Impact fees still unresolved

After two years and two studies, Kalispell starts 2013 still trying to wrap up needed reviews of its water and sanitary sewer impact fees.

Signs point to increases for both fees, last adjusted almost five years ago. And that could mean thousands of dollars of extra costs for even small construction projects in the city.

Depending on the path Kalispell chooses to take, a study by Morrison-Maierle recommends a minimum sewer impact fee set anywhere from $4,257 to $9,153 per equivalent residential unit.

That compares to the $2,499 fee in place.

“These numbers are definitely not set in stone,” cautioned Susie Turner, Kalispell’s public works director. “These are draft numbers.”

The increase’s size will depend in part on the planning horizon used, the amount of growth projected and the number of sewer expansion projects built into the fee’s calculation.

Those are all questions Kalispell’s advisory Impact Fee Committee will face when it meets on Jan. 22.

 The lowest proposed adjustments target $8.1 million of committed sewer extensions listed in the city’s capital improvements plan.

Fees then could raise enough money to at least partially pay for sewage interceptors envisioned to be needed along Stillwater Road, Three Mile Drive and Springcreek Road.

Including those projects leads to a $4,257 fee with a 2035 planning horizon or a $6,656 fee with a 2025 horizon.

Plugging in another $6.7 million of uncommitted sewer extensions for west, east and south Kalispell — projects expected to be needed but not in the capital improvements plan — boosts the impact fee to $5,527 with a 2035 horizon or $9,153 with a 2025 horizon.

A longer planning horizon means lower fees because costly infrastructure expansions can be spread over more people paying the fees.

The fees are one-time charges paid for construction projects that put new demand on city services.

Morrison-Maierle projects Kalispell’s sewer collection system to get 2,814 new equivalent residential units through 2025 and 5,529 through 2035.

Impact Fee Committee members must scrutinize any projects going into the fee’s calculation because of the large increases that result, said Terri Loudermilk, budget resource manager for public works.

Some or even all of the sewer extension projects could be put on the backs of future developers through things like latecomer agreements. But that could pose a financial challenge to growth just like higher impact fees.

And low fees could leave Kalispell with little cash to expand infrastructure. “It’s a huge balance act they’ll have to go through,” Loudermilk said of the committee’s task.

Kalispell’s wastewater treatment plant factors heavily into the sewer impact fees.

It was expanded in 2008 and 2009 at a cost of $22 million. An effort to recoup some of that cost from new growth makes up almost $2,200 of the total impact fee in any of the proposed adjustments.

The expansion boosted the plant’s daily treatment capacity by 2.4 million gallons, much of which is going unused. Morrison-Maierle estimates Kalispell has enough capacity to serve 8,850 more equivalent residential units, a total that could take most of three decades to reach.

The expansion was pursued as Kalispell approached its old sewage-plant capacity and continued to annex large tracts of land for housing projects that failed to materialize when the economy entered a recession.

About 78 percent of the expansion was growth-driven and eligible to be paid for with sewer impact fees. But less than $5 million in impact fee money was applied to the project.

Additionally, impact fees have been paying less than a quarter of the annual bond payment for the expansion. That has left sewer customers to foot the rest of the bill through a series of rate increases the City Council adopted. But with slow growth, even that level of contribution has been burning through Kalispell’s stash of sewer impact fee money.

The Impact Fee Committee is also expected to finalize a recommendation that the City Council increase water impact fees 16 percent from $2,213 to $2,567 per equivalent residential unit.

That’s the minimum fee that developers pay for a new 3/4-inch water connection. Projects with more or larger connections pay proportionally more.

NEITHER IMPACT fee has been adjusted since April 2008.

Last February, City Council rejected adjustments based on an August 2010 study by HDR Engineers. Those would have reduced water impact fees to $1,930 and increased sewer impact fees to $5,345.

Council members did not consider the $23,813 study by HDR until 18 months after it was done. They then determined the study was out of date and directed public works to do a new study, a task contracted to Morrison-Maierle.

These studies are calculating fees using a 29-square-mile annexation boundary Kalispell adopted in March 2011. Earlier studies used a 77-square-mile utility planning area.

Growth projections also have been reduced, from 4 percent a year to 2 percent.

The scaled-back service area and slower growth rate mean fewer projects are needed to keep up with water and sewer demands. But they also mean less development to absorb any such costs.

Kalispell also charges impact fees for its stormwater, police and fire services.

Current impact fees total $6,375 for construction of a typical single-family home. They can total hundreds of thousands of dollars or more for larger projects.

Stormwater impact fees also were last reviewed and adjusted in 2008. Police and fire impact fees were last adjusted in August 2010.

Montana law governs how impact fees are calculated and says they must be reviewed and adjusted every two years.

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