Sewer Plan Adopted

The real affect of this policy will be to save the next generations of taxpayers $400 million in taxes and fees in today’s dollars. Seriously $400 million…

By a 6-1 vote the Sanitary Sewer Masterplan has been adopted. This, along with the Planning 2 Succeed Comprehensive Plan are perhaps the most important steps towards sustainable growth Rochester has taken since the Great Depression. Sanitary Sewer Masterplan

For nearly 2 decades I have realized that providing subsidies for sprawl and we should abandon that process, geographic growth should be able to support itself. Rochester is already geographically larger than Minneapolis or St. Paul despite having just a fraction of their population. Both of those cities are actually gaining population faster that Rochester. There is a belief among some that sprawl is required for growth, and at some point that is true, however Rochester already has enough infrastructure to grow for decades without major expansion.

Traditionally new infrastructure including sewers were heavily subsidized by property taxes or user fees for people that didn’t need the expansions. The rules will force growth to first occur where infrastructure capacity exists. Additionally it will prevent most growth in areas that are terribly expensive to add capacity like far SW Rochester.

Obviously some builders and realtors were opposed to these smart growth policies. While we never thought that we would have their support, we did want to make sure we understood the data, costs, and allowed dialog to answer questions. In the end, the plan was opposed by the builders association, but overwhelmingly adopted by the council. The RAB issued an Advocacy Alert and raised 4 issues, I asked out team to respond in detail.

Rochester Area Builders distributed an Advocacy Alert that many or all of you received.  In advance of this afternoon’s Council Meeting, below is the City teammates’ response to their concerns.  Additionally, we had a meeting with them where these items were discussed.  The attachment is referred to in #2.  Look forward to more discussion about this at today’s Council Meeting.

  1. The City did not fully examine and review other financing for this infrastructure.

City Staff did look at the three sources of potential funding for infrastructure improvements, which include Developer Charges, Tax Levy, and Utility Fees. The capacity improvements alone are $208 million. Since the Tax Levy (including the additional tax base of new homes) is already used to fund the needed street and park maintenance, any use of the Tax Levy would come from significant increase to the property taxes of residents with limited benefit to the tax papers. The Sewer Utility Fee pays for maintenance and repairs to the existing and future infrastructure. The current collection system uses approximately 40% of the revenues collected to fund the required maintenance and repairs. The Sewer Utility is currently not able to cover the needed collection system improvements along with the needed WRP improvements. A new rate study is planned for next year and if development charges were added it would significantly increase the rates. Again there is little benefit for the utility users to participate in development improvements. The existing sanitary sewer collection is in good shape with little need for improvements. Since the only reason replace the existing system with new piping would be for capacity improvements, it was decided to make the benefiting users responsible for those charges.

  1. No attention has been paid to the effect this “plan” will have on housing availability which is already at a historic low.

Over the past 5 years, national and local market trends show that single-family home development in mid and large sized cities has generally slowed down. The slow down around the production of single-family housing over the last 5 years is not a trend that is unique to Rochester. However, local data shows that trend may be shifting locally. Single-family home production is ahead of where we were at the end of May in 2019. Below we have listed the single-family home permits, though the month of May for the last five years. This data shows that single-family home production is not at a historic low.

·       2020 through May – 100 new homes

·       2019 through May – 88 New homes

·       2018 through May – 128 New homes

·       2017 through May – 165 New homes

·       2016 through May – 160 New homes

Additionally, it should be noted that sewer charges are just one aspect that contributes to the cost of development. Attached please find a sample of the per lot development fees on a $450,000 single family home. In this example, City fees are estimated at roughly $16,700. A relatively small portion of the total construction cost on a $450,000 home.

  1. An uneven charge will pick winners and losers within the city of Rochester.

Development requires upfront investment of City resources to build infrastructure, including sanitary sewers. Due to the limited financial resources available for this use the City must prioritize growth. Development fees are data driven and reflect the true costs the City would incur to expand infrastructure to the new development. Some locations in Rochester are simply more expensive to develop. The existing SAC numbers are different dependent on project location and were calculated on project basis in some instances.  The last area calculated was the Northwest Territories ($18,231.65/ac) which was significantly higher than previous charges and Master Plan reflects the increased cost to extend and upsize sanitary sewers. 

  1. The increased fee will largely be paid to cover the cost of downstream pipes that are immediately serving the new development, similar to the traffic impact fee.

The trunk line charges are not like traffic impact fees. The trunk line charges are for the sewer trunk line extensions that serve development and for capacity increases that allow the extensions to occur. The charges represent the costs the utility must collect to pay for the extensions and capacity upgrades that are benefiting the new development. The Sanitary Sewer Master Plan includes what these charges represent and how they are calculated. The costs for all extensions is $181 million and the costs for the capacity improvements is $208 million.

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