Developer Spin on Who Pays for Growth
| By Dave Gardner - Feb 14th, 2008 at 4:22 pm EST |
| Also listed in: COSprings Progress |
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Categories: Economic Fairness & Security, Environment / Conservation, Public Infrastructure / Transportation, Consumer and Worker Protection, Budget Priorities
Categories: Economic Fairness & Security, Environment / Conservation, Public Infrastructure / Transportation, Consumer and Worker Protection, Budget Priorities
A developer recently repeated the typical talking points he believes prove that growth pays its way. He didn't anticipate he was addressing someone who's done his homework on costs of community growth.
I'm currently serving on The Gazette's first Community Advisory Board. We've been meeting monthly with Gazette editor Jeff Thomas. I'm really impressed with Jeff and I'm enjoying the process. Jeff created a MySpace group where members of this board are free to post and encouraged to have some dialogue about how to improve the newspaper (we can't cover it all in our monthly meetings). The public is invited to view this dialog, though you cannot post to this forum.
Here is the MySpace Group: GazetteCAB
We have one developer on the board, and he recently posted a response to one of my posts in the forum (see "guest columnists" forum topic). My post regarded the presentation of opinion pieces outside the opinion section of The Gazette, but I believe our developer may have taken my remarks to be anti-developer. Since that forum is for discussion of The Gazette, I'm choosing not to engage in a growth cost debate in MySpace. I've instead invited the developer to discuss the topic at my SaveTheSprings Yahoo Group. Please feel free to view the entire dialogue at the above url. But I'm going to post part of his comment here and offer what I would characterize as a correction to his misleading statements. If I am wrong, I hope he'll join us at the Yahoo Group and set the record straight.
Here is his comment I feel requires a response:
"I also believe that the blame for growth and builders and devlopers not paying their way is false. I have developed large and small parcels and I assure those naysayers that we do pay our own way. We install water, sewer, electric and gas main extensions to our developments.This includes roads, drainage and other items.We then turn it over to the city or county as applicable. I believe the public should be informed truthfully about what is going on."
Here is my response: I attended a series of meetings in 2004 of the Utilities Policy Advisory Committee as the group studied utilities extension policy. So I believe I'm pretty well-informed about this. The above developer comment is very similar to a statement made by another developer, City Council member Scott Hente, at a utilities rate hearing in late 2003.
Here are the facts as explained by utilities staff back in 2004: In 2003, according to Colorado Springs Utilities, the average actual cost of utilities infrastructure per new customer was $25,230. The average total fees and infrastructure contributed by developers per new customer were $12,077. This amounted to 48% of the cost. The rest of that cost was covered by rates (our utility bills).
While developers typically do install water, sewer, gas and sometimes electric infrastructure within their developments, they are reimbursed for the gas infrastructure investments as gas customers in that development connect to the utility. Developers are typically required to pay the cost of burying electric distribution lines above what it would cost to string them in the air. Otherwise the utility typically pays for the cost of installing the electrical distribution system. Sometimes, if there are extraordinary costs of extending electric service to a new subdivision, the developer may be required to cover the cost of that extension. Water and wastewater infrastructure WITHIN the development are funded and built by the developer.
Capacity improvements/increases necessary to meet the added demand (whether for electric, water, gas or wastewater) are almost never funded by the developer, except through "system development charges" (connection fees), which utilities informed us do not recover 100% of the costs. Since 2003 the connection fees have been increasing gradually to decrease that gap. There are no system development charges for gas or electricity. So, for example, if Banning Lewis Ranch buildout requires our utility to construct a new power plant, 100% of that cost will be recovered through our utility bills, not through developer fees.
Outside of utilities, developers do not build and equip police stations or municipal service centers. Developers usually do not construct parks. They do not construct schools. Developers are also not assessed for impacts of their developments on our regional transportation network or air quality. Fees paid to the city for land use review and other activities of city planning staff related to their developments intentionally do NOT recover 100% of the cost of staff to perform those services. So there are many externalized costs associated with each new development.
Current public policy in Colorado Springs is not to recover 100% of the cost of new growth. Some may feel that is appropriate and we should continue to subsidize growth. It's no secret I believe we are foolish to subsidize growth and then scramble to accommodate it with huge highway and water projects. And foolish to subsidize growth when our future water supply is so tenuous. And foolish to send struggling retirees and schoolteachers higher utility bills in order to artificially reduce the price of new mcmansions (and increase developer/builder profits) through utility connection fees that do not recover the full cost of capacity and infrastructure they require. Regardless of your stance on these issues, it is a fact that growth does not pay its own way.
