Several months of speculating over the numbers came to an end Monday. The Sidney City Council, after a public hearing Monday, is mulling over charging developers $6,000 impact fees for water and sewer.
Fees had been in consideration for some time as consultant Dave DeGrandpre, of Land Solutions, studied figures for what the city will need to pay for new and expanded infrastructure needed by new developments.
Fees can only be used to pay for capital improvements, land, and buildings and equipment that can be used for 10 years or more; not for personnel or operation and maintenance costs. They are also only paid upon demand. “The idea here is new growth has to pay for itself, but if there’s no demand then there’s no need for them to pay,” DeGrandpre said.
DeGrandpre, basing the fees on a population growth of up to 10,000 over 10 years, estimates 4,525 equivalent dwelling units (a measurement that bases daily demand for service from a typical single-family home). That’s a projected increase of 1,686 EDUs from the current 6,300 estimated population. The population is based on water connections and flow volumes.
In order for the water system to meet demands for 10,000 and to meet Montana Department of Environmental Quality standards, the city must make several capital improvements: two wells, water treatment, 650,000- and 200,000-gallon storage tanks, water mains, design and construction and equipment.
The cost comes to an estimated $6,657,838 – almost all of which can be paid through the fee – or $3,949 per EDU, plus a 5 percent tax for administrative costs ($197.44). The maximum allowable impact fee for water is $4,145.
The level of service for sewer connections must be raised from a noncompliant grandfathered system to one that meets DEQ standards.
“This is a little bit of a dilemma for the city,” DeGrandpre told the council. That’s because normally, a grandfathered system can continue being operated as is, but because of extraordinary circumstances with the influx, it must be brought up to standards. “Under Montana law, you can’t charge new residents for one level of service and existing residents for another level of service,” he said, “so there’s this gap in the middle we’re going to have to find some funding for, and we haven’t determined exactly how that’ll be, where that’ll come from.”
Capital improvements include: north sewer trunk main (installed), sludge removal for existing cells, lift station, new lagoon cells, spray irrigation to get rid of the excess water, design and construction and equipment.
A total estimated cost comes to $21,723,042, though only about $8 million can be paid for by impact fees, leaving $13.6 million unfunded. “The question is where does that money come? That, I guess, is the elephant in the room, and it’s something that’s not worked into these impact fees,” DeGrandpre said.
Meanwhile, the maximum fee the city can charge is $5,750.
Together, the two maximum fees total $9,895, which would be among the highest in the state. Instead, an advisory committee made of two council members, Deb Gilbert and Melissa Boyer, the city’s CPA representative, a developer and two consultants, hashed out a lower fee, recommending to the council on Monday the city charge $2,500 for water and $3,500 for sewer; $6,000 total.
“We always said that we didn’t want the impact fees to be a burden on the new development…and we don’t want to have such a huge burden on those in the community that want to rebuild either,” Gilbert said.
City leaders must also keep in mind the possibility the 2013 Montana Legislature may not come through with funds for oil-impacted communities. Mayor Bret Smelser said the fees will cover only about 25-50 percent of what’s needed for the next two to five years when the city faces a $50 million deficit.
“I do think we need to move forward with this,” Smelser said. “I think this puts us on a path of even if we don’t go to Helena and get anything, at least this is a start, and it shows the community and it shows the state that we are trying to work through the problem.”
Impact fees must be reviewed every two years with a recommendation from the advisory committee, a public hearing and council’s vote. With that, the council voted to put the recommendation in resolution form to take action on at its next meeting, Oct. 1.
“We don’t know what we’re going to get from the legislature,” Gilbert said. “We’re just trying to be one step ahead of everything that’s going to be happening in the future.”