DIF allocation letter from CIAC Mr. Mayor and Council Members,
We at the CIAC appreciate the time and attention you give to the opinions of our committee. We strive
to restrict our comments to issues related to capital improvements and impact fees as is directed by our
charter. Your desire to take action on the allocation of the Development Impact Fees for water and
wastewater utilities has inspired us to provide some history and comments from our committee.
Our Development Impact Fees were created to provide funding to increase the capacity of these utility
systems in response to added demand from the construction of new buildings and their occupants. In
other words, as new buildings are constructed and occupied, the utilities must supply them with water
and wastewater services. The allocation was created with the intent of charging the fees to those who
caused the need for increased capacity and those that benefit from the expansion of services. It is
apparent to most how the Builder and the End-user Customer are involved, but it may not appear
obvious how the Rate Base receives a benefit from the expanded service. When Development Impact
Fee funds are used to expand the wastewater treatment plant, install a new water well, or build a new
water quality testing lab,those services cannot be limited to just service the new buildings but in fact
improve the service for the entire utility system. For instance, when some of the most recent wells were
built and added to the system (#70 and#71)they were located in the south and west areas of Las
Cruces. The bulk of new construction happens miles away in the northeast part of Las Cruces. The
water from these wells increased the availability and redundancy of service to all of the water system
and; therefore, the entire Rate Base.
Our committee feels it is important to consider the total cost to the residents of Las Cruces. When fees
are charged to the Builder,they are passed on to the End-user Customer in the price of the building.
But, before they are passed on, the builder must pay Gross Receipts Tax, Sales Commissions, Real Estate
Fees, and Overhead. For every$100 dollars of fees charged to the Builder, $130 are added to the price
of the building. For the case of residential construction, the End-user Customer usually finances the
majority of the price for 30 years. By the time the Customer has paid off the building, that$100 could
cost$250 or more. For this reason, we do not recommend moving the entire fee to the Builder.
Our committee agrees with those that went before us when they created the allocation as it is today.
We feel their decision was made with great consideration for all those impacted by the fees and all
those who benefit from them. It is our recommendation that you choose Option#1 and let the
allocation remain as it has been since the inception of the Development Impact Fee.
Thank you again for your time and consideration.
Respefully,
Capital Improvements Advisory Committee