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Fresno wants $4,200 in water fees added to new-home prices. Big developers say: See you in court

A worker walks through an area called the filter gallery at the Northeast Surface Water Treatment Facility near Chestnut and Behymer avenues in northeast Fresno in a 2013 file photo. The plant is an important part of the city’s goal of reducing reliance on pumped groundwater to supply Fresno businesses and homes. Fresno has raised fees on new housing development to cover the cost of future water supplies for residents.
A worker walks through an area called the filter gallery at the Northeast Surface Water Treatment Facility near Chestnut and Behymer avenues in northeast Fresno in a 2013 file photo. The plant is an important part of the city’s goal of reducing reliance on pumped groundwater to supply Fresno businesses and homes. Fresno has raised fees on new housing development to cover the cost of future water supplies for residents. Fresno Bee file

Buyers of newly built homes in Fresno are on the hook for a fee of more than $4,000 to ensure they have enough water coming to their residences. But a trio of major home builders is challenging the city’s fees in court, contending they’re too high, are unfair and amount to a tax that violates state law.

The “water capacity fee,” which adds up to $4,246 for a typical new single-family home with a one-inch connection to a water meter, was approved in April on a 5-1 City Council vote following a contentious public hearing at which developers voiced strong objections. Many of those concerns found their way into the litigation now working its way toward a March trial date in Fresno County Superior Court.

“We want to make sure that new-home buyers pay their fair share, but we want to make sure it’s fair and equitable,” Granville Homes president Darius Assemi told the council earlier this year. “We’re simply going to pass it through.  We want to make sure an appropriate fee is put together with the correct amounts.”

The Building Industry Association of Fresno/Madera Counties, Granville Homes Inc., Wathen Castanos Peterson Homes Inc. and Lennar Homes of California Inc. filed the lawsuit in May. Less than a month later, however, the trade association pulled out of the case in a petition to Judge James Petrucelli without detailing a specific reason.

“The board decided that it was not in the BIA’s best interest to continue,” said Mike Prandini, the association’s president and chief executive officer. “If we won, it would just delay the inevitable. The builders felt the amount (the city) was charging wouldn’t go down much, if at all, so it wasn’t worth the resources to battle the city.”

Attorneys for the developers say the fees unjustly burden builders with extra charges that they say cannot be legally justified. They point to references in a water fee study conducted for the city that describe doubling the treatment capacity of the Northeast Surface Water Treatment Plant to help meet future water needs. They assert that the expansion requires a detailed analysis under the California Environmental Quality Act before fees for that portion of the long-term program can be charged.

“Basically the bottom line is primarily the 50 percent of fees for the northeast treatment plant,” said John Kinsey, one of the builders’ attorneys. “It increases the costs for people who are interested in buying new homes.”

They also argue that the fees are greater than what it will cost the city to assure a stable water supply for a growing population. As such, they should be considered a “tax” that requires approval from two-thirds of voters in an election rather than mere adoption by the Fresno City Council.

“The city’s position is that there’s no need to comply with CEQA because the funds are for unknown future projects, but the fees can’t be greater than needed to cover cost,” Kinsey said. Either the city has committed to a project with a known cost and has to do the environmental review, or hasn’t finalized a project with a known cost and hasn’t taken it to the voters, Kinsey added.

In their lawsuit, the builders and their attorneys want Petrucelli to declare the fees invalid and decide that they violate state law, and order the city to rescind its approval of the fees. They also want a court order barring the city from assessing and collecting the fees “unless and until the city complies with all controlling laws, including  CEQA.”

The city’s legal team – City Attorney Douglas Sloan and attorneys from the Irvine law firm Aleshire & Wynder – contends that the new fees don’t violate the state’s constitution. In court documents, they assert that the fees are only what’s needed to cover the cost of services. They add that the fees will bear a “fair or reasonable relationship” to new homeowners’ burdens on future water demands or their benefit from a more reliable water supply.

The defense attorneys also argue that the fees themselves do not represent a project that triggers CEQA requirements for an environmental assessment. “CEQA applies only to projects which have the potential for causing a significant effect on the environment,” they countered. “The fees do not have the potential to result in a direct physical change in the environment. ...”

The $4,246-per-home fee adopted in April was lower than a previous proposal in December 2016 for $6,373. Fees would also be charged for commercial and industrial properties with larger water meter connections. The fees would only be charged for new development, not existing homes and businesses, because they are intended only to accommodate the water demands created by future growth. That includes $143.9 million in new water wells, groundwater recharge basins and distribution pipelines.

The city began charging the new fees in mid-June. Builders typically pay the fees when building permits are issued. Through the end of September, Fresno has collected just over $104,000 – about the equivalent of 24 single-family homes, said Mark Standriff, a spokesman for the city.

The two sides will argue their points in a March 22 hearing in Petrucelli’s courtroom in downtown Fresno.

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