Lakeland hasn’t raised the water and wastewater impact fees it charges on new developments since 2011. Now, to catch up to the actual cost, a consultant is recommending more than doubling the fee for each new residential unit from $2,966 to $7,275.
The city paid Maitland-based Raftelis Financial Consultants Inc. $21,000 in April 2020 to review its water and wastewater impact fees. The company presented the results of its study at a special workshop on Monday.
Murray Hamilton, vice president of Raftelis, told commissioners that the city’s current fee is far below the actual cost of adding new users to its system.
What are impact fees? Impact fees are charged on new development. They are meant to cover the cost of extending service to new users. Impact fees cannot be used to make repairs, replace aging infrastructure or cover operating expenses.
“The fee really aims to avoid growth-related costs from burdening existing customers … The idea is growth pays for growth.”
Trevor McCarthy, senior consultant for Raftelis
Residential units are charged a standard fee per connection. Commercial customers’ impact fees vary based on the number of gallons of water and wastewater they use or produce per day.
Why hasn’t Lakeland raised its fee in over a decade? A similar study in 2015 recommended raising the water and wastewater impact fee from $2,966 to $3,330. But at the time, the City Commission worried about how an increase might affect the soft housing market, so it decided not to take any action.
By law, any impact fee increase must be backed by data. The city did not invest in researching the issue again until mid-2020.
“It is a significant increase, but the fees have not been adjusted in 14 years,” McCarthy said. “The proposed increase in the fee represents about 1% of the median price of a new home.”
Slowing the pace of growth? If Lakeland more than doubles its impact fee, it could have a cooling effect on the local housing market. Impact fees raise the cost of each newly constructed home or business. Although the one-time fees are charged to builders, they are typically passed on to buyers.
However, Commissioner Bill Read said if it slows the pace of growth, that might not be a bad thing. “I’ve always avoided stopping development, per se. But if we raise our fees to what they should be, it may slow it a little. And then we can get in line with our traffic and everything else,” he said.
How Lakeland’s fees compare: Currently, Lakeland charges less for water and wastewater impact fees than any of its surrounding municipalities. The proposed increase would move it toward the upper end of the spectrum — but perhaps not for long.
Hamilton told commissioners that 11 of the 16 members of the Polk Regional Water Cooperative have engaged Raftelis. Although he couldn’t divulge specifics, he said many of those municipalities will be raising their rates soon. Cities that are reviewing their fees include Bartow, Davenport, Haines City, Auburndale, Polk County and Eagle Lake.
Are there other impact fees? Lakeland also charges impact fees for transportation, fire protection, law enforcement and parks. The city’s fees average $8,627 for a new single-family home. Lakeland also collects impact fees on behalf of Polk County for transportation, schools, jails and emergency medical services. Polk County’s fees average $11,943. So the combined cost — not including water and wastewater — is about $20,570 for each new single-family home.
Potential legal complication: The city might not be able to raise its impact fee all at once. A bill passed by the Legislature in 2021, known as the Impact Fee Act, caps impact fee increases at 50% and says they must be phased in over four years.
The proposed increase in Lakeland’s water and wastewater fee is 145%. But the Raftelis team and City Attorney Palmer Davis said there is a legal debate about whether water and wastewater fees are exempt from those limits.
Davis said that’s the way he reads the statute, but there is no case law yet to clarify the issue. “I can’t guarantee you that’s the way a court would interpret that. So there is some risk in increasing the fees beyond the statutory limits.”
Next steps: The City Commission is unlikely to leave the rate untouched, as it did in 2015. But it can choose an amount lower than the recommended fee of $7,275. That figure is the maximum that can be justified based on actual costs.
Commissioner Mike Musick asked if the rate could be adjusted annually in the future so there isn’t a sudden “kick to the gut” that triggers a huge influx of applications from builders trying to get in before the new fee takes effect.
Davis said the city cannot legally put the fee on an “escalator” and raise it by 2% or 3% each year because “impact fees have to be based on an analysis of the data.” However, the city could schedule a professional review every three years.
Mayor Bill Mutz asked city staff to draft a resolution with its recommendations for how much to raise the rate and whether to do it all at once or in phases. The commission is expected to consider the matter at its July 1 meeting.
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Cindy about time the impact fees went up. I have a question for you. Where does the soapy water go from the dozen or so car washes in Lakeland and the County. Who inspects the out flow. Got a few here on South Florida Ave.
Good question. I’ll ask as I write more about wastewater and aging infrastructure. Stay tuned!