New utility fees could stymie development in San Antonio

Developers are already struggling to get projects off the ground amid high interest rates and tough lending standards. In San Antonio, things could get tougher with new development fees.

The San Antonio Water System’s board of trustees is considering a 23 percent increase in impact fees, which fund capital improvements required to service new developments. the San Antonio Business Journal reported. 

The surge in fees is directly correlated to the city’s explosive growth. According to assessments conducted by Carollo Engineers, San Antonio’s population within the SAWS’ service area is projected to rise from 2 million to 2.5 million by 2033, necessitating $2.3 billion in capital improvements. SAWS anticipates collecting $465 million from impact fees to fund these enhancements.

While the proposed increase is being billed as a way to ensure developments financially support their own infrastructure needs, it could pose a challenge for prospective homeowners. The housing market, already grappling with affordability issues amid high demand, may face further strain due to elevated development costs likely to be passed along to home buyers.

Under the current structure on fees, developers can expect to pay between $5,902 and $8,548 per typical home lot. The proposed increase would take the charges from $7,343 to a maximum of $11,528 per lot.

Around 12,625 future home lots await development in San Antonio, the outlet reported, citing housing data firm Zonda. Using the existing fee structure, SAWS could collect roughly $74.5 million to $107 million in impact fees from connecting these lots to utilities. With the proposed structure, these figures could soar to a minimum of $92 million and a maximum of $145.5 million.

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Although San Antonio’s proposed fees would place it at the higher end among Texas cities, they remain substantially lower than those implemented by New Braunfels in 2023. New Braunfels, a northern suburb that’s also bursting at the seams, saw its impact fees increase by more than 100 percent to manage its own growth challenges.

SAWS’ Senior Director of Engineering, Tracey Lehmann, foresees this trend continuing.

“We’ve seen what happened in New Braunfels with their huge increase in impact fees, and that will probably be the trend moving forward,” Lehmann told the outlet.

—Quinn Donoghue