El Paso was the leading city in the southwest. It occupied just 25 square miles of land - a modest growth from its beginnings with 8 square miles. With the advent of the automobile, the freeway, and the suburban model of development, El Paso today occupies 260 square miles and is one of the poorest cities in the country. Certainly, it is not the leader in the southwest or Texas. Sprawl has not brought prosperity. It has brought burdensome property taxes and increasing blight.

The agenda of the sprawlers became obvious today. They loathe impact fees and hope that a State proposition will soothe the unfairness of putting the burden on ratepayers. They want no impact fees. Moreover, they want to abolish Smart Growth and they want to rezone the Northwest and Northeast master plans so that there are no smart growth requirements. Unfortunately they own this current City Council and may succeed with their agenda.

I do hope that a study about sprawl and prosperity can be conducted during this coming year. The downside to my proposal is that the Council can always cherry pick a consultant who will tell them what they want to hear - sprawl makes us more prosperous; build, build, build to your greedy heart's content, Mr. Sprawler. The builders control CIAC which will continue to advise against impact fees. Surprise. Surprise.

One hopes that the Mayor will listen to good scientific data about sustainable growth. There are very knowledgeable people here in El Paso who can help him: people from Eco El Paso, people already in city government in Planning and Sustainability. They need a place at the table as well. My guess is that, just like the stakeholder meetings that were held for selecting a new City Manager, there will be no one with environmental engineering and planning expertise and what gets done will be mere window dressing. The real decisions will be behind closed doors - Mayor with John Balliew and with builders and the chit chat of Representatives outside of City Council.

It's not good.

Tell City Council that You Favor Impact Fees

Although it appears as an introduction with a public hearing later, City Council will hear from the public tomorrow morning regarding impact fee increases. The proposed increase is the first item on the Regular Agenda - Number 6.1. If you can't make Council to speak in favor of the proposal, please contact your Council representative:

Ann Lilly          lillyam@elpasotexas.gov
Larry Romero    romerol@elpasotexas.gov
Emma Acosta   acostaea@elpasotexas.gov
Carl Robinson   robinsoncl@elpasotexas.gov
Michiel Noe      noem@elpasotexas.gov
Eddie Holguin   holguinex@elpasotexas.gov
Lily Limon        limonl@elpasotexas.gov
Cortney Niland  nilandcc@elpasotexas.gov

The issue is a matter of fairness as I have written in two previous posts HERE and HERE and one just posted today. The need for the EPWU to make improvements at the Bustamante and Jonathan Rogers Water Treatment plants as well as other infrastructure expansions is new development particularly in east, northeast and northwest El Paso. If you buy a new home in a newly developed area, then in all fairness you should pay for the improvements the utility has had to make. You shouldn't expect others to pay for it.

Besides the highest increase (on the east side) is only an additional $1,259.25 per home or just $6.20/month on a 30 year loan at the highest current rate of 4.25%. $6.20!!!

One expects builders to add on more per home not only to cover the impact fee increase but to garner some more profit. So why are some builders adamant that there not only be any further impact fee increases but that impact fees should be done away with altogether? The increase of $6.20/month on a mortgage payment doesn't threaten the sale of a home nor justify an outcry.

I suspect that some builders truly believe that more development means more in the City coffers via property taxes. I don't think builders are bad people. I just don't think that they realize that the additional growth means higher property taxes for all of us to pay for the additional infrastructure and services for new development. Growth doesn't pay for itself as study after study shows. In a town of lower incomes, the burden of development becomes a real drag on the family income because of higher property taxes.

Studies show that each new home built in a new development will cost an extra $18,000. Multiply that by the number of new homes in a new development and you have the additional tax burden for all of us to pay. That's why Smart Growth which cuts that expense in half makes more sense. Builders don't like smart growth. Again, I don't think they want in their heart of hearts to burden low income El Pasoans to subsidize their work; I think that they just believe something that isn't true - viz., growth pays for itself. Sprawl hurts the family income. It hurts that income a lot.

So, in all fairness, those who use something should pay for it. Those who don't, shouldn't. The increase isn't extravagant and quite affordable under a 30 year mortgage. Opposing this small increase may be a belief in something that just isn't true: that we can grow our way to prosperity. In fact, we can't and the way we are growing is adding greater burden on the property tax of all El Pasoans.

