Home builders freaked over 140% Pasco water rights fee increase. This is what’s changing

The surcharge fee that Pasco charges home builders and other developers to provide them with water rights is expected to change following a big outcry.

Builders, real estate agents and property owners said they were caught off guard last year after the city council approved a 140% increase to its water rights acquisition fee in addition to the surcharge.

The acquisition fee change bumped up the cost from $1,725 per acre-foot to the market rate of $4,150 an acre-foot.

Revenue from the fee is used by the city to buy water rights for new developments that don’t have them. The difference is an additional 8 pennies on each gallon of needed water rights.

City staff say Pasco does not have enough water rights remaining to serve all the new developments and projects currently in line for review and approval and will need to buy more. At the moment, there are currently more than 2,000 homes being reviewed.

The November vote also included an additional 50% surcharge for properties that had water rights within the past decade but chose to relinquish those rights. Some property owners sold their rights on the open market believing they could buy the rights cheaper from the city and pocket the difference.

Now, after meeting with upset stakeholders and city staffers, a Pasco City Council subcommittee is suggesting some changes that are being called a compromise. The full council is to vote at its May 6 meeting on the following changes:

• Remove the 10-year surcharge that went into effect in December.
• Evaluate water rights acquisition fees regularly every two years to account for market changes.
• Explore and implement water conservation programs.

These recommendations were made by a subcommittee, made up of two of the newest city councilmen, Leo Perales and Charles Grimm.

“I think we’ve brought this to what is the best conclusion we can,” Grimm said at a recent city council study session.

“As the population continues to boom, I think water’s going to continue to be one of the most precious resources — if it’s not already — on the planet. I think this is something that just needs to stay in front of us as possible,” he added later.

Several of the elected officials voted into office this year say they were dissatisfied with the way city staff went about quickly drafting and recommending the higher in-lieu rate and new surcharge, especially as new council members were about to take office.

“I think we need to be more forthcoming and transparent when we’re doing stuff like this, especially heavy-lifting, complex issues like this,” Perales said. “We need to get with stakeholders. We need to get with developers, builders, the Tri-City Association of Realtors — whoever is going to be affected by this, and not be so reactive.”

Water rights

Water resources in Washington belong to the public and can’t be owned by any individual or group, according to the Washington State Department of Ecology . The “rights” allow a person or business to use the water for a specific time, place and purpose.

Pasco’s higher acquisition fee gives property owners the incentive to provide the city with any rights tied to the land instead of absorbing the costs of the previous fee, which went into effect in 2014 when water rights were significantly cheaper to buy.

The value of water rights has risen so high over the last 10 years that some developers are choosing to pay the city’s acquisition fee and request water service from the city, then sell their existing water rights at a higher price on the market and keeping the profit.

Some argued the higher in-lieu fee would result in a noticeable bump in home prices as developers simply passed the increase down to buyers and leasers.

For developers, the fee increase amounts to an extra $1,800 per home on every acre lot with four units, and an extra $1,100 per home on every acre lot with 11 units.

If the city instead did not increase the fee, existing water customers would be left footing the cost for new development.

Those customers would have been charged an extra $4 per month on every $1 million in water rights the city needed to buy.

But since the city adopted a fee increase, water customers will not see any changes to their water bills.

In December, a group of 41 Tri-City developers, builders, real estate agents and property owners asked the city to rescind the acquisition fee and form a steering committee to further study the issue.

Under the current proposal, the November acquisition fee increase won’t change, just the surcharge.

WA’s fastest growing city

Pasco is among the fastest growing cities in Washington — and new residential and commercial developments have been booming.

On a per-capita basis, Pasco permits more housing units than either the Spokane, Yakima or greater Tri-Cities metro area. Over the next 20 years, the city’s population will increase by 60,000, and the city needs to add 23,000 housing units just to keep up.

The city currently leases or owns about 18,883 acre feet in annual water rights — or about 6.2 billion gallons of potable water that’s drawn from the Columbia River and underground.

The city used about 84% of that water last year and will need to buy more to meet expected growth. It will need almost 11,000 more acre-feet of water rights — or another 3.5 billion gallons of water — to support development over the next two decades.

Perales says smart water consumption is the largest issue the city is not addressing at the moment.

Higher in-lieu fees to pay for more water rights doesn’t address the fact that the city is lacking enough water for growth and is using potable water for irrigation that should be used for other purposes, Perales said.

It’s a big reason why they should be prioritizing water preservation efforts.

“We’re just really kicking the can down the road,” he said.