Waco City Council voted 5-1 on Tuesday to end long-standing subsidies for water utility construction, over the protests of developers who said the move would jeopardize projects already in the works.
Since 1975, the city has reimbursed developers for the cost of public water utilities in subdivisions, which in recent times has cost an average of $3,698 per lot.
Council members said the incentives were unnecessary and took away from other utility projects. The council’s action, which Councilman John Kinnaird opposed, restricts water refunds to projects for which utility construction plans were submitted before May 12.
“What I’m not trying to indicate is that we are against growth,” said Councilman Kyle Deaver, who represents West Waco and China Spring. “It’s just a matter of whether we’re going to incentivize growth or let it happen the way it normally does.”
Developers and builders protested that the repeal of the policy was too abrupt and would disrupt financing and contracts on projects already in the works.
“Instead of pulling the rug out immediately from builders and developers who are trying to bring in tax base to Waco, think about pulling back and giving a grace period of two or three years,” builder Jason Cooper said.
Walt Fair, an attorney and partner in Waco Construction LLC, said his group owns 130 acres in China Spring and already has lots under contract for sale based on the assumption of utility refunds.
“We can’t call them back and ask for our do-over,” he said. “What we’re stuck with is no profits for our efforts.”
He added that he would have to explain that situation in this way: “Our government reneged on a 40-year-old promise.”
City officials said the refund policy was originally set by staff, not the council, though the council has approved the refund requests over the years. During the last two years, the City Plan Commission and council have discussed ditching the refunds because of the cost and because they incentivize sprawl.
“The city has given millions of dollars in rebates over the years,” Plan Commission vice chairwoman LaRaine DuPuy told the council Tuesday. “No other city offers water rebates for developers. While we’ve been refunding for developers, many cities have been charging impact fees for development.”
She said as cities struggle to pay for infrastructure, “the answer is not to continue to pour public dollars into suburban development. It’s to change the pattern of development.”
Steve Sorrells, a leading Waco builder-developer and president of the Texas Association of Homebuilders, said the incentives have provided a good return on investment, as development has boosted tax base and utility revenue.
He said the policy also has helped keep homes affordable for first-time buyers in a town where homeownership is well below the national average.
“While we very much appreciate fiscal stewardship, the abrupt discontinuance of this policy will have a chilling effect on Waco’s economy,” Sorrells said.
But Deaver said he was not convinced that the incentives were responsible for the growth of the last few decades.
“Is the subsidy the thing that caused growth?” he said. “I don’t think it is. That’s demonstrated by other cities that have grown without it.”
Kinnaird voted against the measure, saying he thought the city should phase out the subsidies to avoid disrupting the financial models for planned developments.
“In general, I agree these refund contracts need to go away,” he said.
Mayor Malcolm Duncan Jr. reiterated his support for immediate repeal of the refunds, citing the hundreds of millions of dollars in utility improvements the city is considering for the next quarter-century.
“There’s no way to sustain that and continue rebates,” he said.