San Marcos staff begin process to update water and wastewater impact fees; public hearings planned

City staff and consultants presented the steps the San Marcos City Council will take this year to update water and wastewater impact fees required under state law. Richard Reynosa, assistant director of engineering, and consultant Ethan Shires described the purpose of impact fees — a one‑time charge on new development to recover capital costs for system expansions — and explained the statutory framework and analytic steps the city will follow.

The presentation clarified that impact fees apply only to new development and to capital improvements that expand capacity for growth, not to routine maintenance or upgrades for existing customers. Consultants described the main study components: land‑use and service‑area assumptions, conversion to service‑unit equivalents using AWWA guidance, identification of eligible capital projects from city water and wastewater master plans, utilization and eligibility calculations, a detailed credit analysis for future rate payments, and then the final calculation of a maximum allowable fee under Chapter 395 of the Texas Local Government Code (presented in the meeting as Chapter 3 95).

Staff said the city’s current fees date to 2018 and that legislative changes and rising construction costs (cited as a major driver of fee increases) have required an update. The consultants said they used the detailed credit method for calculations (a more detailed approach than the 50% credit method) and that the process will include public reports, advisory committee review (the Impact Fee Advisory Committee, IFAC), a required financial audit of historical impacts (results posted online), and public hearings; staff said the schedule aims for a public hearing in the summer and potential adoption in July.

Councilmembers asked whether the proposed fees would be prohibitive to development and how San Marcos’ fee will compare to neighboring cities; the consultant said benchmarking is underway and that cities that updated more recently tend to have higher fees because construction costs have increased. Council also asked about incentives for water reuse (purple‑pipe systems) and whether such programs could affect the assessed fees. Staff said the impact‑fee study treats reuse as a separate utility for these calculations and that reuse does not directly offset the water/wastewater impact‑fee components under the current method, although the city could consider phased rollouts or incentive programs as policy choices.

Next steps: staff will circulate the full reports and benchmarking spreadsheets, hold IFAC meetings and a public hearing on the financial audit and then a public hearing on the maximum allowable fee. IFAC will provide written recommendations before council considers formal adoption later this summer.

The presentation and study documents were made available on the city’s website; staff committed to supplying a comparison spreadsheet showing the dates used for neighboring cities’ fee schedules.