Cape Coral considering steep increase in impact fees for new homes to fund utility projects

Developers and new homeowners may soon face increased impact fees as Cape Coral City Council is set to decide on them as current growth is not paying for the costs of future utility projects.

A new single-family home could pay as much as $8,748 for water, irrigation, and sewer in the next few years. The proposed increase could be nearly 30% in some areas.

"We need to look at funding these improvements going forward, otherwise, we are not going to be able to continue the Utilities Expansion Program as we know it today," said Cape Coral Financial Services Director Mark Mason.

According to Spokesperson Melissa Mickey, the Utility Capital Expansion Fee is on this week's agenda for a public hearing for approval from the council.

It's an introduction that sets a follow-up public hearing for March 6. If approved, the new fees will be in effect on July 27, 2024.

The Utilities Extension Project (UEP) provides water, sewer, and irrigation services in phases to replace septic and shallow groundwater wells and connect households to the city's potable water treatment and distribution facilities.

Jeff Dykstra, principal planner with Stantec Consulting, presented the information to the council at the Feb. 14 committee of the whole meeting.

The Utility Capital Expansion Fees, or impact fees, are one-time fees for new developments to help expand utilities like water, sewer, and irrigation.

Developers pay impact fees as part of the development approval process, which could affect the cost of new homes by passing them on to the homeowners.

"The takeaway from our study ultimately is that the current fees are below the city's cost of capacity," Dykstra said.

What is proposed?

The Florida Impact Fee Act limits the increase in each fee to 50%, and any increase between 25% and 50% has to be phased in equally over four years. A 90-day notice before the effective day for the increased fees must be given. Fees may not be increased more than once every four years.

Stantec recommended the city do the increases in phases over four years.

The current single-service potable water fee, no irrigation service, is $2,254. It would increase to $3,027 over four years, a $476 increase.

Most new customers get dual services with current fees of $1,106 for water and $2,254 for irrigation.

Water would see it increase to $1,658 over the next four years, a $552 increase; while irrigation would increase to $2,636 over the next four years, a $382 increase.

Cape Coral splits fees for sewers into two districts, with District 2 being anywhere southwest of the Utilities Extension project area and District 1 everything else.

District 1 would see a $912 increase, from $2,406 to $3,318, and District 2 would see a $1,064, from $3,390 to $4,454.

Overall, a new single-family home in District 2 would go from an average cost of $6,750 to $8,748 for water, irrigation, and sewer, nearly a 30% increase.

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Why the need for the increase?

What's partly driving this need for increased fees is that the city has several growth-related projects on the horizon.

"In order for us to actually borrow the funds, I need the rates in place," Mason said. "And borrowing them allows us to actually do the construction."

These include the following:

• North Water Reclamation Facility - $250 million

• Non-Assessed Transmission North 1 & North 3 Utilities Extension Project - $181 million

• Veterans Parkway Transmission - $48 million

• North Reverse Osmosis Water Treatment Plant Expansion & Storage Tank - $46 million

• Raw Water Wells - $42 million

• North Deep Injection Well - $23.5 million

• US 41 Conveyance - $20 million

Cape Coral staff said these projects will not be fully completed by 2027, but all will be under construction by then.

Dykstra said the city capital expansion fees have relatively stayed the same since 2008, meaning there's been no major change for 15 years, leaving current customers to make up the difference in monthly water and sewer bills.

"To the extent that these fees are not set at their cost, that puts the burden on the existing ratepayers to subsidize growth," Dykstra said.

They anticipate an estimated $20 million less revenue in impact fees through fiscal year 2033 if things continue this way.

"Every dollar of revenue that you don't get from these capacity fees have to come from somewhere else if these projects continue," Dykstra said.

Council discussion

Councilmember Bill Steinke questioned why these increases haven't happened before.

"What I'd like to make sure of is that we don't find ourselves in this situation again where we wait so long to do something about it and operate at a deficit that we then have to bring a shock to the system to get ourselves brought up to date," Steinke said.

Cape Coral Utilities Director Jeff Pearson said in the past there wasn't the willingness to raise it to the full cost needed.

Pearson also said the impact fee increases will help alleviate costs for existing customers but no rate reduction.

Mason explained to the council, that since they can only increase the fees by 50% over four years, they will most likely need to do this again.

"So when we come back and we do this again four years from now, we'll already be behind, 50% behind, and have to do this again," Mason said.

Gunter agrees with Steinke's assessment and says this issue has been "dumped" on the council's lap, but the council will have to make some hard decisions to move the UEP projects forward.

"Like Councilmember Steinke said, no matter if it's our water rates or impact fees, we have to make sure that every five years we take a look at that and adjust that," Gunter said. "Unfortunately, this will be a rip-the-bandaid-off approach."

Before he can be a yes vote when it's time to vote on the increase, Gunter said he wants to see construction plans for the seven projects.

Luis Zambrano is a Watchdog/Cape Coral reporter for The News-Press and the Naples Daily News. You can reach Luis at Lzambrano@gannett.com. Follow him on Twitter @Lz2official.

This article originally appeared on Fort Myers News-Press: Cape Coral to implement new impact fee increases for utility projects