I'm currently serving on The Gazette's first Community Advisory Board. We've been meeting monthly with Gazette editor Jeff Thomas. I'm really impressed with Jeff and I'm enjoying the process. Jeff created a MySpace group where members of this board are free to post and encouraged to have some dialogue about how to improve the newspaper (we can't cover it all in our monthly meetings). The public is invited to view this dialog, though you cannot post to this forum.
Here is the MySpace Group: GazetteCAB
We have one developer on the board, and he recently posted a response to one of my posts in the forum (see "guest columnists" forum topic). My post regarded the presentation of opinion pieces outside the opinion section of The Gazette, but I believe our developer may have taken my remarks to be anti-developer. Since that forum is for discussion of The Gazette, I'm choosing not to engage in a growth cost debate in MySpace. I've instead invited the developer to discuss the topic at my SaveTheSprings Yahoo Group. Please feel free to view the entire dialogue at the above url. But I'm going to post part of his comment here and offer what I would characterize as a correction to his misleading statements. If I am wrong, I hope he'll join us at the Yahoo Group and set the record straight.
Here is his comment I feel requires a response:
"I also believe that the blame for growth and builders and devlopers not paying their way is false. I have developed large and small parcels and I assure those naysayers that we do pay our own way. We install water, sewer, electric and gas main extensions to our developments.This includes roads, drainage and other items.We then turn it over to the city or county as applicable. I believe the public should be informed truthfully about what is going on."
Here is my response: I attended a series of meetings in 2004 of the Utilities Policy Advisory Committee as the group studied utilities extension policy. So I believe I'm pretty well-informed about this. The above developer comment is very similar to a statement made by another developer, City Council member Scott Hente, at a utilities rate hearing in late 2003.
Here are the facts as explained by utilities staff back in 2004: In 2003, according to Colorado Springs Utilities, the average actual cost of utilities infrastructure per new customer was $25,230. The average total fees and infrastructure contributed by developers per new customer were $12,077. This amounted to 48% of the cost. The rest of that cost was covered by rates (our utility bills).
While developers typically do install water, sewer, gas and sometimes electric infrastructure within their developments, they are reimbursed for the gas infrastructure investments as gas customers in that development connect to the utility. Developers are typically required to pay the cost of burying electric distribution lines above what it would cost to string them in the air. Otherwise the utility typically pays for the cost of installing the electrical distribution system. Sometimes, if there are extraordinary costs of extending electric service to a new subdivision, the developer may be required to cover the cost of that extension. Water and wastewater infrastructure WITHIN the development are funded and built by the developer.
Capacity improvements/increases necessary to meet the added demand (whether for electric, water, gas or wastewater) are almost never funded by the developer, except through "system development charges" (connection fees), which utilities informed us do not recover 100% of the costs. Since 2003 the connection fees have been increasing gradually to decrease that gap. There are no system development charges for gas or electricity. So, for example, if Banning Lewis Ranch buildout requires our utility to construct a new power plant, 100% of that cost will be recovered through our utility bills, not through developer fees.
Outside of utilities, developers do not build and equip police stations or municipal service centers. Developers usually do not construct parks. They do not construct schools. Developers are also not assessed for impacts of their developments on our regional transportation network or air quality. Fees paid to the city for land use review and other activities of city planning staff related to their developments intentionally do NOT recover 100% of the cost of staff to perform those services. So there are many externalized costs associated with each new development.
Current public policy in Colorado Springs is not to recover 100% of the cost of new growth. Some may feel that is appropriate and we should continue to subsidize growth. It's no secret I believe we are foolish to subsidize growth and then scramble to accommodate it with huge highway and water projects. And foolish to subsidize growth when our future water supply is so tenuous. And foolish to send struggling retirees and schoolteachers higher utility bills in order to artificially reduce the price of new mcmansions (and increase developer/builder profits) through utility connection fees that do not recover the full cost of capacity and infrastructure they require. Regardless of your stance on these issues, it is a fact that growth does not pay its own way.
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When a new development goes in, traffic congestion increases on nearby thoroughfares. It can take several years before local government acknowledges the problem, and several more years before they do anything to solve it. Just about the time they finish the lane-widening project, the utilities crews show up with their backhoes and traffic cones, and proceed to dig up (and clog) the brand new pavement. By that time, the developers have moved on, leaving the tab for capacity expansion for taxpayers to pay.