Project requirements suggest a pattern of double charging, which nearly sunk a 160-unit affordable housing project in Beacon Hill.
Navigating the Seattle permitting system is arduous, unpredictable, and unnecessarily difficult. To make matters worse, hidden within the overall building permit process is a Seattle Public Utilities procedure that places costly and unsubstantiated burdens on new housing construction projects.
The city is crisscrossed with distribution water mains. Water mains are pipes carrying fresh water that are generally 8-inches in diameter. They run within most streets. In contrast, the service pipe entering your house is 1-inch or less. Connecting a house or building to the large water main is a matter of installation. Per the City of Seattle Municipal Code, SPU is authorized to charge connection and installation fees for new services. These fees are significant, and come in at $7,980 per each new single-family dwelling unit and much more for multifamily buildings. Fees are pooled into a fund to pay for system-wide upgrades.
Extending water mains is an upgrade to the city’s water infrastructure. The Seattle Municipal Code does not give the City and the departments therein “carte blanche” authority to require system-wide infrastructure upgrades as a condition of permit approval. However, there are compelling reasons to conclude that Seattle Public Utilities (SPU) may be assessing such upgrades on private development permit approvals. This would be an abuse of the agency’s permit authority.
This article speaks to three projects where SPU administered procedural steps that go far beyond the allowable charges. SPU attempted to require unsubstantiated expensive upgrades as a condition of permit approval. Such assessments place the burden of paying for upgrades to the entire city-owned water system infrastructure on individual projects. That burden is not consistent with the legislative policy and intent.
Six homes abandoned for a valve
The first of the three projects succumbed to the burdensome exaction and the new housing project was abandoned by the permit seeker. It was a six unit ADU/DADU project within the North Rainer Urban Village. As I discussed in the article “How to Crush a Housing Project – The Seattle Way,” there were rounds of permits required by City departments, few of whom communicated with each other.
Among these layers of requirements, SPU’s condition stood out. After the department rejected the application for new service connection to the water main, they devised a solution to the problem of their own creation. The builder would be required to install a custom-built unique water valve in a large 24-inch water main with costs upward of $100,000. This unjustified $100,000 cost would be in addition to the allowed charges for new service water connection fees.
If the project proponent agreed to pay for the design and construction costs for installation of a new water valve, then connection to the water main would be allowed. Due to the cost of the unjustified water valve installation, the project proponent abandoned the project to construct the middle-income dwelling units. Instead of six units, the single detached house was renovated and sold. SPU’s mandate resulted in knocking-out a small middle-income housing project and much needed middle income housing.
ADU/DADU in jeopardy for 500 feet of water main
The second project on the cusp of being crushed is a duplex on South Concord Street. Utilizing the Accessory Dwelling Unit/Detached Accessory Dwelling Unit (ADU/DADU) section of the zoning code, the applicant proposes a duplex with each unit adding an ADU for a total of four dwelling units. SPU mandated an incredibly disproportional requirement to install 500-linear feet of 8-inch diameter ductile iron water main at a cost upwards of $800,000. This is an unreasonably large burden to place on such a small project and is extremely disproportionate to the permit action.
The Seattle Code allows agencies to charge impact fees for new service based upon actual usage. The City’s water system may charge new water service connection and installation fees set forth in a published rate schedule that is itself based upon the usage required. The code does not give authority to mandate absurd and burdensome system-wide upgrades as a condition of permit approval. SPU is not allowed to chase an 8-inch water main extension to a connection point down the block and around the corner.
Installation of 500-linear feet of eight-inch water main is not supported by city code as a condition of permit approval for new housing construction on one lot. Attempting to place this excessive cost on a four-unit housing project is a violation of the permit power entrusted to the City of Seattle. Unless relief from this burden is obtained, the project proponent will be forced to abandon the project and the much needed four new housing units will not be added to the city’s inventory.
160 affordable homes almost slipped away
The third project is a 160-unit development on Beacon Hill in the north parking lot of Pacific Hospital. Developed as a partnership between Seattle Chinatown International District Preservation Development Authority (SCIDpda) and Pacific Hospital & Preservation Development Authority (PHPDA), the 160-unit mixed-use low income housing project also includes a day care facility.
Last November, the project was thrown off course by an unsubstantiated mandate by SPU. After months of review, the department informed the developers that a $1 million water main installation was required as a condition of permit approval. SPU’s assertion was that a new 12-inch diameter water main would be required within the access drive aisle of the north parking lot. There are no reasons to support the requirement stemming from either water flow capacity limitations or authority given via the Seattle Municipal Code.
SPU’s contention was that the water main replacement is triggered due to the daycare facility within the building classifying the project as commercial. Said day care facility was proposed as part of the project from the time of initial permitting with the City. Why SPU waited over a full year into the permitting process to disclose their position has not been explained.