Please read Michael Kingsley's short paper "Sustainable Development: Prosperity without Growth" which he published in 1992. His conclusion: "In summary, while growth is often perceived as the only path to economic viability, the good news for both declining and growing communities is that there is an alternative. Prosperity does not require growth; it requires development that is sustainable. The global perspective makes it painfully clear that, if our strategies for economic development are not sustainable, they will be terminal." [Emphases are mine.]

Sustainable Development: Prosperity without Growth 

The News about Impact Fees Just Gets Better!

I made a mistake in my February 24th post on impact fees. I didn't do my arithmetic. It turns out that the increase is much less than I reported. This means the increase will be only a tiny portion of a monthly mortgage payment. Tiny!

It also means that the El Paso Times can't be trusted when it comes to reporting the seriousness of something. You will see below why this tiny increase hardly deserves the headline: "Sharp increase is possible if City Council approves ordinance". Take the Times with a grain of salt. They also love using the verbs "would" and "could" in their major headlines. Anxieties not realities are their forte.

Here's a chart that will make it clear that the current brouhaha over an impact fee increase is a tempest in a teapot:

You can enlarge the image of the chart by clicking on it. You can also hit Ctrl along with the key with the plus sign and enlarge this entire page.

First, remember that the developers (and in the end the homeowner) pays just 75% of the impact fee. Even though you and I don't use or require the additional capital improvements at the Bustamante and the Jonathan Rogers Treatment Plants, etc., we still pay 25% of those fees. (I'm going on a shopping spree at Union Fashion. I'll pay 75% but you need to kick in the remaining 25%. That's how it works with impact fees.)

So the total amount that the developer paid for 2009 impact fees for east side development was $1,617 or 75% of $2,156. (See chart.) 

The 2014 Impact Fee Calculation for the east side is $3,835. That's the total that I mentioned yesterday as did the El Paso Times. The real increase is this: 75% of that $3,835 is $2,876.25. Subtract the 2009 total of $1,617 and you come up with the increase on the east side of just $1,259.25! 

The current rate on a 30 year loan is 4.25%. That additional $1,259.25 means an increase of a lowly $6.20/month on a 30 year loan. 

$6.20!

Hardly worth the words "Sharp increase is possible if City Council approves ordinance".

It is worth all of the thousands of dollars of ad revenue from home builders in the El Paso Times every month. 

Please plan to be at the next City Council meeting on March 4. City Hall is located at 300 N. Campbell. (Map)

The issue is about fairness. The increase is just a modest $6.20/month on a house payment for a new home built on the east side. Less elsewhere. (Actually it will be much more because you can be sure that the builders will jack up the price of a home to make some more money above and beyond the impact fee.) The increase pays for the capital improvements necessary to support new development. Nobody is arguing here against development - just who should pay. 

Fairness - that's what it is all about. If not, then please pay for my new swimming pool and wardrobe. Thanks.

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  
             

Impact Fees - Now What?

Most of you already know that impact fees passed City Council this past Tuesday night with Mayor Cook breaking a 4-4 split vote.

Already, builders are suggesting that homebuyers will absorb the costs (as opposed to everyone else prior to the decision).

We do know that there is some disgruntlement within the El Paso business community. There are fears that the City Council will turn increasingly anti-business now that the election is over. One business person even asked, "Why is Susie Byrd so anti-business?"

In response, Representative Byrd wrote the following in an email to me:

"I'm pro-District 2. I'm pro-El Paso. I'm pro-El Paso businesses.

I want a city where folks can depend on a good wage for a hard day's work, where they can live in a great safe neighborhood that makes them proud of the place they call home, where they can start a business and flourish and thrive and where they know they are getting value and services for the taxes they give to the City.

This year, ratepayers paid about $100, or 20% of their water bills, for new development. They receive little or no value for that investment in new development. We voted to shift those costs to the developers and to the users who receive the full value of that investment. That was the right decision for District 2 residents and the right decision for El Pasoans.

For too long, the prevailing business model depended on influencing government and little or no competition. Look where that got us. We are now seeing many business and civic leaders step up and speak out against that business model, demanding real competition and investment in our community that will create jobs and make El Paso shine. We need to put that era behind us and look for solutions that serve the community and serve business."

Hopefully, now that there will be impact fees, the City will be able to manage sprawl much better than before. According to a 2003 Maryland study, impact fees can direct growth to targeted areas and protect open space.

City Council to Hear Public about Impact Fees

El Paso's City Council has scheduled a public hearing on impact fees for water and stormwater infrastructure tomorrow, Tuesday May 12th at 6 p.m. Here's more info along with comment from Charlie Wakeem.