Spokane City Council approves major boost to fees on development

Development just got more expensive in Spokane. In some areas, a lot more expensive.

Will it be worth it?

In three back-to-back votes Monday, the Spokane City Council approved significant increases to fees paid by developers, revenue that can be used to improve roads and other facilities, as well as an exemption to some fees for affordable housing.

It’s not clear if all of them will stick, however.

Before any of the votes, the council preemptively pledged to consider on March 27 Councilman Jonathan Bingle’s alternative to some of the most controversial fees passed Monday. While a majority agreed to consider Bingle’s suggestions, there was no commitment that they would approve the substitution.

Everyone agrees something needed to be done.

For decades, population growth in Spokane has outpaced investments in the services needed to sustain that growth, such as roads or water and sewer systems.

In September, the Spokane City Council voted to pause all residential construction for six months in the Latah-Hangman and Grandview-Thorpe neighborhoods, where old roads have been strained by population growth.

City leaders blamed this strained infrastructure in large part on insufficient fees paid by developers to mitigate the problems caused by growth, though there is disagreement about how fast and how far to reverse course.

On Monday, as the Latah Valley building ban expired, the Spokane City Council passed major fee increases for new developments, which are expected to both slow growth in certain areas and pay for the strain that growth puts on local infrastructure.

While the largest fee increases will be focused on the Latah Valley, where new services are most costly to build, the entire city will see increased development costs in the plan passed by the council’s left-leaning supermajority.

Specifically, the council approved updates to transportation impact fees and general facilities charges, which have both been greatly outpaced by rising construction costs.

Transportation impact fees are one-time charges to developers, which pay for the increased burden on area roads caused by the new development.

The exact fees differ depending on the type of development and the area of the city, which was previously split into a downtown area, where fees are by far the cheapest, and the northwest, northeast, south and West Plains. Impact fees collected from a certain area can only go to improve that area’s infrastructure.

Monday’s vote greatly expanded the low-fee downtown area, shrank the south area, and created a new Latah Valley area with the highest fees in the city.

By a 6-1 vote, with Jonathan Bingle casting the sole vote in opposition, the City Council also significantly increased fees across the board.

Downtown, the transportation impact fee for a single-family home or duplex has jumped from around $105 to $236. Fees for a single-family home in the south district would jump from $1,230 to nearly $3,000.

Impact fees in the new Latah Valley district, which is currently within the south district, would balloon to nearly $7,500 for a single-family home.

General facilities charges are one-time fees charged to developers or property owners when they first connect to city sewer and water services.

These fees haven’t budged in more than 20 years, and the fees haven’t kept up with increased demand.

Since 2002, the water connection fee has been $1,232 and the sewer connection fee has been $2,400 for a 1-inch water pipe smaller, by far the most common in the city. Charges for both water and sewer connections are calculated based on the size of the water tap pipe.

By a 5-2 vote, the City Council sharply increased both fees. Bingle and Councilman Michael Cathcart voted against the measure.

Sewer fees for 3/4-inch water connections, which are used in roughly 71% of construction in Spokane, will more than triple to $7,461. Under the new proposal, 3/4-inch pipe connections would cost less than 1-inch pipes, where both sizes currently cost the same amount.

Water connection fees are now more complicated. The city has been split into two zones, upper and lower, roughly depending on elevation and the relative cost to provide water and wastewater services to different areas.

In the upper zone, including southern and northwestern Spokane, as well as a smattering of smaller areas to the east, fees will skyrocket.

From a cost of $1,232 for the smallest connection, a 3/4-inch pipe connection will rise to $10,407. Connecting a 6-inch pipe for commercial or multifamily buildings will jump from around $18,000 to nearly $470,000.

In the lower zone, which includes downtown Spokane and most of the low-lying city to the north or east, fees will be much lower than elsewhere and won’t take effect immediately. Fees will increase to $2,823 for a three-quarter inch connection in 2024.

Some existing waivers of the connection fees are going away. Before Monday, both water and sewer fees were automatically waived if the development occurred in certain areas where infill is encouraged, primarily the central portion of town and land owned by the Spokane International Airport.

Instead of this geographically based waiver system, the City Council majority proposes a waiver for permanently affordable residential developments, where affordability requirements would be written into the deed. Building affordable housing would be an alternative to potentially huge fees, particularly for larger multifamily developments that could be slapped with as much as $500,000 in connection charges.

Outside of these waivers, the expected effect of the new rate is that developments will be encouraged in the city core and discouraged in outlying areas.

Bingle and Cathcart have repeatedly warned in recent days that the ordinances would discourage residential development while the city is already experiencing a housing crisis.

“The trouble is that these rates have been far lower than what they should have been for a very long time, so we’re in a position now where we need to take our medicine,” Bingle acknowledged in a recent meeting.

But Bingle argued the council should pursue an alternative that would make the medicine less bitter.

In a plan supported by Mayor Nadine Woodward, the conservative council minority called for significantly smaller increases in the short-term and up to two years of additional study. If no agreement was reached, however, Bingle’s plan would have left the city back at square one.

Still, he argued that the alternative would be falling further behind in a race to build up housing stock.

“I think (Monday’s vote) could set us back years, if not decades,” Bingle said during a Friday news conference.

Representatives from the Spokane Home Builders Association, Spokane Realtors and others, as well as independent developers, showed up to council chambers en masse prior to Monday’s vote, warning of dire consequences if the council didn’t choose Bingle’s alternative proposal.

Tom Hormel, president of the Spokane Realtors, noted a multi-million dollar project at the airport that would be partially paid for through transportation impact fees.

“It had better be a nice upgrade to the airport, because it’s going to be busy with all the citizens leaving Spokane to find a place that’s affordable to live,” Hormel said.

In an hour-long debate, council members mulled the merits of Bingle’s alternative, as well as the concerns raised by the crowd of homebuilders.

Proposals were submitted then retracted to extend the Latah Valley building moratorium, to adopt a version of Bingle’s alternative, and more, but nothing came of them. In some cases, Councilwomen Karen Stratton or Betsy Wilkerson appeared to be willing to further compromise with Bingle, but the logistics of doing so at the eleventh hour proved onerous.

In the end, Bingle was only able to extract a promise that the council would consider an alternative of his in two weeks.