Making growth pay for itself!

Welcome to Austin But Pay Your Own Way by Brian Rodgers

The following opinion editorial was published in the Austin American-Statesman on Wednesday, October 16, 2013.

At the behest of previous City Councils, the Austin Water Utility has sold its water and wastewater taps to developers at huge losses for the past 15 years — selling far below cost and at a fraction of that charged by surrounding communities. Who picked up those losses? You, the ratepayer.
Another 175,000 people will move into the utility service area over the next 10 years. Are you willing to subsidize them, too?

On Thursday, the Austin City Council will vote on whether to keep selling taps at a loss or to finally begin recouping the full cost as allowed by state law. There are two main options on the table. Option 4i, favored by the Real Estate Council of Austin and the Downtown Austin Alliance, requires ratepayers to subsidize $165 million of future capacity costs. Option 5, recommended by the Water and Wastewater Commission, provides no subsidy; future capacity is paid by future development. Please tell the City Council that you prefer Option 5.

Texas is business-friendly, but even the state recognizes that ratepayers aren’t a bottomless piggy bank to pay for infrastructure required to serve new private development. Hence, in 1987 the Legislature allowed municipalities to recoup the cost of new infrastructure “necessitated by and attributable to new growth” by charging impact fees to future development. Thus growth pays for itself when growth-related capacity in water and sewer plants, major lines and other facilities is paid for by new development.

However, Austin has never charged what the state allows. How bad is it? We currently lose an average of $3,230 for every water/wastewater service unit we sell. (A service unit is the equivalent use of a 5/8-inch meter, or a typical household. Larger meters are charged proportionately more.)

Option 4i will lose $1,140 for every service unit sold in the environmentally sensitive Drinking Water Protection Zone to the west, $3,800 for every service unit sold downtown, and $3,000 in the rest of the city. Overall, losses will total $165 million, which will be added to your water/sewer bill. Under Option 5, we will lose nothing.

Supporters of Option 4i say we need continued subsidies from ratepayers to meet the goals of Imagine Austin for a compact city. They want a 50 percent subsidy for their developments downtown, at the Domain, Mueller and the Riverside corridor. But these areas are on fire right now; developers are tripping over each other trying to build in these areas and don’t need our help. Yes, the impact fees will go up dramatically downtown, where developers previously enjoyed huge ratepayer subsidies. A million-dollar condo at the Austonian paid only $70 for its water tap under the old schedule. A condo at the 360 Condominiums paid only $58. That’s less than the price of a faucet in the guest bathroom. Under the ratepayer-preferred Option 5, the developer would pay $760 and $630 respectively – still a bargain.

Will Option 5 hurt affordable housing? No. Affordable housing is exempt from impact fees. Will Option 5 drive developers into outlying cities? No. The three fastest growing cities in the U.S. — San Marcos, Georgetown and Cedar Park — have been charging two to three times more than Austin with no effect on growth. Will Option 5 bump up homes prices? No. Prices are driven by supply and demand in the current hot market; the 42 percent increase in lot prices over the past three years is far more responsible for soaring home prices than a utility recoupment.

Please tell the council to vote for Option 5. Welcome to Austin, but pay your own way.

Brian Rodgers, an Austin real estate developer, serves on the Impact Fee Advisory Committee and served on the Joint Committee on Austin Water Utility’s Financial Plan.

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