Consultant outlines process, bounds and tradeoffs of potential water/wastewater impact fees

Grady Reid, senior project manager for HDR Engineering, gave a 45-minute "Impact Fee 101" presentation to the Planning Commission and City Council on Jan. 27 outlining how Beaumont could study and adopt water and wastewater impact fees and what those fees would and would not fund.

Reid said impact fees are "a one-time payment... levied on new typically or expanded development" to pay for capital infrastructure needed to serve growth rather than operations and maintenance. He cited Chapter 395 of state law as the statutory framework that governs impact-fee development, credits and reporting requirements. "Impact fees are not a perfect panacea for this," Reid told the meeting, cautioning that timing differences can leave cities advancing capital costs before fees are collected.

Reid described the standard process: define the impact-fee service area, estimate 10-year demand (typically using existing connections and usage data), identify growth-related capital projects for water and wastewater, and apportion project costs to new development by living-unit equivalents (LUEs). He said the final maximum fee can be adjusted to avoid double charging new customers — either by applying a one-half rule or by calculating a rate-based credit tied to expected rate revenue contributions.

He listed permissible uses of impact-fee proceeds (construction, design, surveying, financing costs, and debt service for growth projects) and explicit exclusions (operations and maintenance, rehabilitation of existing facilities, federal/state-mandated projects such as Lead and Copper Rule compliance, and school districts unless they contractually agree). Reid also explained the advisory role of a capital improvement advisory committee (CIAC) — typically the planning and zoning commission augmented by an ETJ representative — which must review and adopt the draft impact-fee report before council holds its two required public hearings.

When asked about likely dollar amounts, Reid declined to give a firm local number without the study but offered regional context: "I don't anticipate an what I would call an abnormally high water and wastewater impact fee coming out of this study," and suggested similar cities in the region commonly land between roughly $3,000 and $7,000 per LUE combined. Reid said HDR's fee to prepare an impact-fee study for Beaumont would be about $45,000.

Council members and developers asked about who pays the fee and timing: Reid said fees are typically assessed at platting and collected at building permit issuance, so in most cases the homebuilder or commercial developer pays the fee and can pass the cost to the eventual buyer. He and staff noted that exemptions or waivers can be allowed by council but that exempting development reduces impact-fee revenue and generally shifts costs back onto ratepayers or the general fund.

Reid and staff recommended forming the CIAC (likely the Planning Commission plus an ETJ representative), preparing a land-use and capital-improvement plan for a 10-year horizon, and then returning drafts for committee review before the required council public hearings and ordinance adoption steps. Council and staff raised questions about administrative cost, study cost ($45,000), and whether impact fees would be meaningful in a low-growth city; Reid said even modest growth can recoup the study cost and that industrial meters can generate large fees if substantial meters are installed.

No vote was taken; the presentation was informational and council directed staff to continue refining data for potential study steps.