2023-014 Water & Wastewater Impact Fee Study Update February 17, 2023 Report No. 2023-014
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Water/Wastewater Impact Fee Study Update
BACKGROUND:
Chapter 395 of the Texas Local Government Code (TLGC) requires impact fees to be updated at
five-year intervals, with the current Water/Wastewater impact fee study being updated in 2018.
The Denton City Council first implemented water and wastewater impact fees in 1998 due to the
high population growth projected for Denton. Several factors influenced this decision, including
the significant cost of the water supply and water treatment plant at Lake Ray Roberts, community
resistance towards increasing water and/or wastewater utility rates to pay for the new infrastructure
needed to support the projected growth rates, and the general use and acceptability of impact fees
in other communities in the Dallas-Fort Worth metroplex.
An impact fee is a one-time charge imposed on new developments to help recover a portion of the
capital costs of infrastructure and other improvements required to provide service to the
developments. The use of water/wastewater impact fees helps to stabilize rates during periods of
rapid growth and helps minimize the economic impacts of growth on the rates of existing utility
customers.These fees help shift a portion of the cost of the new or expanded infrastructure required
by the development away from the existing utility customers and towards the new development
itself.
One of the first steps of the Water/Wastewater impact fee study is to establish a Capital
Improvement Advisory Committee (CIAC) to review assumptions and make formal
recommendations to the Public Utilities Board(PUB)and City Council. The Planning and Zoning
Commission has historically served in this capacity with one additional ad hoc member from the
City's Extra Territorial Jurisdiction (ETJ).
Updating the study requires the completion of a land use analysis to project changes in land uses,
densities, and populations within water and wastewater service areas over the next ten years. Part
of the land use analysis includes forecasting the timing and mix of single-family, multi-family,
and other development types within the service area. The City's consultant,Kimley Horn,and City
staff will use this information to develop ten-year water and wastewater capital improvement plans
(CIPs) capable of supporting the expected demands. The ten-year CIP will summarize capital
projects and associated costs required to support growth in the service areas over the study period
according to land use data, population projections, water and wastewater demand forecasts, and
the Master Plans of the water and wastewater systems.
February 17,2023 Report No. 2023-014
Impact fees are developed by expressing the growth in demand for water and wastewater facilities
over the planning horizon in"service units"of impacts. The water and wastewater impact fees for
Denton use a single-family equivalent (SFE) as a service unit. The SFE is simply the water and
wastewater demand associated with the smallest water meter in the system, which is the typical
meter used by a single-family residence. The impact fee study determines the costs to provide a
new customer with water or wastewater service using the SFE as the base unit, and these costs
become the maximum impact fee amounts allowed under TLGC. The maximum impact fees
represent the fees needed for full recovery of costs associated with the proportion of capital
programs needed to serve the demands of additional growth. In 2018, the City Council adopted
the maximum impact fee and maintained three service areas for water to reflect the differences in
service costs among various areas in the City.
The current SFE impact fee for each utility is listed below.
Water: Zone IA - $3,569; Zone 113 - $5,352; Zone 2 - $7,638
Wastewater: $4,716
During the work session on February 21, staff will discuss the formation of the CIAC, including
nominations for one ad hoc member, and the current and proposed service areas for water and
wastewater.
STAFF CONTACT:
Nick Vincent, Interim-Director of Finance
(940) 349-8063
Nicholas.vincent(a,cityofdenton.com
Stephen Gay, Director of Water Utilities
(940) 349-8086
Stephen. agy(a�cityofdenton.com
REQUESTOR:
Staff initiated
PARTICIPATING DEPARTMENTS:
Finance and Water Departments
STAFF TIME TO COMPLETE REPORT:
I hour