City officials are considering whether to revise or even abolish water connection fees now imposed on developers amid an ongoing state investigation into hundreds of thousands of dollars in waivers granted to certain projects that didn’t appear eligible for them.
State officials began probing the water connection fees last week, about two months after Mayor Joanne Yepsen sought an opinion on whether roughly $900,000 worth of waivers was properly granted. On Monday, auditors with the state Comptroller’s Office were working out of the Public Works Department, reviewing documents on the policy and talking with those responsible for administering the fee system.
“We’re in there,” confirmed Brian Butry, a spokesman for the comptroller’s office. “We’re reviewing documents related to the hookup fees, interviewing city officials and talking to city workers.”
Yepsen said the probe should help the city clarify the water connection fee policy after it was called into question once it became apparent that large waivers were being issued.
“Hopefully the investigation will get the city to a better place,” she said.
Meanwhile, Public Works Commissioner Anthony “Skip” Scirocco is asking the City Council to ditch the water connection fee system, in part because the money it brings to his department can be used only for very specific purposes — extension of a specific size of water line or improvement of existing infrastructure. He said the city now relies on a capital improvement fee assessed to all water users to maintain its infrastructure, leaving little need for the water connection fee system.
Scirocco even questioned the legality of the city assessing the fee. He said at least two developers successfully challenged the assessment in court in the past.
“Everybody agrees it’s too problematic,” he said. “It’s an unnecessary fee.”
Adopted in 1992, the policy assesses a fee of $3,000 for the first unit and $2,000 per additional unit for most new service connections to the municipal water system. The cost of any project that improves the city’s water distribution system solely at the expense of a developer can be deducted from the total fee, provided the diameter of the water main being installed is 12 inches or greater.
Over four years, however, Public Works waived all connection fees for six projects that didn’t appear to meet the policy’s criteria. The waivers also appeared to be granted unilaterally by public works officials, rather than being reviewed by the full council as prescribed by local ordinance.
The largest fee waivers — more than $800,000 — went to Bonacio Construction for Market Center at Railroad Place and the Springs apartment project on Weibel Avenue. Additional waivers were granted to a nine-unit residential project on Gilbert Road by M&J Construction and three new single-family homes on Adams and Jackson streets by James Doyle, a local broker and developer. Public Works also granted a partial $35,000 waiver to a 57-unit luxury apartment complex at Morgan and Seward streets.
Scirocco argues the projects provided important upgrades to infrastructure that benefited the city at a fraction of what such improvements would have cost the city. He welcomed the audit and said he’s got ample documentation to show the work conducted by the developers dwarfs the amount of fees waived.
“There’s plenty of backup to justify what we did,” he said. “In each and every case, the developer put more money out of their pocket and into the ground than those fees.”
Last week, Scirocco urged the council to rewrite or simply eliminate the water connection fee policy. He scheduled a public hearing on the matter for the council meeting next week, after which he’ll urge his fellow commissioners to do away with the policy.
“The whole thing doesn’t make any sense now that we’re looking at it,” he said, “The fee is going to go away.”
But that sentiment isn’t shared by Bill McTygue, a Scirocco critic and the former Public Works director who oversaw the water connection fees for years. He said the fund — now totaling more than $1 million — is a critical resource in helping the city extend the boundaries of its water district.
“I can’t believe they’d attempt to do this while they’re under investigation,” he said. “It’d be egregious for this City Council to change this ordinance in order to pull the chestnuts out of the fire for Skip Scirocco.”
In a related development, the City Council approved settlement with Bonacio stemming from an attempt to pull the waivers granted to Market Place and the Springs. In February, city engineer Tim Wales sent a letter to the developer acknowledging the fees were incorrectly waived and the city would either need to collect them or seek the necessary approvals from the council. An attorney representing Bonacio indicated the developer had no intention of paying the fees, but would work with the city to “reconcile its paperwork and policies” regarding the waivers. The company apparently threatened a lawsuit threatening to seek $1.02 million for improvements associated with the Springs project that benefited the city directly.
After a discussion in executive session last week, the City Council agreed to settle the Bonacio claim by waiving $810,000 in connection fees. The council also agreed to accept a $219,359 “gift” from Bonacio in the form of infrastructure work with the project.
“This was one single claim that we were resolving from an attempt to recover some of the [water connection fee] funds lost and to eliminate the level of legal exposure for the city,” Yepsen said.
Reach Gazette reporter Justin Mason at 885-6705, [email protected] or @MasonAbridged on Twitter.