Kalispell's water, sewer impact fees will get further review

Kalispell’s water and sewer impact fees are going back to the drawing board, with the City Council questioning proposed fee adjustments that were based on a study done by HDR Engineering in August 2010.

Public works staff will update the study’s figures in-house and return with revised fee proposals, most likely this summer.

“It may not affect anything,” Public Works Director Bill Shaw said about the task being undertaken at the Kalispell City Council’s request.

Introduced and tabled last week, proposals based on the 2010 study would decrease the base water impact fee from $2,213 to $1,930 and more than double the base sewer impact fee from $2,499 to $5,345.

The fees are charged to new construction, additions and renovation projects that put more demand on city services, and must be reviewed and adjusted every two years under state law.

The proposed adjustments sat on a shelf for 19 months as Kalispell first worked out five years of sewer rate increases that go into effect in July.

At a work session on Monday, council member Bob Hafferman called the 122-page, $23,813 study by HDR outdated and said it should have been updated before it was presented for action.

“When you make a report and you want someone to act on it you give them current information available ... This is not current and this report was given to us the other day,” he said.

For one example, Hafferman pointed to the study’s sewage treatment growth projections, which show Kalispell hitting its 5.4 million gallon a day treatment capacity over the next few years.

The study projected the wastewater plant treating 4.82 million gallons a day last year and 4.97 million gallons a day this year.

In reality, Kalispell is treating just 3 million gallons a day this year — a total that should have been surpassed back in 2006 according to the study.

“We’re being asked to do something with impact fees and the information furnished should be correct for what we know today,” Hafferman said, pushing for the updated study.

TO CALCULATE the proposed impact fees, the study used water and sewer projects expected to be needed over the next five, 10 and even 20 years in a large facility planning area that was adopted in 2008 and extends well beyond Kalispell’s existing city limits.

Hafferman argued a much-smaller annexation boundary adopted in March 2011 should be taken into account.

“That change of boundary really affects a lot of the costs,” he said.

Public works staff agreed the annexation boundary was not considered in the 2010 study and could significantly reduce the size of the planning area.

Shrinking that planning area would reduce the total cost of projected infrastructure needs, but also reduce the number of people costs can be spread among.

THE IDEA behind the impact fees the city charges is that growth should pay for growth, and some questions arose over how effective they have been.

A $22 million expansion of the city’s wastewater plant completed in 2009 was 78 percent growth-related, Budget Resource Manager Terry Loudermilk told the council on Monday.

“So technically, of the $22 million, 78 percent — around $15 million — should have been paid by impact fees,” she said.

In reality, an estimated $4.7 million of sewer impact fee revenue was applied to the project.

Trying to recoup money spent on the wastewater treatment plant expansion is one of the biggest drivers of the proposed sewer impact fee increase.

Additionally, out of the $1.2 million annual bond payment for the plant, only $250,000 a year is being paid by impact fees. That leaves the rest to be paid by customer rates.

“I assume we took as much as possible out of impact fees to put toward that bond and the rates had to be increased to make up any deficiency there,” Mayor Tammi Fisher said.

But even that contribution could shrink in coming years unless impact fee revenues pick up.

“At the rate we’re collecting impact fees, that will be extinguished after two years. In the 2013-2014 budget it would have to fall to somewhere around $150,000 simply because we literally used up the [impact fee] account,” Shaw said.

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com.