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You Asked: Can the city use impact fees or federal grants instead of sewer bond?

Boise’s $570 million sewer bond is a big ask for voters on November 2, raising questions from the public of how else the city could be funding the project.

Some voters on social media asked BoiseDev last week why the City of Boise is asking residents to approve a bond that would be repaid using years of increases to rates instead of relying on federal funding or impact fees to cover the project. If approved, these bonds would help cover the roughly $1 billion worth of improvements to the system to replace aging assets, like the 1940s era Lander Street Wastewater Treatment facility, build new plants to accommodate the growth in the region, meet new regulatory requirements, and water recycling.

City: Impact fees would not raise enough funds

Public Works Director Steve Burgos told BoiseDev that the city has not ruled out starting to collect wastewater impact fees to help cover the cost of improvements, but the amount of money that program could build up over time would be in the tens of millions, as opposed to the hundreds of millions needed for the scale of the improvements public works is planning.

Impact fees are already collected in the City of Boise to help pay for parks, fire service, and police, but not for sewer at this time.

“If you have a planned community and part of your planned community’s impact fees would go to a park, the first ten houses pay their impact fees, but that’s not enough to build a park,” Burgos said. “The need at the park is not there right away because there are other parks in the city, but the need for sewer service is immediate. Those impact fees wouldn’t provide enough upfront for those first ten or first 15 houses. We need to build capacity in large chunks because it’s the most cost-effective way to do it.”

Do developers pay for growth now?

That doesn’t mean developers don’t currently pay fees to cover their impact on the system, though.

Boise, and dozens of other municipal sewer systems across Idaho, collect sewer connection fees from developers. This cost covers the cost of the pipes to bring the raw material to the treatment plant, and the ongoing cost to the city to clean it, which Burgos said comes in at a higher price tag than an impact fee would.

Burgos also pointed out that using impact fees to pay for the expansion of sewer capacity would likely be challenged in court due to a pair of lawsuits in Blaine County. In 1983, the City of Hailey passed an ordinance requiring developments hook up to city sewer and raised the sewer connection fee with a specific portion of the revenue for future system expansion. A resident sued the city, and the district court ruled that this constituted an illegal tax because the fee was for future expansion, which should be funded by a bond instead.

After the court’s decision, the city developed a formula to determine the cost of connection fees that would only cover the costs of the new growth connecting to the system and upkeep, but it could not be used for expansion. The city of Hailey was once again sued for this connection fee structure, but the Idaho Supreme Court affirmed it in 1991. Burgos said after that decision, wastewater systems across the state followed that fee model so “growth pays for growth,” but still required voters to approve bonds for large expansion projects.

What about federal funds?

There are federal funds up for grabs too, but it’s not as simple as applying for a grant to cover the entire project cost.

The city of Boise landed roughly $36 million from the American Rescue Plan earlier this year. Infrastructure for wastewater and drinking water are approved uses for the money, but the city is still waiting for final guidance on what projects it can be used for. While officials wait, the city of Boise is gathering input from residents.

Even if the city were to use the entirety of the American Rescue Plan funds, it would not cover the cost of the $1 billion project or the $570 million bond the city is asking residents to approve. Congress is still hotly debating an infrastructure package, which could include funds to cover water-related infrastructure projects.

Boise Public Works spokesperson Natalie Monro told BoiseDev the city is closely watching Washington to see what federal funding is available. If the city lands some grants or uses ARPA funds, it would borrow less money from voters. She said that the bond is only a ceiling of what they would borrow, not a guaranteed amount.

“The $570M is a preauthorization of what we can take in total over ten years, but we will be taking the bonds out in 2-3 year increments,” she wrote in an email. “Each time, we will be in front of City Council for approval on which projects are bond-financed and which are paid for with ratepayer revenue. This also gives us the flexibility to borrow less if we are awarded federal grants.”

Without a yes, Boise locked out of federal loans

A lot of federal assistance for sewer projects also comes in the form of loans, which the city cannot take advantage of without voter approval.

Earlier this year, the city submitted a letter of interest to apply for a loan through the Water Infrastructure Finance and Improvement Act. This federal program loans money to localities for specific water-related projects, like water recycling, aquifer recharge, or other projects to make communities more drought resistant.

The letter of intent said the city was only hoping to apply for $271 million in loans, which is only part of the $570 million it is asking voters for. Monro said this is because only a portion of the bond it’s asking voters to approve can be funded by this source. The rest would come from other bonds and cash. Even though it’s a federal program, it requires voter approval for Boise to participate.

In the WIFIA application, the city also listed $128 million in cash as “certain” funds it can contribute toward the project. Monro said this is because the city collects revenue from ratepayers, regardless of if the bond is approved or not. These funds can be used toward the system improvements the city is hoping for.

The city has also applied for funds from the Idaho Department of Environmental Quality’s revolving fund to cover the project costs, but this is another loan program that would require bonding approval from the voters for the city to participate in.

Correction: The original version of this story had incorrect information about the ongoing negotiations on the infrastructure bill in Washington. It has been corrected to reflect that talks are ongoing and there has not been a vote on the package yet.

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Margaret Carmel - BoiseDev Sr. Reporter
Margaret Carmel is a BoiseDev reporter focused on the City of Boise, housing, homelessness and growth. Contact her at margaret@boisedev.com or by phone at (757)705-8066.

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