Why this matters: When a development project increases the capacity of an existing water or sewer connection, a local agency may charge only for the additional capacity — not as though it were an entirely new connection.
Reasonable utility charges
In the development of new housing, development impact fees charged by local agencies need to demonstrate they are reasonable.
Until recently, local agencies were not required to demonstrate that water and sewer connection and capacity charges reflected the estimated reasonable cost of providing those services.
Senate Bill (SB) 1036 increases transparency and ensures water and sewer fees are more closely tied to actual costs. This brings down costs to build new housing.
Accurate fees for water, sewer and electrical connections
The Mitigation Fee Act requires local agencies who impose a fee as a condition for approving the development project to:
- identify the purpose of the fee;
- identify the use to which the fee is put;
- explain how the fee is used to serve the development project; and
- explain why the development project creates the need for those facilities or services funded by the fee. [Calif. Government Code §66001]
Local agencies may now only charge what is reasonably necessary to provide utility service to a new development, rather than using connection fees to generate excess revenue.
When a development replaces or changes an existing use of a property, the local agency reduces the development impact fee to account for the property’s existing use. The developer may only be charged for the additional impact the new project places on public facilities or services — not as though the property were being developed from scratch. [Gov C §66001(h)]
When the impact fee reduction is greater than the fee, the developer does not receive a refund or credit toward other fees. [Gov C §66001(h)(1)]
When a development already has a water or sewer connection and the owner changes the capacity of the existing connection, only the increase in capacity may be charged. No credit or refund is issued to the developer when the capacity decreases. [Gov C §66013(j)]
Thus, local agencies achieve greater transparency and accountability in development impact fees imposed on housing developers.
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