City staff proposes reservation fee or take‑or‑pay approach to curb speculative water commitments

City water utilities staff told council July 30 that a large and growing number of approved development agreements and will‑serve letters create a mismatch between reserved capacity and the city’s actual water/wastewater infrastructure and financing needs. Mike Murphy and Blake Knuffendorf presented an audit of dozens of development agreements and will‑serve commitments and showed the sum of committed LUEs (living unit equivalents) substantially exceeds current average daily demand and near‑term treatment capacity expansions.

Staff recommended two tools: take‑or‑pay contracts (one‑time payment for reserved capacity) where service is readily available, or an annual reservation fee billed while capacity is reserved (staff used a working example of 10% of the impact fee, annually for 10 years). Knuffendorf said reservation fees are commonly used in the region and would reduce the incentive to hoard unused capacity: "Reservation fees are typically paid annually... and the reservation fees cease being paid when the water meter is set, which at that point, the impact fee gets paid." Council asked staff to return with details and proposed language for amending active development agreements and will‑serve letters and discussed possibly trimming CCN service areas to reduce obligations outside the city limits.