Sioux Falls council adopts wastewater system capacity charge ordinance

The Sioux Falls City Council on a 6-0 vote approved an ordinance amending City Code Chapter 51 to add a wastewater system capacity charge (SCC) that will be collected when a water meter is purchased, replacing the current area-based cost recovery fee system.

The change, presented as Item 40 at the council meeting, moves the one-time charge from the planning stage to the point when service is required. City presenters said the council will phase the SCC in over 10 years and retire cost recovery fees at the end of 2028.

Mark Cotter, with the City of Sioux Falls Public Works team, told the council the city and consultant HDR Engineering worked with more than 40 stakeholders and received endorsements from the Home Builders Association and recommendations from the Infrastructure Review Advisory Board and the Accessible Housing Advisory Board. "We're proposing to do this over a 10 year transition period," Ryan Johnson, City of Sioux Falls Public Works, told the council. He said the SCC is based on water meter size so customers pay for capacity they use and the fee is a one-time charge collected when the meter is purchased.

City staff said the transition aims to stabilize customer rates, reflect capacity-based costs, and scale utility financing as growth continues. Staff estimated that, after full implementation, roughly $3.5 million in revenue would shift from monthly utility rate payers to SCC collections.

Two members of the public spoke during the item. Mike Gray, Sioux Falls Development Foundation, expressed support and praised Public Works for stakeholder engagement. George Hahn, a lifelong Sioux Falls resident, said the city should better encourage water-efficient appliances and noted that smaller meters could suffice for water-efficient homes: "If you do your dishes by hand, you'll use 40 gallons ... An Energy Star efficient dishwasher ... will use 4 gallons," he said.

Councilors commented favorably on staff work and the outreach behind the proposal. The motion to approve the ordinance was moved by Councilor Bassey and seconded by Councilor Spellerberg; votes recorded were Councilor Thomason — Yes; Councilor Barranco — Yes; Councilor Bassey — Yes; Councilor McCurries — Yes; Councilor Sigourney — Yes; Councilor Spellerberg — Yes. The motion passed 6 to 0.

The ordinance replaces the city’s cost recovery fee framework with a meter-size SCC, collected once at meter purchase, and will apply to new connections and to customers that increase meter size. Staff said the change is intended to be revenue-neutral over time and to reduce pressure on monthly rates by aligning financing with capacity demands.

The council did not set an effective date in the meeting beyond the described 10-year transition; staff said cost recovery fees will dissolve at the end of 2028. Further implementation details and administrative rules were not specified in the record and will be handled by city staff under the adopted ordinance.