United States: Comments Due Soon On Latest Proposed Changes To DC Water System Availability Fees

Amy L. Edwards is a Partner and Aaron S. Heishman is an attorney in Holland & Knight's Washington D.C. office

HIGHLIGHTS:

  • Proposed changes to the District of Columbia Water and Sewer Authority's System Availability Fee (SAF) regulations would provide developers credits for providing new affordable housing units.
  • Proposed sewer service fees would increase 29 percent in Fiscal Year (FY) 2019 and 35 percent in FY 2020 compared with current fees.
  • Comments on both proposed rulemakings are due no later than April 16, 2018.

The District of Columbia Water and Sewer Authority (DC Water) is requesting public comments on proposed changes to its System Availability Fee (SAF) regulations and proposed increases to its sewer and water fees. The proposed changes to the SAF regulations would provide credits against the SAF for new affordable housing units. DC Water also proposes to change the Right-of-Way Occupancy Fee Pass Through Charge, Payment-in-Lieu of Taxes (PILOT) Fee, the Clean Rivers Impervious Area Charge, and Retail Rates and Charges for Water and Sewer Services for Fiscal Year (FY) 2019 and 2020. Notably, the proposed sewer rates would increase 29 percent in FY 2019 and more than 35 percent in FY 2020 compared with current fees.

Public comments are due no later than April 16, 2018,to Linda R. Manley, Secretary to the Board, DC Water, 5000 Overlook Ave. SW, Washington, DC 20032, by email to LManley@dcwater.comor by fax at 202-787-2795.

PROPOSED SAF REGULATION CHANGES

Affordable Housing Credits

In response to earlier public comments that expressed concern that the pending SAF would disproportionately impact the economic viability of affordable housing projects, DC Water is proposing a credit against the SAF for each net affordable housing unit (AHU) created by projects that require a new water metered service connection that are subject to the SAF.

An AHU is defined as "a housing unit that is offered for rent or for sale for residential occupancy and as a result of a federal or District subsidy, incentive or benefit, and is made available and affordable to households whose income limit requirements are established by a federal or District program or agency or the Council for the District of Columbia."

For residential structures of three or fewer units, the proposed credit is $3,944 for each new net AHU created. For larger multi-family structures of four or more units, the AHU credit will be equal to the percentage of the project's total housing units that qualify as AHUs, multiplied by the SAF for the project based on its water meter size. For example, a multi-family building that requires a 4-inch water meter must pay a SAF of $289,782. If one-quarter of the building's units quality as AHUs, however, the project's SAF would be reduced by $72,445 (0.25 x $289,782 = $72,445), which would reduce the SAF to $217,336.

To receive AHU credits from DC Water, a project developer must submit one or more of the following documents: 1) Land Disposition Development Agreement, 2) Zoning Commission Order, 3) Planned Unit Development Covenant, 4) Certificate of Inclusionary Zoning or 5) a letter from the District financing agency that establishes the number of AHUs in the project. DC Water may request documentation that planned AHUs are constructed and will demand payment of any SAF credit received for AHUs that were not constructed.

Sufficiency of Plans Submitted to DC Water

The current version of SAF regulations provides that a building project can avoid the SAF if, among other things, its plans and specifications are submitted to DC Water before the June 1, 2018, effective date in a form that is "sufficiently complete to allow DC Water to complete its Engineering Review without substantial changes or revisions." The phrases "sufficiently complete" and "substantial revisions" are not currently defined.

DC Water's proposed changes attempt to clarify these ambiguities. Under the proposed rules, plans and specifications to DC Water are deemed to be "sufficiently complete" if they "meet the requirements listed in DC Water Project Submission Checklist." Additionally, the proposed regulations make clear that changes to plans submitted to DC Water are "substantial" if they "result in the change in the peak water demand that changes the size or number of meter connections for the project."

"Force Majeure" Event

Even if plans and specifications for a project are properly submitted to DC Water before June 1, 2018, the project can avoid the imposition of a SAF only if DC Water issues a Certificate of Approval by June 1, 2019. Several public comments highlighted the unfairness of this provision, as it could allow the SAF to be imposed upon a developer if DC Water was prevented by unforeseeable events from issuing a Certificate of Approval by the June 1, 2019, deadline. In response to these comments, DC Water is proposing to add language in the rule that the June 1, 2019, deadline applies "unless D.C. Water's review is delayed due to a force majeure event that closes DC Water's offices for one or more days one week before June 1, 2019." This limited force majeure language is not likely to provide the type of relief for which the development community was looking.

No Change in the SAF Effective Date

The SAF was originally set to go into effect on Jan. 1, 2018. Following the receipt of public comments requesting a delay, the DC Water Board of Directors adopted a resolution on Feb. 1 that delayed the effective date of the SAF rule to June 1, 2018. DC Water's latest proposal does not make any further changes to the effective date of the SAF.

PROPOSED INCREASES TO SEWER AND WATER RATES

In a separate proposed rulemaking, DC Water proposed changes to the Right-of-Way Occupancy Fee Pass Through Charge, PILOT Fee, Clean Rivers Impervious Area Charge, and Retail Rates and Charges for Water and Sewer Services.

Sewer Service Rates

DC Water proposed significant increases to its sewer service rates. Compared with current rates, DC Water proposed to increase rates for all users by 29 percent in FY 2019 and by more than 35 percent in FY 2020. DC Water did not explain why this degree of increase was needed.

 

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Right-of-Way Occupancy Fee Pass Through Charge

The Right-of-Way Occupancy Pass Through Charge is a fee charged by the District of Columbia to DC Water for the use of the District's public space and rights of way. The proposal would hold these rates steady in FY 2019 and increase them by $0.01 per one hundred cubic feet (CCF) of water use in FY 2020.

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PILOT Fee

The PILOT Fee is assessed to cover the amount that DC Water pays to the District for goods and services received. The proposed rate would increase by $0.01 per CCF in both FY 2019 and FY 2020.

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Clean Rivers Impervious Area Charge

DC Water uses the Clean Rivers Impervious Area Charge (CRIAC) to recoup the cost of maintaining storm sewers and protecting area waterways. The impervious area fees are based on a property's estimated contribution of rainwater to the District's sewer system based on the amount of impervious surface measured in Equivalent Residential Units (ERUs). DC Water proposes to reduce the annual fee per ERU from $302.16 to $276.00 in FY 2019, but then to raise the fee to $306.96 in FY 2020.

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Retail Water Rates

DC Water is proposing across the board decreases to the cost of water service. Compared to current rates, multi-family buildings would see rates decline by more than 11 percent in FY 2018 and by more than 6 percent in FY 2020. Proposed rates for non-residential buildings would be nearly 8 percent lower in FY 2019 and more than 3 percent lower in FY 2020.

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SUBMISSION OF PUBLIC COMMENTS

The deadline for submitting comments is imminent; comments are due no later than Monday, April 16, 2018. To avoid confusion, comments on the two issues should be submitted separately rather than combined into a single submission. Comments should be submitted to Linda R. Manley, Secretary to the Board, District of Columbia Water and Sewer Authority, 5000 Overlook Ave., SW, Washington, DC 20032, by email to LManley@dcwater.com or by fax at 202-787-2795.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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