Who Pays for Drainage Infrastructure Serving New Development?
Texas cities are learning that there could be costly implications associated with some higher drainage standards for new development and redevelopment. Many cities have adopted design standards that require developers, as a condition to obtain a permit, to design and construct new drainage infrastructure that serves fully developed upstream watershed conditions, even if the upstream watershed is undeveloped (or only partially developed) at the time the developer seeks a permit.
The reason for this standard is logical. Urban development causes increases in land use density and creates a need for larger public infrastructure, such as water, sewer and roads to serve the population. Similarly, urban development contributes to increases in the rate and volume of stormwater runoff, necessitating larger channels, pipes and easements to safely contain the flows and prevent flooding.
Retrofitting downstream areas as upstream development occurs (or afterwards) is impractical. But is the downstream developer responsible for paying for infrastructure that provides drainage capacity for their future upstream neighbors?
“If a municipality requires…as a condition of approval for a property development project that the developer bear a portion of the costs of municipal infrastructure improvements by the making of dedications, the payment of fees, or the payment of construction costs, the developer's portion of the costs may not exceed the amount required for infrastructure improvements that are roughly proportionate to the proposed development as approved by a professional engineer…retained by the municipality…”
A key phrase is, “…the developer’s portion of the costs may not exceed the amount required for infrastructure improvements that are roughly proportionate to the proposed development…” It has been argued this section of the code has a few logical — and impactful — implications:
- The developer is only responsible for a “portion” of the cost of constructing municipal infrastructure, not all of it.
- The developer’s portion is “roughly proportionate” to the proposed development’s need for the infrastructure.
- Others are responsible for paying the remaining “portion” of the costs.
- The municipality is responsible for making a final determination of proportional share.
These implications suggest municipalities need to develop a strategy to determine how the remaining costs for new drainage infrastructure are to be allocated. One strategy would be for a municipality to not require developers to design and construct infrastructure to receive and convey stormwater runoff from future development upstream. This strategy relies on other aspects of the municipality’s design standards to prevent increases in stormwater discharges due to development and as a result, eliminate the need to “oversize” downstream drainage infrastructure in anticipation of a greater future flow. Most current drainage design standards generally disallow increases in peak flows. However, most do not limit the total volume of stormwater runoff, and cumulative effects of increases in runoff volume could cause public safety and welfare concerns.
Another strategy would be for a municipality to enter into agreements with developers to fund the cost of the drainage infrastructure above their proportional shares. Due to funding and schedule constraints, many growing municipalities would likely find this strategy to be impractical. An alternate strategy often used by municipalities for water, sewer and road infrastructure is to require the payment of a development “impact fee.” Impact fees are payments made to expand public infrastructure serving future development, proportional to the development’s anticipated future use of the infrastructure.
The Texas Local Government Code provides authority for municipalities to develop impacts fees for financing capital improvements required by new development (Title 12, Subtitle C, Chapter 395). This part of the Code describes how impact fees are to be established and administered at the local level. Although they are common to help fund other infrastructure improvements, impact fees are less common in Texas for drainage infrastructure. In some cases, the initial cost of drainage master planning is seen as prohibitive or unnecessary. However, several devastating flood events in Texas over the last decade have contributed to a shift in perspectives towardsmore proactive stormwater and floodplain management.
Many Texas cities have experienced a rapid pace of development activity, and associated drainage impacts, in recent years. In response, cities have adopted more aggressive drainage standards that require developers to design and build drainage infrastructure (and dedicate public easements) to serve fully developed watershed conditions. Some of these cities are experiencing challenges from developers and realizing that they have not fully considered the cost implications associated with these standards. Preparing a drainage master plan, in accordance with Chapter 395, and establishing drainage impacts (like for other public infrastructure) is becoming an investment with an attractive return for cities poised for continued growth.