Citing urgent need, City raises system development charges for the first time in nine years

Published 11:46 am Wednesday, March 18, 2015

It’s about to get pricier to buy a new home in Auburn.

On Monday night, for the first time since 2006, the Auburn City Council increased its system development charges (SDCs), the charges new development incurs for hooking up to the City’s water, sewer and storm utilities.

Where water’s current SDC is $2,424 for tying into a three-quarter-inch meter — large meters, say for commercial customers, are proportionally greater — the new charge will be $6,272, per residential customer equivalent. The sewer SDC, now $850 for a residential customer, will increase to $2,327, whereas the current storm SDC, which has been $1,162 since 1996, will not change.

The City collects the SDCs as part of the building permit process for building new or expanded utilities to support current and future growth and development; they are not for operational maintenance or repair and rehabilitation. The idea is to provide for intergenerational equity between present and future customers. The SDCs are based on a single-family home, so for commercial customers, the charges will be incrementally greater.

Concerned about the impact on home sales and the overall economic picture, representatives of the Master Builder’s Associations of King and Pierce counties asked the council to phase in the SDC increases in two stages – 50 percent on March 30 and the remaining 50 percent in late December.

“Auburn home values are still about 18 percent below the peak in 2008, so we’re still in recovery mode down here,” said Corey Watson of Quadrant Homes. “The number of sales has been relatively flat since July of 2013. … In the 98002 Zip Code, which is where Quadrant Homes is currently selling, 21 percent of the homes are still under water, meaning the homeowner owes more on the homes than they are worth, and 6 percent are in delinquency. The market conditions are very fragile right now. There’s very little elasticity in this city to absorb cost increases like that, to just raise prices to recover that. There’s so much downward pressure there because of short sales, foreclosures, and a large quantity of resales with these market conditions.…”

“We understand that the City is in a very difficult position, with costs you need to recover, and we are very appreciative of the steps you’ve taken to listen to our concerns. We’re concerned not only for the impact on builders, but on end-home buyers and the overall economy,” said Jeremiah La Franca of the MBA of Pierce County.

The council later voted 4-3 to implement the SDC increases in full at one time, the ayes insisting action could not be put off any longer because of the urgency of the need. City officials noted that the City had delayed making any such changes for nine years because of the fragile state of the economy.

Data the councilmembers relied on were set down in the Utility Cost of Service Analysis prepared by the FCS Group, which the City hired in 2013. The consultant analyzed the value of existing utilities systems and the cost of necessary expansions and upgrades needed over the next 20 years, based on a 1-percent growth rate and revisions to SDCs based on existing values and future costs divided by existing and future customers. Councilmembers got their first look at the report in February at their regular study session at City Hall.

“Absent an appropriate SDC, existing customers support the costs of capacity needed for future growth customers without equitable compensation for this support. In this case, the concept of ‘growth pays for growth’ has merit, as the absence of an equitable SDC would result in a subsidy of new customers by existing customers,” Karyn Johnson, an analyst working for FCS Group, noted in the report.

Major utility infrastructure projects, existing and future, are as follows:

• Purchase of water capacity in Tacoma Pipeline 5

• Wells and treatment facilities

• Expansion of the Coal Creek and West Hill water supply facilities

• New Valley reservoir and water pump station expansions

• New sewer and storm water interceptors and pump stations

• New regional storm water improvements