This past week Westminster City Council made a bad business decision. On a 6-1 vote, the council jumped water-tap rates by 40 percent for new water …
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This past week Westminster City Council made a bad business decision.
On a 6-1 vote, the council jumped water-tap rates by 40 percent for new water service connections.
While council members did cut some slack to the development community by delaying the effective date to Jan. 1, 2014, they increased the cost of developing in Westminster beyond what was justified by the city administration.
Staff had provided options for council to consider on raising water-tap fees, recommending a fee of $20,836 for a single-family-unit tap.
This represents a 27.6 percent increase over the current $16,325 fee. It addresses the components of the water-tap fee.
A separate option of jumping the fee schedule by 40 percent caught the eye of a majority of council with an expressed attitude of “let’s get all we can while we can.” That is not justified, and it is not sound public policy.
Unwarranted extra cost
Water and sewer tap fees are a key cost component for new development. For a single-family home, the combined water and sewer tap fees currently amount to $21,229.
So, you can see by jumping the fee an additional $6,661, the combined utility-tap costs for a new home becomes $27,890. For an office building, retail center or industrial building, it would cost much more, depending on the size of water and sewer service connections needed. So, you can see the impact to the bottom line for builders and developers is considerable.
Such an increase can easily affect whether a project is financially doable. For a project with 100 dwelling units, that is an additional $666,100.
Given the extended soft economy, jumping any costs for new development is questionable, beyond documented increased costs to the city.
Certainly, increasing the fees beyond what was justified by staff’s analysis violates the implied intent of not charging more than is needed to cover the city’s costs.
City Council’s action further defines the reputation of Westminster being a place where it is more expensive and more challenging to develop.
Other cost considerations
The city imposes a variety of one-time costs on new development.
These include the tap fees already mentioned, park-development fees on residential development, building-permit fees, plan-review fees, building-use tax, and public-land dedication or “cash in-lieu” payments.
In the past, the amounts for these various charges have been carefully and analytically developed. Hopefully, council’s “let’s get all we can” approach is an isolated one and will not be further seen on any other development costs.
Given the protracted soft economy and very limited new construction, you would think City Council would be thinking about incentives to new development, not costly impacts.
The consumer ultimately pays
It is important to remember that the fees and taxes charged to the builder or developer ultimately are paid by the consumer.
That may be a residential owner, shopping center owner, office building owner, industrial complex owner or others. In order to attract additional tax base and create jobs, it is important to be sensitive to the costs imposed by governmental units. Imposing unjustified extra costs to obtain water and sewer service is going in the wrong direction.
Impact on the queue
I know there were new development projects in the queue in various stages of planning and design. Some or none of these may be affected or eliminated by the 40 percent utility-tap-fee rate increase even though the rates are not effective until the first of 2014.
It would be most unfortunate if any of these projects became casualties of council’s action. And then looking beyond those projects already in the queue, it is unknown what impact, if any, the increased tap fees might have on future projects. Plus, council’s reputation for raising development costs beyond justified and documented amounts could give developers pause in pursuing their project in Westminster. What impact might this have on the current negotiations with the Westminster Center (former Westminster Mall) master developer?
Hopefully, the feedback that developers and other interested parties gave to City Council during the second reading of the ordinance on the tap-fee increases will have enlightened council members on future development-cost increases.
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