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Page 16 — Multifamily Properties Quarterly — May 2017
Regulatory
Fifty Eight Hundred − Lakewood Peakview Trails − Greeley
T here is tremendous value
placed on water in the high
desert. Every drop counts
and as one public service
advertisement suggests,
people should “Use only what
you need.” The implementation of
impact fees, however, has caused
a mismanagement of this valuable
resource for new buildings and has
placed a burden on the affordability
of new housing through flat rates
and overestimating water demands.
Impact fees are fees charged by
water and sanitary sewer provid-
ers on new construction. Few ten-
ants, homeowners or occupants
know these fees are a significant
portion of their mortgages or rent.
These impact fees are paid upfront
before the occupant uses one drop
of water and are costs the devel-
oper includes in the financing of
the building and thus the rents and
mortgages of every residence.
The Front Range of Colorado has
some of the highest water impact
fees in the nation. For example,
according to Western Resource
Advocates Study, Arizona’s average
impact fee for a single-family home
is $5,200 and in Utah it is $2,900.
The average for all of Colorado,
according to the same study, is
$12,400 per single-family home. In
many parts of the Front Range, fees
for a residence are over $30,000 per
home, which is more than 10 times
Utah’s average.
Unfortunately,
many water pro-
viders’ impact
fees are flat rates
that do not mea-
sure water usage,
and one cannot
manage what one
does not measure.
Thus, the impact
fees neither accu-
rately reflect the
cost of service, nor
offer an incen-
tive for water conservation for
new construction. For example, a
600-square-foot affordable studio
apartment often pays the same
water and sewer impact fee as a
5,000-sf luxury penthouse.
As with most successful resource
management tools, the market pro-
vides a very effective best manage-
ment practice. Flat rates provide no
price signal to the consumer and
are the least-effective rate structure
to manage water resources. In fact,
the flat rates provide a disincentive
for a developer to invest in water
management devices when they
pay the same impact fee, whether
the building is using 15,000 gal-
lons per month or 4,500 gallons per
month. Flat-rate impact fees also
negatively impact affordable hous-
ing, because an affordable studio
apartment is subsidizing the high-
impact luxury penthouse or home,
often adding more than $200 per
month in rent for water that is not
needed.
The way impact fees are designed
are ineffective in managing and
conserving our water supplies.
There often is no link between the
amount of capacity used by a build-
ing and the amount paid for the
water and sewer service. Without
a market link, an opportunity to
better manage water supplies by
providing a price incentive to the
builders to imbed water-conserving
systems into their buildings is lost.
The nexus between the amount
of water capacity needed and the
design of the building is lost.
The customers often don’t know
these fees exist, how many addi-
tional dollars are included in their
mortgage or rent for these fees, or
even how much water capacity they
have paid for at their premise for
water they do not need or use. If the
consumer doesn’t know how much
water has been allocated to their
residence, how can they appropri-
ately manage their investment?
I believe the solution is the use of
a market-based system for fees that
are grounded in actual demands,
which in turn, increases affordabil-
ity in our water-efficient housing.
First, the cost of providing water
to a residence and a nonresiden-
tial building should be similar – no
differentiation in the impact-fee
schedule for residential and non-
residential.
Second, this fee should take into
account the peak demand the
building places on the system and
the amount of estimated annual
water consumption used. This can
be ascertained from the estimates
provided from a licensed engineer
and can be calculated by the fixture
unit method or the demand profil-
ing method. The American Water
Works Association for sizing water
services recognizes both processes,
but considers demand profiling
more accurate.
Flat rates and broad generaliza-
tions regarding demands placed
on systems need to be eliminated.
The homeowner, renter or build-
ing owner should pay only for the
amount of water and sewer capac-
ity he anticipates using. Elimina-
tion of flat-rate impact fees sends a
clear market signal that if a devel-
oper can reduce his water demand,
the impact fee will be lowered and
one can determine the value of
investing in water conservation.
There is no question that flat
rates do not manage resources and
excellent opportunities are missed
to reduce water demand that, in
turn, would make our residences
more affordable by including water
management in the design of the
building. The market system is the
best way to send these signals.
Water is too valuable in the Front
Range for estimates, let’s “use and
pay only for what you need.”s
Carmine Iadarola
President,
AquaSan Network,
Glendale