SPU did not provide any section of code to support their assertion that a daycare facility triggers a requirement for a $1 million water main system improvement. Instead, per the code (section 21.04.061), installation of system improvements to extend existing water mains can only be required if there are no suitable City distribution water mains existing within the streets next to the property. There are existing suitable eight-inch water mains within the streets surrounding the property, and thus the City has no authority per the code to require any upgrades.
For a project of this size, the only charge that can be assessed for the new water connection per the published installation rates is calculated at just over $1 million. SPU is requesting the water main extension on top of that connection fee. Charging million-dollar fees twice is “double dipping” and is not allowed per code.
Furthermore, SPU’s asserted that a fire hydrant be re-located on the Pacific Hospital property. There is no justification to support this position as confirmed via a conversation between the civil engineer of record at the Red Barn Group and the Seattle Fire Chief.
The Fire Chief stated that none of the hydrants on the Pacific Hospital property in the vicinity of the shared drive aisle, either existing or proposed, will be used in the event of a fire response. They are simply too close to both buildings and present a safety concern for firefighters. Instead the fire department will connect to existing fire hydrants within the surrounding streets at a safe distance away from the buildings. Hence, any re-location of fire hydrant(s) on the property is for naught.
In the development of this article, SPU was contacted for comment, and, in that process, SPU rescinded the costly requirement to install the water main upgrade for the 160-unit building. It appears that the timing of the contact and the rescinding to be more than coincidence. Perhaps, SPU will also rescind the requirement for the S. Concord Street ADU/DADU project referenced above.
Extending water mains is an unsupported exaction
A city needs water, and a growing city like Seattle needs to expand the water supply. That expansion is built into the regular connection fees. Offseting the impacts of new water service is achieved via water service connection fees and not from mandating system wide upgrades. The policy to collect fees based upon the level of water service required was initially established in 2007 and continues via City Council Resolution 31760.
This resolution addresses how funds are collected for the water service provided by Seattle. It provides the legislative path to increase the water meter connection fees and new service installation fees as the method to offset impacts to the City’s water system from new development.
In passing Resolution 31760, the city council had the foresight to recognize fees charged based upon actual usage as a more equitable method of mitigation. This is summarized within the resolution, where it states the policy will result in “minimizing negative impacts on affordable housing development.”
Legislative intent supporting limits on charging individual projects for system upgrades is found within Seattle Municipal Code (SMC) 21.04.061. This section of code limits the city’s authority to require capital improvements of the city water system as a permit condition. The change in policy included a rate increase to cover system improvements. The connection charge and installation fee is now $7,980, which is twice as much as it cost a decade ago.
Fees collected are applied to SPU capital improvements budget as outlined within the city’s Capital Improvement Program Report for the six-year period of 2020 to 2025 and also outlined in reports of previous years. Per the reports funding sources for capital improvements include income from developer tap fees, (i.e. connection and installation fees) which are allocated toward funding for system wide upgrades.
Resolution 31760 and subsequent codification paved the way for the revision of city policy to charge fees based upon usage. The City cannot require both system upgrades and charge connection and installation fees, that is “double dipping” or double charging.
The three projects cited leads to concern that SPU may be requiring system-wide upgrades on top of connection fees as a standard review response to permit applications, even though said practice is not supported by the Seattle Municipal Code.
Design and construction are tenuous businesses requiring many tradeoffs between finance, materials, and legal requirements. Project proponents are unable to balance the costs when SPU adds significant capital improvement upgrades on top the permit requirements. When one of these unjustified mandates are issued by SPU, civil engineers such as myself are tasked with finding a solution. We spend time and resources to run water capacity calculations, call distribution companies to assess costs, and many other steps to untangle SPU’s demands. The cumulative hours spent by numerous civil engineers are taken from a limited resource pool. Hours spent in response to unnecessary SPU mandates are hours not spent on other projects when there is a backlog for our services.
In all, SPU’s high exactions and double dipping place the engineers, the developers, and the city’s housing in a state of duress over and over again. The three projects documented in this article may only be a small sampling of numerous staff and permits affected. It is likely there are other projects that have been crushed. The power entrusted to SPU must not be abused, and City Hall must institute checks to rein in its agency. Seattle needs to ensure this practice of exaction ceases immediately, before more housing projects succumb to the burden.
Correction: This article originally stated that water service fees were up fivefold for single family homes. A SPU reached out to note that the fees (counting connection charge and installation together) have not increased that dramatically. They have doubled over the past decade, according to the department, and we have corrected that passage accordingly.
Donna Breske (Guest Contributor)
Donna Breske is a licensed Professional Engineer in the State of Washington. She owns Donna Breske & Associates and with her staff provides land use consulting and civil engineering design for numerous infill projects within multiple jurisdictions in the Puget Sound Area. She has a Bachelor of Science in Civil Engineering from the University of Washington and an MBA from Seattle University. She is married to her husband Fred with whom they share two adult children. She grew up in Seattle and is passionate about eliminating absurd impediments from permitting departments and ensuring consistent and predictable outcomes.